UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS 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: 9/30
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
SEPT. 30, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
COMMON STOCKS (99.6%)
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (2.2%)
Boeing 59,616 $3,228,206
General Dynamics 96,271 6,219,106
Goodrich 15,984 868,571
ITT 18,839 982,454
Lockheed Martin 45,098 3,521,252
Northrop Grumman 59,209 3,064,066
Raytheon 37,910 1,818,543
United Technologies 21,912 1,335,098
---------------
Total 21,037,296
-------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.2%)
CH Robinson Worldwide 26,764(g) 1,545,621
FedEx 4,668 351,127
---------------
Total 1,896,748
-------------------------------------------------------------------------------------
AUTO COMPONENTS (--%)
Johnson Controls 10,469(g) 267,588
-------------------------------------------------------------------------------------
AUTOMOBILES (0.1%)
Harley-Davidson 47,514 1,092,822
-------------------------------------------------------------------------------------
BEVERAGES (2.2%)
Brown-Forman Cl B 20,369(g) 982,193
Coca-Cola 191,183 10,266,527
Coca-Cola Enterprises 91,210 1,952,806
Pepsi Bottling Group 26,646 970,980
PepsiCo 105,966 6,215,966
---------------
Total 20,388,472
-------------------------------------------------------------------------------------
BIOTECHNOLOGY (0.8%)
Amgen 71,779(b) 4,323,249
Biogen Idec 21,192(b) 1,070,620
Cephalon 31,037(b,g) 1,807,595
---------------
Total 7,201,464
-------------------------------------------------------------------------------------
BUILDING PRODUCTS (0.1%)
Masco 68,608(g) 886,415
-------------------------------------------------------------------------------------
CAPITAL MARKETS (4.6%)
Bank of New York Mellon 166,834 4,836,518
Franklin Resources 9,699 975,719
Goldman Sachs Group 98,380 18,136,354
Morgan Stanley 468,016(g) 14,452,334
State Street 61,120 3,214,912
WCAS Capital Partners II LP 4,292,803(i) 1,622,679
---------------
Total 43,238,516
-------------------------------------------------------------------------------------
CHEMICALS (1.5%)
Air Products & Chemicals 27,099 2,102,340
CF Inds Holdings 9,852 849,538
Dow Chemical 269,313 7,020,991
EI du Pont de Nemours & Co 70,716(g) 2,272,812
PPG Inds 26,162 1,522,890
---------------
Total 13,768,571
-------------------------------------------------------------------------------------
COMMERCIAL BANKS (3.0%)
BB&T 70,863(g) 1,930,308
Comerica 50,712(g) 1,504,625
Fifth Third Bancorp 98,736(g) 1,000,196
First Horizon Natl 74,911(b) 991,066
KeyCorp 123,471 802,562
Marshall & Ilsley 140,663 1,135,150
PNC Financial Services Group 158,238(g) 7,688,784
SunTrust Banks 149,950(g) 3,381,373
Wells Fargo & Co 359,945 10,143,250
---------------
Total 28,577,314
-------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.3%)
Avery Dennison 27,121 976,627
Iron Mountain 27,654(b) 737,256
RR Donnelley & Sons 55,756 1,185,372
---------------
Total 2,899,255
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
8 TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
COMMUNICATIONS EQUIPMENT (1.5%)
Cisco Systems 173,076(b) $4,074,209
Motorola 406,815 3,494,541
QUALCOMM 137,914 6,203,372
---------------
Total 13,772,122
-------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (8.0%)
Apple 172,384(b) 31,954,823
Dell 351,031(b) 5,356,733
Hewlett-Packard 110,964 5,238,610
IBM 232,905(e) 27,857,767
Lexmark Intl Cl A 64,655(b,g) 1,392,669
NetApp 42,759(b) 1,140,810
QLogic 9,925(b,g) 170,710
Western Digital 78,329(b) 2,861,358
---------------
Total 75,973,480
-------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.1%)
Fluor 25,350 1,289,048
-------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.1%)
Vulcan Materials 16,377(g) 885,504
-------------------------------------------------------------------------------------
CONSUMER FINANCE (0.8%)
American Express 29,059 985,100
Capital One Financial 110,776(g) 3,958,026
Discover Financial Services 99,564 1,615,924
SLM 129,265(b,g) 1,127,191
---------------
Total 7,686,241
-------------------------------------------------------------------------------------
DISTRIBUTORS (0.1%)
Genuine Parts 29,421 1,119,763
