UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-00266
TRI-CONTINENTAL CORPORATION
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 12/31
Date of reporting period: 6/30
Semiannual Report
TRI-CONTINENTAL CORPORATION
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
JUNE 30, 2009
TRI-CONTINENTAL CORPORATION SEEKS FUTURE GROWTH OF
BOTH CAPITAL AND INCOME, WHILE PROVIDING REASONABLE
CURRENT INCOME.
TABLE OF CONTENTS --------------------------------------------------------------
Your Fund at a Glance.............. 2
Portfolio of Investments........... 6
Statement of Assets and
Liabilities...................... 15
Statement of Capital Stock and
Surplus.......................... 16
Statement of Operations............ 17
Statements of Changes in Net
Investment Assets................ 18
Financial Highlights............... 19
Notes to Financial Statements...... 22
Proxy Voting....................... 35
Change in Independent Registered
Public Accounting Firm........... 36
Proxy Results...................... 37
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
--------------------------------------------------------------------------------
> Tri-Continental Corporation (the Fund) common stock declined 0.19% based on
net asset value and 5.64% based on market price for the six-month period ended
June 30, 2009.
> The Fund underperformed its benchmark, the S&P 500 Index, which gained 3.16%
for the six-month period.
> The Fund underperformed its peer group, as represented by the Lipper Closed-
End Core Funds Average, which gained 5.77% for the same period.
ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009)
--------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------
Tri-Continental
Corporation
Market Price -5.64% -39.55% -15.11% -6.15% -5.25%
-------------------------------------------------------------------------
Net Asset Value -0.19% -35.07% -13.57% -6.10% -5.21%
-------------------------------------------------------------------------
S&P 500 Index(1)
(unmanaged) +3.16% -26.21% -8.22% -2.24% -2.22%
-------------------------------------------------------------------------
Lipper Closed-End Core
Funds Average(2) +5.77% -28.93% -10.20% -2.65% -0.29%
-------------------------------------------------------------------------
Lipper Large-Cap Core
Funds Average(3) +4.83% -25.92% -8.14% -2.21% -1.82%
-------------------------------------------------------------------------
* Not annualized.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when sold, may be worth more or
less than their original cost. Current performance may be lower or higher than
the performance information shown. You may obtain performance information
current to the most recent month-end by visiting seligman.com. J. & W. Seligman
& Co. Incorporated, former investment manager of the Fund, made certain payments
to the Fund in 2004. Absent such payments, the net asset value returns that
include this period would have been lower.
Returns reflect changes in market price or net asset value, as applicable, and
assume reinvestment of distributions. Returns do not reflect the deduction of
taxes that investors may pay on distributions or the sale of shares.
--------------------------------------------------------------------------------
2 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
The index and the averages do not reflect the effects of sales charges, expenses
(excluding Lipper) and taxes. It is not possible to invest directly in an index
or an average.
(1) The Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), an
unmanaged index of common stocks, is frequently used as a general measure of
market performance. The index reflects reinvestment of all distributions and
changes in market prices.
(2) The Lipper Closed-End Core Funds Average measures the performance of closed-
end funds. The average reflects reinvestment of all distributions and
changes in market prices.
(3) The Lipper Large-Cap Core Funds Average includes open-end funds that, by
portfolio practice, invest at least 75% of their assets in companies with
market capitalizations (on a three-year weighted basis) above Lipper's U.S.
Diversified Equity large-cap floor. Large-cap core funds typically have an
average price-to-earnings ratio, price-to-book ratio, and three-year sales-
per-share growth value relative to the S&P 500 Index. The average reflects
reinvestment of all distributions and changes in market prices. The Lipper
Large-Cap Core Funds Average is provided for comparative purposes so that
the Fund's performance can be measured against both closed-end and open-end
funds with similar portfolio holdings as the Fund. Lipper classifies the
Fund, based on its portfolio holdings, as a Closed-End Core Fund.
PRICE PER SHARE
--------------------------------------------------------------------------------
JUNE 30, 2009 MARCH 31, 2009 DEC. 31, 2008
----------------------------------------------------------------------------
Market price $ 9.19 $8.42 $ 9.86
----------------------------------------------------------------------------
Net asset value 11.13 9.74 11.29
----------------------------------------------------------------------------
DIVIDEND AND CAPITAL GAIN INFORMATION (for period ended June 30, 2009)
--------------------------------------------------------------------------------
CAPITAL GAIN (LOSS)
------------------------------------
DISTRIBUTIONS UNREALIZED UNREALIZED
PAID(a) REALIZED GAIN(b) LOSS(b)
-----------------------------------------------------
$0.11 $(2.38) $0.58 $(2.90)
-----------------------------------------------------
(a) Preferred Stockholders were paid dividends totaling $1.25 per share.
(b) Represents the per share amount of gross unrealized gain or loss on
portfolio securities as of June 30, 2009.
The net asset value of the Fund's shares may not always correspond to the market
price of such shares. Common stock of many closed-end funds frequently trade at
a discount from their net asset value. The Fund is subject to stock market risk,
which is the risk that stock prices overall will decline over short or long
periods, adversely affecting the value of an investment in the Fund.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
--------------------------------------------------------------------------------
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a fund, and may serve as a guideline for helping you
build a portfolio.
Investment products, including shares of funds, are not federally or FDIC-
insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets)
---------------------------------------------------------------------
Consumer Discretionary 9.2%
------------------------------------------------
Consumer Staples 11.0%
------------------------------------------------
Energy 12.6%
------------------------------------------------
Financials 15.8%
------------------------------------------------
Health Care 22.6%
------------------------------------------------
Industrials 5.6%
------------------------------------------------
Information Technology 13.0%
------------------------------------------------
Materials 2.2%
------------------------------------------------
Telecommunication Services 2.6%
------------------------------------------------
Utilities 3.1%
------------------------------------------------
Other(2) 2.3%
------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing. No single
industry exceeds 25% of portfolio assets.
Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan) as of June
30, 2009. The Fund's composition is subject to change.
(2) Cash & Cash Equivalents.
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
--------------------------------------------------------------------------------
4 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets)
---------------------------------------------------------------------
Chevron 5.7%
------------------------------------------------
Johnson & Johnson 4.7%
------------------------------------------------
Procter & Gamble 4.3%
------------------------------------------------
Pfizer 4.2%
------------------------------------------------
McDonald's 3.6%
------------------------------------------------
IBM 3.0%
------------------------------------------------
Home Depot 3.0%
------------------------------------------------
Amgen 2.5%
------------------------------------------------
Bank of America 2.4%
------------------------------------------------
Occidental Petroleum 1.8%
------------------------------------------------
Excludes cash & cash equivalents.