-------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.5%)
Apollo Group Cl A 45,020(b) 3,316,624
H&R Block 77,095 1,417,006
---------------
Total 4,733,630
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (5.2%)
Bank of America 1,472,802 24,919,810
CIT Group 137,161(g) 165,965
Citigroup 2,617,393 12,668,182
IntercontinentalExchange 14,207(b) 1,380,778
JPMorgan Chase & Co 236,534 10,364,920
---------------
Total 49,499,655
-------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (3.3%)
AT&T 596,178 16,102,768
CenturyTel 36,445 1,224,552
Frontier Communications 80,589(g) 607,641
Qwest Communications Intl 183,030(g) 697,344
Verizon Communications 415,670 12,582,331
---------------
Total 31,214,636
-------------------------------------------------------------------------------------
ELECTRIC UTILITIES (1.0%)
Edison Intl 29,772 999,744
FirstEnergy 39,287 1,796,202
Northeast Utilities 38,587 916,055
Pinnacle West Capital 30,607 1,004,522
Progress Energy 84,011(g) 3,281,469
Southern 56,269 1,782,039
---------------
Total 9,780,031
-------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.2%)
Emerson Electric 43,778 1,754,623
Rockwell Automation 1,979(g) 84,305
---------------
Total 1,838,928
-------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (1.0%)
Corning 403,276 6,174,155
Jabil Circuit 23,163 310,616
Tyco Electronics 121,885(c) 2,715,598
---------------
Total 9,200,369
-------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.9%)
Baker Hughes 67,743(g) 2,889,916
BJ Services 96,118 1,867,573
Diamond Offshore Drilling 11,999(g) 1,146,144
ENSCO Intl 65,568(g) 2,789,263
Halliburton 40,690 1,103,513
Nabors Inds 63,575(b,c) 1,328,718
Natl Oilwell Varco 76,799(b,g) 3,312,340
Noble 62,178(g) 2,360,277
Smith Intl 29,906 858,302
Weatherford Intl 11,912(b,c) 246,936
---------------
Total 17,902,982
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT 9
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FOOD & STAPLES RETAILING (1.1%)
SYSCO 75,211 $1,868,993
Walgreen 82,882 3,105,589
Wal-Mart Stores 90,429 4,439,159
Whole Foods Market 36,853(b,g) 1,123,648
---------------
Total 10,537,389
-------------------------------------------------------------------------------------
FOOD PRODUCTS (0.9%)
Archer-Daniels-Midland 150,534 4,398,603
ConAgra Foods 57,717 1,251,305
Dean Foods 40,694(b) 723,946
Sara Lee 85,249 949,674
Tyson Foods Cl A 79,202 1,000,321
---------------
Total 8,323,849
-------------------------------------------------------------------------------------
GAS UTILITIES (0.2%)
Nicor 24,521(g) 897,223
Questar 22,473 844,086
---------------
Total 1,741,309
-------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.8%)
Becton Dickinson & Co 27,125 1,891,969
Boston Scientific 97,433(b) 1,031,815
CareFusion 28,672(b) 625,050
Medtronic 59,523 2,190,446
St. Jude Medical 49,498(b) 1,930,917
---------------
Total 7,670,197
-------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (2.7%)
Aetna 82,760 2,303,211
Cardinal Health 92,911 2,490,015
CIGNA 125,553 3,526,784
Coventry Health Care 46,172(b,g) 921,593
Humana 24,709(b) 921,646
Laboratory Corp of America Holdings 12,563(b,g) 825,389
McKesson 39,454 2,349,486
Quest Diagnostics 31,680(g) 1,653,379
UnitedHealth Group 281,928 7,059,476
WellPoint 81,596(b) 3,864,387
---------------
Total 25,915,366
-------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (1.5%)
McDonald's 153,102 8,737,531
Starbucks 242,514(b,g) 5,007,914
---------------
Total 13,745,445
-------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.2%)
DR Horton 99,489(g) 1,135,169
Pulte Homes 81,133 891,652
---------------
Total 2,026,821
-------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.4%)
Clorox 19,549 1,149,872
Colgate-Palmolive 35,231 2,687,421
---------------
Total 3,837,293
-------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
Constellation Energy Group 35,925 1,162,892
-------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (2.8%)
General Electric 1,271,888 20,884,401
Textron 66,356(g) 1,259,437
Tyco Intl 115,005(c) 3,965,372
---------------
Total 26,109,210
-------------------------------------------------------------------------------------
INSURANCE (5.2%)
AFLAC 24,619 1,052,216
Allstate 353,880 10,835,805
Aon 84,339 3,431,754