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 5
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
JUNE 30, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
COMMON STOCKS (97.3%)
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (1.4%)
Boeing 59,616 $2,533,680
General Dynamics 96,271 5,332,450
ITT 18,839 838,336
Northrop Grumman 29,620 1,353,042
United Technologies 37,005 1,922,780
---------------
Total 11,980,288
-------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.6%)
CH Robinson Worldwide 26,764 1,395,743
FedEx 58,611 3,259,943
---------------
Total 4,655,686
-------------------------------------------------------------------------------------
AUTO COMPONENTS (0.2%)
Johnson Controls 66,547 1,445,401
-------------------------------------------------------------------------------------
AUTOMOBILES (0.1%)
Harley-Davidson 47,514 770,202
-------------------------------------------------------------------------------------
BEVERAGES (2.4%)
Brown-Forman Cl B 20,369 875,460
Coca-Cola 191,183 9,174,872
PepsiCo 173,093 9,513,191
---------------
Total 19,563,523
-------------------------------------------------------------------------------------
BIOTECHNOLOGY (3.0%)
Amgen 392,867(b) 20,798,379
Biogen Idec 21,192(b) 956,819
Cephalon 31,037(b) 1,758,246
Gilead Sciences 13,835(b) 648,031
---------------
Total 24,161,475
-------------------------------------------------------------------------------------
BUILDING PRODUCTS (0.1%)
Masco 68,608 657,265
-------------------------------------------------------------------------------------
CAPITAL MARKETS (2.7%)
Bank of New York Mellon 104,993 3,077,344
Charles Schwab 42,014 736,926
Goldman Sachs Group 16,649 2,454,729
Morgan Stanley 405,709 11,566,763
State Street 61,120 2,884,864
WCAS Capital Partners II LP 4,292,803(f,h) 1,352,233
---------------
Total 22,072,859
-------------------------------------------------------------------------------------
CHEMICALS (1.1%)
CF Inds Holdings 9,852 730,427
Dow Chemical 350,196 5,652,163
EI du Pont de Nemours & Co 70,716 1,811,744
PPG Inds 26,162 1,148,512
---------------
Total 9,342,846
-------------------------------------------------------------------------------------
COMMERCIAL BANKS (2.2%)
BB&T 70,863 1,557,569
Comerica 50,712 1,072,559
Fifth Third Bancorp 98,736 701,026
First Horizon Natl 73,739 884,864
KeyCorp 123,471 646,988
Marshall & Ilsley 140,663 675,182
PNC Financial Services Group 68,155 2,645,096
SunTrust Banks 61,720 1,015,294
Wells Fargo & Co 359,945 8,732,265
---------------
Total 17,930,843
-------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.5%)
Avery Dennison 27,121 696,467
Iron Mountain 27,654(b) 795,053
Republic Services 81,844 1,997,812
Stericycle 15,157(b) 781,040
---------------
Total 4,270,372
-------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (2.3%)
Cisco Systems 259,043(b) 4,828,562
Corning 326,269 5,239,880
Motorola 406,815 2,697,183
QUALCOMM 137,914 6,233,713
---------------
Total 18,999,338
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
6 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
COMPUTERS & PERIPHERALS (4.3%)
Dell 351,031(b) $4,819,656
Hewlett-Packard 110,964 4,288,759
IBM 232,905(d) 24,319,939
Lexmark Intl Cl A 64,655(b) 1,024,782
QLogic 74,089(b) 939,449
---------------
Total 35,392,585
-------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.2%)
Fluor 25,350 1,300,202
-------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.2%)
Vulcan Materials 36,162 1,558,582
-------------------------------------------------------------------------------------
CONSUMER FINANCE (0.7%)
American Express 29,059 675,331
Capital One Financial 110,776 2,423,779
Discover Financial Services 99,564 1,022,522
SLM 129,265(b) 1,327,552
---------------
Total 5,449,184
-------------------------------------------------------------------------------------
DISTRIBUTORS (0.1%)
Genuine Parts 29,421 987,369
-------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.6%)
Apollo Group Cl A 45,020(b) 3,201,822
H&R Block 77,095 1,328,347
---------------
Total 4,530,169
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (4.7%)
Bank of America 1,472,802 19,440,987
CIT Group 137,161 294,896
Citigroup 2,617,393 7,773,657
CME Group 2,791 868,308
JPMorgan Chase & Co 292,301 9,970,387
---------------
Total 38,348,235
-------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.1%)
AT&T 60,738 1,508,732
CenturyTel 36,445 1,118,862
Frontier Communications 80,589 575,405
Qwest Communications Intl 183,030 759,575
Verizon Communications 415,670 12,773,538
---------------
Total 16,736,112
-------------------------------------------------------------------------------------
ELECTRIC UTILITIES (1.6%)
Edison Intl 29,772 936,627
Northeast Utilities 38,587 860,876
Pinnacle West Capital 30,607 922,801
Progress Energy 84,011 3,178,136
Southern 238,044 7,417,451
---------------
Total 13,315,891
-------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.4%)
Emerson Electric 68,399 2,216,128
Rockwell Automation 24,160 776,019
---------------
Total 2,992,147
-------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.5%)
FLIR Systems 39,880(b) 899,693
Jabil Circuit 166,965 1,238,880
Tyco Electronics 121,885(c) 2,265,842
---------------
Total 4,404,415
-------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (2.1%)
Baker Hughes 67,743 2,468,555
BJ Services 96,118 1,310,088
Diamond Offshore Drilling 11,999 996,517
ENSCO Intl 65,568 2,286,356
Halliburton 202,292 4,187,444
Nabors Inds 16,496(b,c) 257,008
Natl Oilwell Varco 76,799(b) 2,508,255
Noble 62,178 1,880,885
Smith Intl 29,906 770,080
Weatherford Intl 11,912(b,c) 232,999
---------------
Total 16,898,187
-------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.0%)
SYSCO 75,211 1,690,743
Walgreen 82,882 2,436,731
Wal-Mart Stores 90,429 4,380,381
---------------
Total 8,507,855
-------------------------------------------------------------------------------------
FOOD PRODUCTS (1.1%)
Archer-Daniels-Midland 57,068 1,527,710
Campbell Soup 29,686 873,362
Dean Foods 40,694(b) 780,918
General Mills 52,101 2,918,698
JM Smucker 26,839 1,305,986
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 7
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FOOD PRODUCTS (CONT.)
Kellogg 19,352 $901,223
Sara Lee 85,249 832,030
---------------
Total 9,139,927
-------------------------------------------------------------------------------------
GAS UTILITIES (0.2%)
Nicor 24,521 848,917
Questar 22,473 698,011
---------------
Total 1,546,928
-------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.5%)
Becton Dickinson & Co 27,125 1,934,283
Covidien 38,683(c) 1,448,292
Medtronic 31,535 1,100,256
---------------
Total 4,482,831
-------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (2.5%)
Cardinal Health 57,345 1,751,890
CIGNA 125,553 3,024,572
DaVita 32,035(b) 1,584,451
Humana 24,709(b) 797,112
Laboratory Corp of America Holdings 12,563(b) 851,646
McKesson 39,454 1,735,976
Quest Diagnostics 58,653 3,309,789
UnitedHealth Group 281,928 7,042,561
---------------
Total 20,097,997
-------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (3.7%)
McDonald's 508,270 29,220,442
Starbucks 56,747(b) 788,216
---------------
Total 30,008,658
-------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.2%)
Leggett & Platt 56,843 865,719
Pulte Homes 81,133 716,404
---------------
Total 1,582,123
-------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (5.2%)
Clorox 42,557 2,375,957
Colgate-Palmolive 73,635 5,208,940
Procter & Gamble 687,232 35,117,555
---------------
Total 42,702,452
-------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
Constellation Energy Group 35,925 954,887
-------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.9%)
General Electric 288,775 3,384,443
Textron 66,356 640,999
Tyco Intl 115,005(c) 2,987,830
---------------
Total 7,013,272
-------------------------------------------------------------------------------------
INSURANCE (4.8%)
AFLAC 55,592 1,728,355
Allstate 353,880 8,634,673
Aon 84,339 3,193,918
Assurant 28,410 684,397
Chubb 59,901 2,388,852
Hartford Financial Services Group 61,987 735,786
Lincoln Natl 49,430 850,690
Marsh & McLennan Companies 74,640 1,502,503
MetLife 172,900 5,188,729
Principal Financial Group 62,611 1,179,591
Progressive 196,964(b) 2,976,126
Prudential Financial 31,793 1,183,335
Torchmark 41,023 1,519,492
Travelers Companies 152,125 6,243,210
Unum Group 57,272 908,334
---------------
Total 38,917,991
-------------------------------------------------------------------------------------
IT SERVICES (1.3%)
Affiliated Computer Services Cl A 28,552(b) 1,268,280
Automatic Data Processing 103,230 3,658,472
Computer Sciences 29,428(b) 1,303,660
MasterCard Cl A 15,243 2,550,306
Paychex 68,965 1,737,918
---------------
Total 10,518,636
-------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Hasbro 17,965 435,472
Mattel 66,506 1,067,421
---------------
Total 1,502,893
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
8 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
MACHINERY (1.2%)
Cummins 36,900 $1,299,249
Eaton 30,441 1,357,973
Illinois Tool Works 67,069 2,504,357
Ingersoll-Rand 108,637(c) 2,270,513
PACCAR 30,371 987,361
Parker Hannifin 27,786 1,193,687
---------------
Total 9,613,140
-------------------------------------------------------------------------------------
MEDIA (1.0%)
CBS Cl B 202,002 1,397,854
Comcast Cl A 220,998 3,202,261
DIRECTV Group 82,626(b) 2,041,688
Gannett 234,802 838,243
News Corp Cl A 107,443 978,806
---------------
Total 8,458,852
-------------------------------------------------------------------------------------
METALS & MINING (0.8%)
Alcoa 60,562 625,605
Allegheny Technologies 24,486 855,296
Freeport-McMoRan Copper & Gold 28,588 1,432,544
Newmont Mining 34,888 1,425,873
Nucor 29,439 1,307,975
United States Steel 30,531 1,091,178
---------------
Total 6,738,471
-------------------------------------------------------------------------------------
MULTILINE RETAIL (0.8%)
Family Dollar Stores 71,498 2,023,393
JC Penney 29,136 836,495
Kohl's 58,972(b) 2,521,053
Macy's 65,125 765,870
---------------
Total 6,146,811
-------------------------------------------------------------------------------------
MULTI-UTILITIES (1.2%)
Consolidated Edison 61,365 2,296,278
PG&E 141,394 5,435,185
SCANA 27,155 881,723
Xcel Energy 66,717 1,228,260
---------------
Total 9,841,446
-------------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.1%)
Xerox 123,011 797,111
-------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (10.6%)
Apache 63,178 4,558,293
Chevron 708,056(d) 46,908,711
ConocoPhillips 123,756 5,205,177
Hess 53,467 2,873,851
Marathon Oil 160,201 4,826,856
Murphy Oil 34,239 1,859,862
Occidental Petroleum 223,422 14,703,403
Peabody Energy 52,438 1,581,530
Sunoco 24,149 560,257
Tesoro 44,673 568,687
Valero Energy 109,961 1,857,241
Williams Companies 47,673 744,176
---------------
Total 86,248,044
-------------------------------------------------------------------------------------
PHARMACEUTICALS (12.9%)
Abbott Laboratories 36,220 1,703,789
Allergan 22,029 1,048,140
Bristol-Myers Squibb 72,690 1,476,334
Eli Lilly & Co 69,672 2,413,438
Forest Laboratories 114,465(b) 2,874,216
Johnson & Johnson 671,478 38,139,949
King Pharmaceuticals 64,212(b) 618,362
Merck & Co 309,587 8,656,053
Pfizer 2,293,822 34,407,330
Schering-Plough 352,988 8,867,059
Wyeth 112,068 5,086,767
---------------
Total 105,291,437
-------------------------------------------------------------------------------------
PROFESSIONAL SERVICES (0.1%)
Dun & Bradstreet 9,432 765,973
-------------------------------------------------------------------------------------
ROAD & RAIL (0.1%)
Norfolk Southern 28,132 1,059,732
-------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.1%)
Altera 22,501 366,316
Intel 743,067 12,297,759
Linear Technology 28,598 667,763
MEMC Electronic Materials 75,552(b) 1,345,581
Microchip Technology 48,510 1,093,901
Xilinx 83,265 1,703,602
---------------
Total 17,474,922
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SOFTWARE (2.3%)
BMC Software 17,722(b) $598,826
Intuit 59,727(b) 1,681,912
Macrovision Solutions 590,649(b) 12,882,055
Symantec 214,023(b) 3,330,198
---------------
Total 18,492,991
-------------------------------------------------------------------------------------
SPECIALTY RETAIL (5.5%)
Abercrombie & Fitch Cl A 42,922 1,089,790
AutoNation 50,188(b) 870,762
AutoZone 8,613(b) 1,301,510
Bed Bath & Beyond 79,348(b) 2,439,951
Best Buy 33,771 1,130,991
Gap 136,021 2,230,744
Home Depot 1,028,999 24,315,246
Lowe's Companies 312,372 6,063,141
O'Reilly Automotive 49,800(b) 1,896,384
Sherwin-Williams 60,838 3,270,043
---------------
Total 44,608,562
-------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.6%)
Coach 47,997 1,290,159
Nike Cl B 53,138 2,751,486
VF 19,467 1,077,498
---------------
Total 5,119,143
-------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.3%)
People's United Financial 181,962 2,736,708
-------------------------------------------------------------------------------------
TOBACCO (1.2%)
Altria Group 446,561 7,319,135
Lorillard 37,660 2,552,218
---------------
Total 9,871,353
-------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (0.1%)
Fastenal 23,363 774,951
WW Grainger 4,874 399,083
---------------
Total 1,174,034
-------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.6%)
Sprint Nextel 933,158(b) 4,488,490
-------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $929,915,289) $793,666,846
-------------------------------------------------------------------------------------
BONDS (0.4%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
BROKERAGE
Lehman Brothers Holdings
Equity-Linked Notes (ELNs)
Sr Unsecured
09-14-08 53.31% $148,440(b,e,f) $1,584,389
10-02-08 39.50 148,440(b,e,f) 1,961,783
---------------
Total 3,546,172
-------------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $29,688,000) $3,546,172
-------------------------------------------------------------------------------------
MONEY MARKET FUND (2.3%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.30% 19,045,128(g) $19,045,128
-------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $19,045,128) $19,045,128
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $978,648,417)(i) $816,258,146
=====================================================================================
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT JUNE 30, 2009
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
------------------------------------------------------------------------------------
S&P 500 Index 46 10,528,250 Sept. 2009 (241,084)
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
10 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the
value of foreign securities represented 1.2% of net assets.
(d) At June 30, 2009, investments in securities included securities valued at
$1,997,590 that were partially pledged as collateral to cover initial
margin deposits on open stock index futures contracts.
(e) This position is in bankruptcy.
(f) Identifies issues considered to be illiquid as to their marketability (see
Note 2 to the financial statements). The aggregate value of such securities
at June 30, 2009 was $4,898,405 representing 0.6% of net assets.
Information concerning such security holdings at June 30, 2009 is as
follows:
ACQUISITION
SECURITY DATES COST
----------------------------------------------------------------------------
Lehman Brothers Holdings
53.31% 2008 03-07-08 $14,844,000
39.50% 2008 03-26-08 14,844,000
WCAS Capital Partners II
LP 12-11-90 thru 03-24-98 4,292,803
(g) Affiliated Money Market Fund -- See Note 7 to the financial statements. The
rate shown is the seven-day current annualized yield at June 30, 2009.
(h) Restricted security.