Assurant 28,410 910,825
Chubb 59,901 3,019,609
Hartford Financial Services Group 61,987(g) 1,642,656
Lincoln Natl 49,430(g) 1,280,731
MetLife 172,900 6,582,303
Principal Financial Group 62,611(g) 1,714,915
Progressive 196,964(b) 3,265,663
Prudential Financial 31,793 1,586,789
Torchmark 41,023(g) 1,781,629
Travelers Companies 213,982 10,534,334
Unum Group 57,272 1,227,912
---------------
Total 48,867,141
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
10 TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
INTERNET & CATALOG RETAIL (0.7%)
Amazon.com 62,858(b) $5,868,423
Expedia 41,043(b) 982,980
---------------
Total 6,851,403
-------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (0.2%)
eBay 72,729(b) 1,717,132
-------------------------------------------------------------------------------------
IT SERVICES (1.2%)
Affiliated Computer Services Cl A 28,552(b) 1,546,662
Automatic Data Processing 79,712 3,132,681
Cognizant Technology Solutions Cl A 37,822(b) 1,462,199
Computer Sciences 29,428(b) 1,551,150
Fiserv 20,080(b,g) 967,856
MasterCard Cl A 15,243(g) 3,081,372
---------------
Total 11,741,920
-------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.1%)
Mattel 66,506 1,227,701
-------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.1%)
Life Technologies 22,582(b) 1,051,192
-------------------------------------------------------------------------------------
MACHINERY (1.1%)
Cummins 26,032 1,166,494
Eaton 30,441 1,722,656
Illinois Tool Works 67,069 2,864,517
Ingersoll-Rand 108,637(c,g) 3,331,897
PACCAR 30,371(g) 1,145,290
---------------
Total 10,230,854
-------------------------------------------------------------------------------------
MEDIA (1.3%)
CBS Cl B 202,002 2,434,124
Gannett 82,836(g) 1,036,278
News Corp Cl A 442,638 5,307,230
Viacom Cl B 137,269(b) 3,849,023
---------------
Total 12,626,655
-------------------------------------------------------------------------------------
METALS & MINING (1.7%)
Alcoa 162,736(g) 2,135,096
Allegheny Technologies 24,486(g) 856,765
Freeport-McMoRan Copper & Gold 84,494(g) 5,797,134
Newmont Mining 95,433 4,200,961
Nucor 29,439(g) 1,383,927
United States Steel 30,531(g) 1,354,660
---------------
Total 15,728,543
-------------------------------------------------------------------------------------
MULTILINE RETAIL (1.1%)
Family Dollar Stores 71,498 1,887,547
JC Penney 29,136 983,340
Kohl's 83,558(b) 4,766,984
Macy's 65,125 1,191,136
Nordstrom 33,368(g) 1,019,059
Sears Holdings 11,412(b,g) 745,318
---------------
Total 10,593,384
-------------------------------------------------------------------------------------
MULTI-UTILITIES (0.9%)
Consolidated Edison 61,365(g) 2,512,283
PG&E 101,954(g) 4,128,117
SCANA 27,155(g) 947,710
Xcel Energy 66,717(g) 1,283,635
---------------
Total 8,871,745
-------------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.1%)
Xerox 123,011 952,105
-------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (10.5%)
Apache 14,688(g) 1,348,799
Chesapeake Energy 41,568 1,180,531
Chevron 768,328 54,113,340
ConocoPhillips 332,245 15,004,184
Hess 53,467 2,858,346
Marathon Oil 236,306 7,538,161
Murphy Oil 34,239(g) 1,971,139
Noble Energy 20,977(g) 1,383,643
Occidental Petroleum 88,644 6,949,690
Peabody Energy 22,475(g) 836,520
Range Resources 20,203(g) 997,220
Sunoco 24,149(g) 687,039
Tesoro 44,673(g) 669,202
Valero Energy 207,889 4,030,968
---------------
Total 99,568,782
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
PHARMACEUTICALS (12.8%)
Abbott Laboratories 36,220 $1,791,803
Allergan 51,107 2,900,833
Bristol-Myers Squibb 72,690 1,636,979
Eli Lilly & Co 69,672 2,301,266
Forest Laboratories 114,465(b) 3,369,850
Johnson & Johnson 671,478 40,886,296
King Pharmaceuticals 64,212(b,g) 691,563
Merck & Co 396,929(g) 12,554,864
Mylan 80,061(b,g) 1,281,777
Pfizer 2,293,822 37,962,755
Schering-Plough 352,988 9,971,911
Wyeth 112,068 5,444,263
---------------
Total 120,794,160
-------------------------------------------------------------------------------------
ROAD & RAIL (--%)
Norfolk Southern 6,836 294,700
-------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.0%)
Analog Devices 37,608 1,037,229
Broadcom Cl A 55,259(b) 1,695,899
Intel 743,067 14,541,821
Linear Technology 28,598(g) 790,163