(i) At June 30, 2009, the cost of securities for federal income tax purposes
was approximately $978,648,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $40,373,000
Unrealized depreciation (202,763,000)
------------------------------------------------------------
Net unrealized depreciation $(162,390,000)
------------------------------------------------------------
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) requires
disclosure regarding the inputs and valuation techniques used to measure fair
value and any changes in valuation inputs or techniques. In addition,
investments shall be disclosed by major category.
SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. When a valuation uses multiple inputs from
varying levels of the hierarchy, the hierarchy level is determined based on the
lowest level input or inputs that are significant to the fair value measurement
in its entirety. The input levels are not necessarily an indication of the risk
or liquidity associated with investments at that level. For example, certain
U.S. government securities are generally high quality and liquid, however, they
are reflected as Level 2 because the inputs used to determine fair value may not
always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date.
Valuation adjustments are not applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect fair value at the
close of the NYSE or require adjustment, as described in Note 2 to the financial
statements -- Valuation of securities.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as
--------------------------------------------------------------------------------
12 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
Level 3 investments due to lack of market transparency and corroboration to
support these quoted prices. Additionally, valuation models may be used as the
pricing source for any remaining investments classified as Level 3. These models
rely on one or more significant unobservable inputs and/or significant
assumptions by the Fund Administrator. Inputs used in a valuation model may
include, but are not limited to, financial statement analysis, discount rates
and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009
---------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
----------------------------------------------------------------------------------
Equity Securities
Common Stocks
Capital Markets $20,720,626 $-- $1,352,233 $22,072,859
Other 771,593,987(a) -- -- 771,593,987
----------------------------------------------------------------------------------
Total Equity Securities 792,314,613 -- 1,352,233 793,666,846
----------------------------------------------------------------------------------
Bonds
Corporate Debt
Securities -- 3,546,172 -- 3,546,172
----------------------------------------------------------------------------------
Total Bonds -- 3,546,172 -- 3,546,172
----------------------------------------------------------------------------------
Other
Affiliated Money
Market Fund 19,045,128(b) -- -- 19,045,128
----------------------------------------------------------------------------------
Total Other 19,045,128 -- -- 19,045,128
----------------------------------------------------------------------------------
Investments in
Securities 811,359,741 3,546,172 1,352,233 816,258,146
Other Financial
Instruments (241,084)(c) -- -- (241,084)
----------------------------------------------------------------------------------
Total $811,118,657 $3,546,172 $1,352,233 $816,017,062
----------------------------------------------------------------------------------
(a) All other industry classifications are identified in the Portfolio of
Investments.
(b) Money market fund that is a sweep investment for cash balances in the Fund
at June 30, 2009.
(c) Other financial instruments are derivative instruments, such as futures,
which are valued at the unrealized appreciation (depreciation) on the
instrument.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
The following table is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value.
COMMON
STOCKS
-------------------------------------------------------------
Balance as of Dec. 31, 2008 $1,893,126
Accrued discounts/premiums --
Realized gain (loss) --
Change in unrealized appreciation
(depreciation) (540,893)
Net purchases (sales) --
Transfers in and/or out of Level 3 --
-------------------------------------------------------------
Balance as of June 30, 2009 $1,352,233
-------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
--------------------------------------------------------------------------------
14 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
JUNE 30, 2009 (UNAUDITED)
ASSETS
Investments in securities, at value
Unaffiliated issuers (identified cost $959,603,289) $797,213,018
Affiliated money market fund (identified cost $19,045,128) 19,045,128
--------------------------------------------------------------------------------------
Total investments (identified cost $978,648,417) 816,258,146
Cash 650,844
Dividends and accrued interest receivable 1,017,664
Variation margin receivable on futures contracts 18,400
Other assets 47,490
--------------------------------------------------------------------------------------
Total assets 817,992,544
--------------------------------------------------------------------------------------
LIABILITIES
Preferred Stock dividends payable 470,463
Accrued investment management services fees 245,625
Accrued Stockholder servicing and transfer agency fees 973,679
Accrued administrative services fees 22,345
Accrued stockholders' meeting fees 65,761
Other accrued expenses 358,216
--------------------------------------------------------------------------------------
Total liabilities 2,136,089
--------------------------------------------------------------------------------------
NET INVESTMENT ASSETS 815,856,455
Preferred Stock 37,637,000
--------------------------------------------------------------------------------------
NET ASSETS FOR COMMON STOCK $778,219,455
--------------------------------------------------------------------------------------
Net assets per share of Common Stock
(Market value -- $9.19) $ 11.13
--------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 15
STATEMENT OF CAPITAL STOCK AND SURPLUS ----------------------------------------
JUNE 30, 2009 (UNAUDITED)
CAPITAL STOCK
$2.50 Cumulative Preferred Stock, $50 par value, assets
coverage per share $1,084
Shares authorized -- 1,000,000; issued and
outstanding -- 752,740 $ 37,637,000
Common Stock, $0.50 par value:
Shares authorized -- 159,000,000; issued and
outstanding -- 69,903,600 34,951,800
SURPLUS
Capital surplus 1,734,700,922
Excess of dividends over net investment income (1,746,554)
Accumulated net realized gain (loss) (827,055,358)
Net unrealized depreciation on investments (162,631,355)
----------------------------------------------------------------------------
NET INVESTMENT ASSETS $ 815,856,455
----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
16 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2009
INVESTMENT INCOME
Income:
Dividends $ 11,497,927
Income distributions from affiliated money market fund 2,360
--------------------------------------------------------------------------------
Total income 11,500,287
--------------------------------------------------------------------------------
Expenses:
Investment management services fees 1,537,418
Stockholder servicing and transfer agency fees 2,196,809
Administrative services fees 22,345
Custodian fees 86,332
Stockholders' meeting fees 98,135
Printing and postage 246,600
Professional fees 35,989
Compensation of board members 12,730
Tender offer fees 479,860
Other 225,103
--------------------------------------------------------------------------------
Total expenses 4,941,321
--------------------------------------------------------------------------------
Investment income (loss) -- net* 6,558,966
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (167,767,799)
Futures contracts (1,634,939)
Payment from the Investment Manager (Note 2) 3,120,206
--------------------------------------------------------------------------------
Net realized gain (loss) on investments (166,282,532)
Net change in unrealized depreciation on investments 145,843,298
--------------------------------------------------------------------------------
Net gain (loss) on investments (20,439,234)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (13,880,268)
--------------------------------------------------------------------------------
* Net investment income for Common Stock is $5,618,041, which is net of
Preferred Stock dividends of $940,925.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 17
STATEMENTS OF CHANGES IN NET INVESTMENT
ASSETS -------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DEC. 31, 2008
(UNAUDITED)
OPERATIONS
Investment Income (loss) -- net $ 6,558,966 $ 53,714,647
Net realized gain (loss) on investments (166,282,532) (937,438,211)
Net change in unrealized appreciation (depreciation) on
investments 145,843,298 (116,914,507)
----------------------------------------------------------------------------------------------------
Net increase (decrease) in net investment assets resulting from
operations (13,880,268) (1,000,638,071)
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO STOCKHOLDERS
Net investment income:
Preferred Stock (per share: $1.25 and $2.50) (940,925) (1,881,850)
Common Stock (per share: $0.10 and $0.50) (7,330,148) (51,832,797)
Net realized gain:
Common Stock (per share: $0 and $0.39) -- (40,184,455)
Return of capital:
Common Stock (per share: $0 and $1.22) -- (126,224,708)
----------------------------------------------------------------------------------------------------
Decrease in net investment assets from distributions (8,271,073) (220,123,810)
----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Value of shares of Common Stock issued at market price in
distributions (348,285 and 4,651,557 shares) 2,958,559 70,865,000
Value of shares of Common Stock issued for investment plan
purchases (238,102 and 375,285 shares) 2,096,305 5,809,097
Cost of shares of Common Stock purchased from investment plan
participants (629,207 and 1,810,291 shares) (5,569,768) (27,998,020)
Cost of shares of Common Stock purchased in the open market (0
and 1,463,111 shares) -- (26,013,153)
Cost of shares of Common Stock purchased in in-kind tender offer
(0 and 25,633,247 shares) -- (281,453,052)
Cost of shares of Common Stock purchased in cash tender offer
(9,247,000 and 0 shares) (93,024,820) --
Net proceeds from issuance of shares of Common Stock upon
exercise of warrants (12,095 and 23,516 shares) 11,248 22,362
----------------------------------------------------------------------------------------------------
Increase (decrease) in net investment assets from capital share
transactions (93,528,476) (258,767,766)
----------------------------------------------------------------------------------------------------
Total increase (decrease) in net investment assets (115,679,817) (1,479,529,647)
Net investment assets at beginning of period 931,536,272 2,411,065,919
----------------------------------------------------------------------------------------------------
Net investment assets at end of period $ 815,856,455 $ 931,536,272
----------------------------------------------------------------------------------------------------
Excess of distributions over net investment income $ (1,746,554) $ (34,447)
----------------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the
current year presentation.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
18 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
Per share operating performance data is designed to allow investors to trace the
operating performance, on a per Common shares basis, from the beginning net
asset value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, the per share amounts are derived by
converting the actual dollar amounts incurred for each item, as disclosed in the
financial statements, to their equivalent per Common share amounts, using
average shares outstanding during the period.
Total investment return measures the Fund's performance assuming that investors
purchased shares of the Fund at the market value or net asset value as of the
beginning of the period, invested all distributions paid, as provided for in the
Fund's Prospectus and Automatic Dividend Investment and Cash Purchase Plan, and
then sold their shares at the closing market value or net asset value per share
on the last day of the period. The computations do not reflect any sales charges
or transaction costs on your investment or taxes investors may incur on
distributions or on the sale of shares of the Fund, and are not annualized for
periods of less than one year.
The ratios of expenses and net investment income to average net investment
assets and to average net assets for Common Stock for the periods presented do
not reflect the effect of dividends paid to Preferred Stockholders.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 19
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
PER SHARE OPERATING PERFORMANCE
Fiscal period ended Dec. 31,
2009(e) 2008 2007 2006 2005 2004
Net asset value,
beginning of period $11.29 $23.03 $25.66 $22.16 $21.87 $19.55
----------------------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income (loss) .09 .52 .84 .33 .26 .26
Net gains (losses)
(both realized and
unrealized) (.16) (9.88) (1.01) 3.47 .29 2.31
----------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
from investment
operations (.07) (9.36) (0.17) 3.80 .55 2.57
----------------------------------------------------------------------------------------------------------------------------
LESS:
Dividends paid on
Preferred Stock (.01) (.02) (.02) (.02) (.02) (.02)
Dividends paid on
Common Stock (.10) (.50) (.87) (.28) (.24) (.23)
Distributions from
realized gains -- (.39) (1.57) -- -- --
Distributions from
return of capital -- (1.22) -- -- -- --
Issuance of Common
Stock in
distributions (.02) (.25) -- -- -- --
----------------------------------------------------------------------------------------------------------------------------
Total distributions (.13) (2.38) (2.46) (.30) (.26) (.25)
Payment from the
Investment
Manager(b) .04 -- -- -- -- --
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $11.13 $11.29 $23.03 $25.66 $22.16 $21.87
----------------------------------------------------------------------------------------------------------------------------
Adjusted net asset
value, end of
period(a) $11.09 $11.26 $22.98 $25.60 $22.10 $21.82
Market value, end of
period $9.19 $9.86 $20.90 $22.38 $18.58 $18.28
TOTAL RETURN
Based upon market
value (5.64%) (45.89%) 3.51% 22.10% 2.98% 12.95%
Based upon net asset
value (.19%)(b) (43.77%) (.52%) 17.38% 2.66% 13.36%(c)
RATIOS/SUPPLEMENTAL DATA
Expenses to average
net investment
assets 1.12%(d) .71% .65% .79% .64% .65%
Expenses to average
net assets for
Common Stock 1.17%(d) .73% .66% .80% .65% .66%
Net investment
income to average
net investment
assets 1.83%(d) 2.90% 3.17% 1.37% 1.18% 1.26%
Net investment
income to average
net assets for
Common Stock 1.93%(d) 2.96% 3.22% 1.40% 1.20% 1.28%
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate 38% 111% 123% 122% 71% 47%
----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT
ASSETS, END OF
PERIOD (IN
MILLIONS):
For Common Stock $777,908 $893,899 $2,373,429 $2,657,209 $2,392,304 $2,470,781
For Preferred Stock 37,637 37,637 37,637 37,637 37,637 37,637
----------------------------------------------------------------------------------------------------------------------------
TOTAL NET INVESTMENT
ASSETS $815,545 $931,536 $2,411,066 $2,694,846 $2,429,941 $2,508,418
----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights.
--------------------------------------------------------------------------------
20 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Assumes the exercise of outstanding warrants.
(b) During the six months ended June 30, 2009, the Investment Manager reimbursed
the Fund for a loss on a trading error. Had the Fund not received this
reimbursement, total return would have been lower by 0.48%.
(c) Excluding the effect of the payments received from the Fund's predecessor
investment manager in 2004, the total investment return would have been
13.33%.
(d) Adjusted to an annual basis. The Non-Recurring Charges (see Note 4 to the
Financial Statements) have not been annualized, as they represent a one-time
occurrence.
(e) Six months ended June 30, 2009 (Unaudited).
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 21
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS OF JUNE 30, 2009)
1. ORGANIZATION
Tri-Continental Corporation (the Fund) is registered under the Investment
Company Act of 1940, as amended (1940 Act) as a diversified, closed-end
management investment company. The Fund has 1 million authorized shares of
preferred capital stock and 159 million authorized shares of common stock which
trades primarily on the New York Stock Exchange (NYSE) under the symbol "TY".
The Fund invests primarily for the longer term and its objective is to produce
future growth of both capital and income while providing reasonable current
income.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of business of the NYSE. Securities
traded on national securities exchanges or included in national market systems
are valued at the last quoted sales price. Debt securities are generally traded
in the over-the-counter market and are valued by an independent pricing service
using an evaluated bid. When market quotes are not readily available, the
pricing service, in determining fair values of debt securities, takes into
consideration such factors as current quotations by broker/dealers, coupon,
maturity, quality, type of issue, trading characteristics, and other yield and
risk factors it deems relevant in determining valuations. Foreign securities are
valued based on quotations from the principal market in which such securities
are normally traded. The procedures adopted by the Board of Directors (the
Board) generally contemplate the use of fair valuation in the event that price
quotations or valuations are not readily available, price quotations or
valuations from other sources are not reflective of market value and thus deemed
unreliable, or a significant event has occurred in relation to a security or
class of securities (such as foreign securities) that is not reflected in price
quotations or valuations from other sources. A fair value price is a good faith
estimate of the value of a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on
--------------------------------------------------------------------------------
22 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource
Investments, LLC (RiverSource Investments or the Investment Manager), as
administrator to the Fund, will fair value foreign securities pursuant to
procedures adopted by the Board, including utilizing a third party pricing
service to determine these fair values. These procedures take into account
multiple factors, including movements in the U.S. securities markets, to
determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the NYSE.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61(st) day before maturity. Short-term securities
maturing in 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is an approximation of market value. Investments in money market
funds are valued at net asset value.