MEMC Electronic Materials 75,552(b,g) 1,256,430
Microchip Technology 48,510(g) 1,285,515
Micron Technology 162,962(b) 1,336,288
NVIDIA 142,105(b,g) 2,135,838
Texas Instruments 162,715 3,854,718
---------------
Total 27,933,901
-------------------------------------------------------------------------------------
SOFTWARE (3.1%)
BMC Software 17,722(b) 665,107
Intuit 59,727(b) 1,702,220
Microsoft 61,794 1,599,847
Red Hat 36,860(b) 1,018,810
Rovi 590,649(b,g) 19,845,805
Symantec 214,023(b,g) 3,524,959
---------------
Total 28,356,748
-------------------------------------------------------------------------------------
SPECIALTY RETAIL (4.7%)
Abercrombie & Fitch Cl A 42,922(g) 1,411,275
AutoNation 50,188(b,g) 907,399
AutoZone 8,613(b) 1,259,393
Bed Bath & Beyond 36,849(b,g) 1,383,311
Best Buy 63,399(g) 2,378,730
Gap 136,021 2,910,849
Home Depot 1,028,999 27,412,534
Lowe's Companies 63,968 1,339,490
O'Reilly Automotive 49,800(b,g) 1,799,772
Sherwin-Williams 60,838(g) 3,660,015
---------------
Total 44,462,768
-------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.7%)
Coach 47,997 1,580,061
Nike Cl B 53,138 3,438,029
VF 19,467(g) 1,409,995
---------------
Total 6,428,085
-------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.2%)
People's United Financial 94,327(g) 1,467,728
-------------------------------------------------------------------------------------
TOBACCO (1.1%)
Altria Group 446,561 7,953,251
Lorillard 37,660 2,798,138
---------------
Total 10,751,389
-------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (--%)
Fastenal 23(g) 890
-------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.4%)
Sprint Nextel 933,158(b) 3,685,974
-------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $956,509,960) $941,425,521
-------------------------------------------------------------------------------------
EQUITY-LINKED NOTES (0.4%)(j)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
Lehman Brothers Holdings
Sr Unsecured
09-14-08 53.51% $14,844,000(b,d,f,h) $1,757,682
10-02-08 39.50 14,844,000(b,d,f,h) 2,176,353
-------------------------------------------------------------------------------------
TOTAL EQUITY-LINKED NOTES
(Cost: $29,688,000) $3,934,035
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
12 TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT
--------------------------------------------------------------------------------
MONEY MARKET FUND (0.3%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.28% 2,655,700(k) $2,655,700
-------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $2,655,700) $2,655,700
-------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (13.1%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND (8.9%)
JPMorgan Prime Money Market Fund 83,622,218 $83,622,218
-------------------------------------------------------------------------------------
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
ASSET-BACKED COMMERCIAL PAPER (1.7%)
Belmont Funding LLC
10-06-09 0.52% $3,999,596 $3,999,596
Ebbets Funding LLC
10-06-09 0.47 3,999,634 3,999,634
Rhein-Main Securitisation
10-20-09 0.32 4,998,889 4,998,889
Tasman Funding
10-23-09 0.30 2,999,250 2,999,250
---------------
Total 15,997,369
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (2.0%)
Banco Espirito Santo e Comm London
10-06-09 0.30 5,000,000 5,000,000
Dexia Credit Local du France
10-09-09 0.42 3,999,347 3,999,347
Monte de Paschi
11-02-09 0.40 5,000,000 5,000,000
Raiffeisen Zentralbank Oest Vienna
10-05-09 0.29 5,000,000 5,000,000
---------------
Total 18,999,347
-------------------------------------------------------------------------------------
COMMERCIAL PAPER (0.5%)
KBC Financial Products
11-02-09 0.48 4,997,691 4,997,691
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $123,616,625) $123,616,625
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,112,470,285)(l) $1,071,631,881
=====================================================================================
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT SEPT. 30, 2009
NUMBER OF UNREALIZED
CONTRACT CONTRACTS NOTIONAL EXPIRATION APPRECIATION
DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
--------------------------------------------------------------------------------------