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
ILLIQUID SECURITIES
At June 30, 2009, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at June 30, 2009 was
$4,898,405 representing 0.60% of net assets. Certain illiquid securities may be
valued by management at fair value according to procedures approved, in good
faith, by the Board. According to Board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 15%
limitation specified
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 23
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
above. Assets are liquid if they can be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which the
asset is valued by the Fund.
PAYMENT FROM THE INVESTMENT MANAGER
During the six months ended June 30, 2009, the Investment Manager voluntarily
reimbursed the Fund $3,120,206 for a loss on a trading error.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income (which includes net short-term capital gains) to
Stockholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all the tax returns filed for the last three
years.
DIVIDENDS TO STOCKHOLDERS
Effective Jan. 8, 2009, the Fund adopted an earned distribution policy. Under
this policy, the Fund intends to make distributions to holders of Common Stock
that are approximately equal to net investment income, less dividends payable on
the Fund's Preferred Stock. Capital gains, when available, are distributed to
Common Stockholders along with the last income dividend of the calendar year.
Prior to Jan. 8, 2009, the Fund had a level rate distribution policy which
called for quarterly distributions to holders of Common Stock equal to 2.75% of
the net asset value attributable to a share of the Fund's Common Stock on the
last business day of the preceding calendar quarter (or approximately 11%
annually) consisting of distributions of income and one or both of net realized
capital gains and returns of capital.
Dividends and other distributions to Stockholders are recorded on ex-dividend
dates.
--------------------------------------------------------------------------------
24 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividends receivable are recognized on ex-dividend dates, except that
certain dividends from foreign securities where the ex-dividend dates may have
passed are recorded as soon as the Fund is informed of the dividend. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
3. INVESTMENTS IN DERIVATIVES
The Fund may invest in certain derivative instruments, which are transactions
whose values depend on or are derived from (in whole or in part) the value of
one or more other assets, such as securities, currencies, commodities or
indices. Such derivative instruments may be used to maintain cash reserves while
maintaining exposure to certain other assets, to offset anticipated declines in
values of investments, to facilitate trading, to reduce transaction costs, and
to pursue higher investment returns. The Fund may also use derivative
instruments to mitigate certain investment risks, such as foreign currency
exchange rate risk, interest rate risk, and credit risk.
FUTURES TRANSACTIONS
The Fund may buy and sell financial futures contracts traded on any U.S. or
foreign exchange to produce incremental earnings, hedge existing positions or
protect against market changes in the value of equities, interest rates or
foreign currencies. The Fund may also buy and write put and call options on
these futures contracts. A futures contract represents a commitment for the
future purchase or sale of an asset at a specified price on a specified date.
Futures and options on futures are valued daily based upon the last sale price
at the close of the market on the principal exchange on which they are traded.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Upon entering into futures contracts, the Fund bears the risk of interest rates,
exchange rates or securities prices moving unexpectedly, in which case, the Fund
may not achieve the anticipated benefits of the futures contracts and may
realize a loss. Additional risks include counterparty credit risk, the
possibility of an illiquid market, and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities. The gross
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 25
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
notional amount of long contracts was $10.5 million at June 30, 2009. The fair
value of such contracts on June 30, 2009 is set forth in the table below.
OPTION TRANSACTIONS
The Fund may buy and write options traded on any U.S. or foreign exchange or in
the over-the-counter (OTC) market to produce incremental earnings, protect
gains, and facilitate buying and selling of securities for investments. The Fund
may also buy and sell put and call options and write covered call options on
portfolio securities. Options are contracts which entitle the holder to purchase
or sell securities or other financial instruments at a specified price, or in
the case of index options, to receive or pay the difference between the index
value and the strike price of the index option. Completion of transactions for
options traded in the OTC market depends upon the performance of the other
party. Cash collateral may be collected or posted by the Fund to secure certain
OTC options trades. Cash collateral held or posted by the Fund for such option
trades must be returned to the counterparty or the Fund upon closure, exercise
or expiration of the contract.
Option contracts purchased are recorded as investments and options contracts
written are recorded as liabilities of the Fund. Option contracts are valued
daily at the closing prices on their primary exchanges and unrealized
appreciation or depreciation is recorded. Option contracts, including OTC option
contracts, with no readily available market value are valued using quotations
obtained from independent brokers as of the close of the NYSE. The Fund will
realize a gain or loss when the option transaction expires or is exercised. When
options on debt securities or futures are exercised, the Fund will realize a
gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
The risk in buying an option is that the Fund pays a premium whether or not the
option is exercised. The Fund also has the additional risk of being unable to
enter into a closing transaction if a liquid secondary market does not exist.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The Fund's maximum payout in the case of
written put option contracts represents the maximum potential amount of future
payments (undiscounted) that the Fund could be required to make as a guarantor
for written put options. For OTC options contracts, the transaction is also
subject to counterparty credit risk. The maximum payout amount may be offset by
the subsequent sale, if any, of assets obtained upon the exercise of the put
options by
--------------------------------------------------------------------------------
26 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
holders of the option contracts or proceeds received upon entering into the
contracts. At June 30, 2009, the Fund had no outstanding written or purchased
options.
EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of the Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on the Fund's operations over the period including realized gains
or losses and unrealized gains or losses. The derivative schedules following the
Portfolio of Investments present additional information regarding derivative
instruments outstanding at the end of the period, if any.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JUNE 30, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------- -------------------------------------
STATEMENT OF ASSETS STATEMENT OF ASSETS
RISK EXPOSURE AND LIABILITIES AND LIABILITIES
CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE
-------------------------------------------------------------------------------------
Equity contracts Net assets --
unrealized
N/A N/A depreciation $241,084*
-------------------------------------------------------------------------------------
TOTAL N/A $241,084
-------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as
reported in the Futures Contracts Outstanding table following the Portfolio
of Investments. Only the current day's variation margin is reported in
receivables or payables in the Statement of Assets and Liabilities.
EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 2009
AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
--------------------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES OPTIONS TOTAL
--------------------------------------------------------------------------
Equity contracts $(1,634,939) $(13,629,094) $(15,264,033)
--------------------------------------------------------------------------
TOTAL $(1,634,939) $(13,629,094) $(15,264,033)
--------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
---------------------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES OPTIONS TOTAL
---------------------------------------------------------------------------
Equity contracts $(241,084) $13,368,643 $13,127,559
---------------------------------------------------------------------------
TOTAL $(241,084) $13,368,643 $13,127,559
---------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
4. EXPENSES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines on behalf of the Fund which securities will be purchased, held or
sold. Effective June 15, 2009, the management fee charged by the Investment
Manager is 0.355% of the Fund's average daily net assets. Prior to June 15,
2009, the Investment Manager received a fee equal to 0.40% of the Fund's average
daily net assets. The management fee for the six months ended June 30, 2009 was
0.40% of the Fund's average daily net assets. The reduction in the investment
management services fee on June 15, 2009 is related to the elimination of the
administrative portion of the management fee that is now being charged
separately to the Fund through the Administrative Services Agreement with
Ameriprise Financial. See Administrative services fees below for more
information.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, effective June 15, 2009, the Fund
pays Ameriprise Financial a fee for administration and accounting services equal
to a percentage of the Fund's average daily net assets that declines from 0.06%
to 0.03% annually as the Fund's net assets increase. The administrative services
fee was 0.01% of the Fund's average daily net assets for the six months ended
June 30, 2009 (annualized). Prior to June 15, 2009, Ameriprise Financial
administered certain aspects of the Fund's business and other affairs for no
additional fee. The fees payable under the Administrative Services Agreement
beginning on June 15, 2009 are offset by corresponding decreases in the
investment management fees charged to the Fund and the elimination of separate
fees that were previously payable to State Street Bank and Trust Company, in its
capacity as the Fund's prior administrative agent.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the six months ended June
30, 2009, other expenses paid to this company were $3,873.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund under the 1940 Act may defer receipt of their
compensation. Deferred amounts are treated as though equivalent dollar amounts
had been invested in shares of the Fund or other funds in the RiverSource Family
--------------------------------------------------------------------------------
28 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
of Funds. The Fund's liability for these amounts is adjusted for market value
changes and remains in the Fund until distributed in accordance with the Plan.
STOCKHOLDER SERVICING FEES
Under a Stockholder Service Agent Agreement, RiverSource Service Corporation
(the Stockholder Servicing Agent) maintains Fund Stockholder accounts and
records and provides Fund Stockholder services. Effective June 15, 2009, the
Fund pays the Stockholder Servicing Agent a fee equal to 0.10% of the average
daily net assets of the Fund's shares of Common Stock.
Prior to June 15, 2009, Seligman Data Corp. (SDC), owned by six associated
investment companies, including the Fund, provided Stockholder servicing and
transfer agency services to the Fund, as well as certain other Seligman funds.
The Fund's ownership interest in SDC at June 30, 2009 is included in other
assets in the Statement of Assets and Liabilities at a cost of $43,681. In
January 2009, the Board approved the Fund's termination of the Stockholder
account servicing and transfer agency relationship with SDC, and the engagement
of RiverSource Service Corporation to provide Stockholder account and transfer
agency services. As a result of the Board's termination of the Stockholder
servicing and transfer agency relationship with SDC (which was SDC's sole
business), SDC has exited the Stockholder servicing and transfer agent business,
effective June 15, 2009.
For the period from Jan. 1, 2009 to June 15, 2009, SDC charged the Fund $915,850
for Stockholder account and transfer agency services in accordance with a
methodology approved by the Fund's Board.
In connection with the termination of the Fund's relationship with SDC, the Fund
incurred certain non-recurring charges, including charges relating to SDC's
leases (the Non-Recurring Charges). These Non-Recurring Charges were incurred
over a period from Jan. 28, 2009 to June 12, 2009, and amounted to $1,174,205,
or 0.16% of the Fund's average daily net assets for the six months ended June
30, 2009 (not annualized). These Non-Recurring Charges are included in the
Stockholder servicing and transfer agency fees in the Statement of Operations.
The liability remaining at June 30, 2009 for the Non-Recurring Charges amounted
to $935,293 and is included in the accrued Stockholder servicing and transfer
agency fees in the Statement of Assets and Liabilities.
The Fund and certain other associated investment companies (together, the
Guarantors) have severally but not jointly guaranteed the performance and
observance of all the terms and conditions of a lease entered into by SDC,
including the payment of rent by SDC (the Guaranty). The lease and the related
Guaranty expire in January 2019. The obligation of the Fund to pay any amount
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
due under the Guaranty is limited to a specified percentage of the full amount,
which generally is based on the Fund's percentage of the expenses billed by SDC
to all Guarantors in the preceding calendar quarter. As of June 30, 2009, the
Fund's total potential future obligation under the Guaranty over the life of the
Guaranty is $921,300. The net present value of this obligation as of June 12,
2009 has been expensed as part of the aforementioned Non-Recurring Charges.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $299,026,571 and $377,204,666, respectively, for the six
months ended June 30, 2009. Realized gains and losses are determined on an
identified cost basis.
6. CAPITAL STOCK TRANSACTIONS
Under the Fund's Charter, dividends on Common Stock cannot be declared unless
net assets, after such dividends and dividends on Preferred Stock, equal at
least $100 per share of Preferred Stock outstanding. The Preferred Stock is
subject to redemption at the Fund's option at any time on 30 days' notice at $55
per share (or a total of $41,400,700 for the shares outstanding) plus accrued
dividends, and entitled in liquidation to $50 per share plus accrued dividends.
The Fund, in connection with its Automatic Dividend Investment and Cash Purchase
Plan and other Stockholder plans, acquires and issues shares of its own Common
Stock, as needed, to satisfy Plan requirements. For the six months ended June
30, 2009, the Fund purchased 629,207 shares of Common Stock from Plan
participants at a cost of $5,569,768, which represented a weighted average
discount of 13.8% from the net asset value of those acquired shares. A total of
238,102 shares were issued to Plan participants during the period for proceeds
of $2,096,305, a weighted average discount of 14.4% from the net asset value of
those shares. In addition, a total of 348,285 shares were issued at market price
in distributions during the period for proceeds of $2,958,559, a weighted
average discount of 15.2% from the net asset value of those shares.
The Fund may make additional purchases of its Common Stock in the open market
and elsewhere at such prices and in such amounts as the Board may deem
advisable. No such additional purchases were made during the six months ended
June 30, 2009.
At June 30, 2009, the Fund reserved 229,587 shares of Common Stock for issuance
upon exercise of 9,491 Warrants, each of which entitled the holder to purchase
24.19 shares of Common Stock at $0.93 per share.
--------------------------------------------------------------------------------
30 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
Assuming the exercise of all Warrants outstanding at June 30, 2009, net
investment assets would have increased by $213,516 and the net asset value of
the Common Stock would have been $11.09 per share. The number of Warrants
exercised during the six months ended June 30, 2009 and the year ended Dec. 31,
2008 was 500 and 994, respectively.
The Fund conducted a cash tender offer for up to 12.5% of its issued and
outstanding shares of Common Stock, which expired on Feb. 11, 2009. The number
of shares of Common Stock that were tendered through the expiration date was
9,247,000 (or approximately 11.7% of the Fund's Common Stock outstanding).
Because less than 12.5% of the issued and outstanding shares of Common Stock of
the Fund was tendered through the expiration date, all properly tendered shares
were accepted for purchase. The purchase price was equal to 99.25% of the net
asset value per share of the Fund's Common Stock as of the close of the regular
trading session of the NYSE on Feb. 12, 2009. The total value of the Common
Stock shares purchased was $93,024,820, which was paid in cash.
7. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of funds in the
RiverSource Family of Funds and other institutional clients of RiverSource
Investments. The cost of the Fund's purchases and proceeds from sales of shares
of RiverSource Short-Term Cash Fund aggregated $20,183,964 and $1,138,836,
respectively, for the six months ended June 30, 2009. The income distributions
received with respect to the Fund's investment in RiverSource Short-Term Cash
Fund can be found in the Statement of Operations and the Fund's invested balance
in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the
Portfolio of Investments.
8. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of options contracts,
investments in partnerships, post-October losses and losses deferred due to wash
sales. The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to the timing of dividend distributions,
the fiscal year in which amounts are distributed may differ from the year that
the income or realized gains (losses) were recorded by the Fund.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
For federal income tax purposes, the Fund had a capital loss carry-over of
$217,818,492 at Dec. 31, 2008, that if not offset by capital gains will expire
in 2016.
Because the measurement periods for a regulated investment company's income are
different for excise tax purposes versus income tax purposes, special rules are
in place to protect the amount of earnings and profits needed to support excise
tax distributions. As a result, the Fund is permitted to treat net capital
losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss)
as occurring on the first day of the following tax year. At Dec. 31, 2008, the
Fund had a post-October loss of $414,241,970 that is treated for income tax
purposes as occurring on Jan. 1, 2009.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires. There is no assurance that the Fund will be able to utilize all of its
capital loss carry-over before it expires.
9. RISKS RELATING TO CERTAIN INVESTMENTS
To the extent that the Fund invests a substantial percentage of its assets in an
industry, the Fund's performance may be negatively affected if that industry
falls out of favor. Stocks of large-capitalization companies have at times
experienced periods of volatility and negative performance. During such periods,
the value of such stocks may decline and the Fund's performance may be
negatively affected.
10. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statement of Assets and Liabilities
through Aug. 24, 2009, the date of issuance of the Fund's financial statements.
There were no events or transactions that occurred during the period that
materially impacted the amounts or disclosures in the Fund's financial
statements.
11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (now known as
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
--------------------------------------------------------------------------------
32 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court,
asking the U.S. Supreme Court to stay the District Court proceedings while the
U.S. Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise
Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In
late 2003, Seligman conducted an extensive internal review concerning mutual
fund trading practices. Seligman's review, which covered the period 2001-2003,
noted one arrangement that permitted frequent trading in certain open-end
registered investment companies managed by Seligman (the Seligman Funds); this
arrangement was in the process of being closed down by Seligman before September
2003. Seligman identified three other arrangements that permitted frequent
trading, all of which had been terminated by September 2002. In January 2004,
Seligman, on a voluntary basis, publicly disclosed these four arrangements to
its clients and to shareholders of the
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Seligman Funds. Seligman also provided information concerning mutual fund
trading practices to the SEC and the Office of the Attorney General of the State
of New York (NYAG).
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund
Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the
Seligman Parties), alleging, in substance, that the Seligman Parties permitted
various persons to engage in frequent trading and, as a result, the prospectus
disclosure used by the registered investment companies then managed by Seligman
was and had been misleading. The NYAG included other related claims and also
claimed that the fees charged by Seligman to the Seligman Funds were excessive.
On March 13, 2009, without admitting or denying any violations of law or
wrongdoing, the Seligman Parties entered into a stipulation of settlement with
the NYAG and settled the claims made by the NYAG. Under the terms of the
settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement
resolved all outstanding matters between the Seligman Parties and the NYAG. In
addition to the foregoing matter, the New York staff of the SEC indicated in
September 2005 that it was considering recommending to the Commissioners of the
SEC the instituting of a formal action against Seligman and Seligman Advisors,
Inc. relating to frequent trading in the Seligman Funds. Seligman responded to
the staff in October 2005 that it believed that any action would be both
inappropriate and unnecessary, especially in light of the fact that Seligman had
previously resolved the underlying issue with the Independent Directors of the
Seligman Funds and made recompense to the affected Seligman Funds. There have
been no further developments with the SEC on this matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the funds. Further,
although we believe
--------------------------------------------------------------------------------
34 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
proceedings are not likely to have a material adverse effect on the funds or the
ability of Ameriprise Financial or its affiliates to perform under their
contracts with the funds, these proceedings are subject to uncertainties and, as
such, we are unable to estimate the possible loss or range of loss that may
result. An adverse outcome in one or more of these proceedings could result in
adverse judgments, settlements, fines, penalties or other relief that could have
a material adverse effect on the consolidated financial condition or results of
operations of Ameriprise Financial.
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; visiting
seligman.com; or searching the website of the Securities and Exchange Commission
(SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies
relating to portfolio securities is filed with the SEC by August 31 for the most
recent 12-month period ending June 30 of that year, and is available without
charge by visiting seligman.com; or searching the website of the SEC at
www.sec.gov.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 35
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -----------------------
On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent
registered public accounting firm for the 2009 fiscal year. A majority of the
Fund's Board of Directors, including a majority of the Independent Directors,
approved the appointment of Ernst & Young LLP effective March 18, 2009. On June
9, 2009, Fund Stockholders ratified the Board's selection of Ernst & Young LLP
as the Fund's independent registered public accounting firm for 2009. The
predecessor independent registered public accounting firm's reports on the
Fund's financial statements for the year ended Dec. 31, 2008 and the year ended
Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
During such fiscal periods and through March 11, 2009 there were no
disagreements between the Fund and the predecessor independent registered public
accounting firm on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which such disagreements,
if not resolved to the satisfaction of the predecessor independent registered
public accounting firm, would have caused them to make reference to the subject
matter of the disagreement in connection with their reports on the financial
statements for such fiscal periods.
--------------------------------------------------------------------------------
36 TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT
PROXY RESULTS -----------------------------------------------------------------
The Annual Meeting of Stockholders of the Fund was held on June 9, 2009.
Stockholders voted in favor of each of the Board's two proposals and voted
against a Stockholder proposal. The description of each proposal and number of
shares voted are as follows:
PROPOSAL 1
To elect four Directors to the Fund's Board, each to hold office until the 2012
annual meeting of Stockholders of the Fund and until their successors are
elected and qualify:
DIRECTOR FOR WITHHELD
-----------------------------------------------
Kathleen A. Blatz 48,012,328 4,361,447
Pamela G. Carlton 48,016,192 4,357,583
Alison Taunton-Rigby 48,066,839 4,306,953
William F. Truscott 48,159,878 4,213,898
-----------------------------------------------
PROPOSAL 2
To ratify the selection of Ernst & Young LLP as the Fund's independent
registered public accounting firm for 2009:
FOR AGAINST ABSTAINING
------------------------------------------------
50,265,316 1,355,190 753,272
------------------------------------------------
PROPOSAL 3
To provide for cumulative voting in the election of directors of the Fund:
FOR AGAINST ABSTAINING
------------------------------------------------
9,152,096 21,866,117 1,889,075
------------------------------------------------
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 SEMIANNUAL REPORT 37
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for
semi-annual reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Total Number of Maximum Number
Shares Purchased of Shares that
as Part of May Yet Be
Total Number Publicly Announced Purchased Under
of Shares Average Price Plans or the Plans
Period Purchased Paid Per Share Programs(1) or Programs(1)
------------------ ------------ -------------- ------------------ ---------------
1-01-09 to 1-31-09 72,692 $9.92 72,692 3,886,374
2-01-09 to 2-28-09 52,413 8.50 52,413 3,833,961
3-01-09 to 3-31-09 148,348 8.01 148,348 3,685,613
4-01-09 to 4-30-09 107,920 8.68 107,920 3,577,693
5-01-09 to 5-31-09 149,976 9.21 149,976 3,427,717
6-01-09 to 6-30-09 97,858 9.16 97,858 3,329,859
(1) On January 8, 2009, the registrant's Board renewed a modified version of
the registrant's stock repurchase program. For 2009, the registrant is
authorized to repurchase up to 5% of its outstanding Common Stock directly
from stockholders and in the open market, provided that, with respect to
shares repurchased in the open market the excess of the net asset value of
a share of Common Stock over its market price (the discount) is greater
than 10%. The registrant's 2008 stock repurchase program allowed the
registrant to repurchase up to 5% of the registrant's outstanding Common
Stock during the period directly from stockholders and in the open market,
provided that, with respect to shares purchased in the open market, the
discount was greater than 5%.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's Principal Financial Officer and Principal Executive Officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Tri-Continental Corporation
By /s/ Patrick T. Bannigan
------------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date September 2, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
-------------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date September 2, 2009
By /s/ Jeffrey P. Fox
-------------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date September 2, 2009