S&P 500 Index 3 $789,675 Dec. 2009 $11,727
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The Fund adopted Financial Accounting Standards Board (FASB) Staff Position
FAS 157-4, "Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly" (FSP 157-4), on June 30, 2009. FSP 157-4
provides guidance on estimating the fair value of an investment when the
trade volume and level of activity for the investment have significantly
decreased relative to historical levels. FSP 157-4 requires funds to
disclose in interim and annual periods the inputs and valuation techniques
used to measure fair value and any changes in valuation
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
inputs or techniques. In addition, investments shall be disclosed by major
category. There was no impact to the Fund's net assets or results of
operations upon adoption. This disclosure can be found as part of the Fair
Value Measurements disclosure in the Portfolio of Investments.
All securities are valued at the close of each business day 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 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
Corporation, 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.
(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 Sept. 30, 2009, the
value of foreign securities, excluding short-term securities, represented
1.2% of net assets.
--------------------------------------------------------------------------------
14 TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
may be determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Sept. 30,
2009, the value of these securities amounted to $3,934,035 or 0.4% of net
assets.
(e) At Sept. 30, 2009, investments in securities included securities valued at
$1,794,150 that were partially pledged as collateral to cover initial
margin deposits on open stock index futures contracts.
(f) This position is in bankruptcy.
(g) At Sept. 30, 2009, security was partially or fully on loan.
(h) Identifies issues considered to be illiquid as to their marketability. The
aggregate value of such securities at Sept. 30, 2009 was $3,934,035,
representing 0.4% of net assets. Information concerning such security
holdings at Sept. 30, 2009 is as follows:
ACQUISITION
SECURITY DATES COST
-----------------------------------------------------------------
Lehman Brothers Holdings
Sr Unsecured
53.51% 2008 03-07-08 $14,844,000
39.50% 2008 03-26-08 14,844,000
(i) Restricted security.
(j) Equity-Linked Notes (ELNs) are notes created by a counterparty, typically
an investment bank, that may bear interest at a fixed or floating rate. At
maturity, the notes must be exchanged for an amount based on the value of
one or more equity securities of third party issuers or the value of an
index. The exchanged value may be limited to an amount less than the actual
value of the underlying stocks or value of an index at the maturity date.
Any difference between the exchange amount and the original cost of the
notes will be a gain or loss.
(k) 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 rate shown is the
seven-day current annualized yield at Sept. 30, 2009.
(l) At Sept. 30, 2009, the cost of securities for federal income tax purposes
was approximately $1,112,470,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $95,862,000
Unrealized depreciation (136,700,000)
-----------------------------------------------------------
Net unrealized depreciation $(40,838,000)
-----------------------------------------------------------
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 QUARTERLY REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require 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.
The Fund categorizes its fair value measurements according to a three-level
hierarchy 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. 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 New York Stock Exchange (NYSE) or require adjustment, as described
in Note (a) to the Portfolio of Investments.
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
--------------------------------------------------------------------------------
16 TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY 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 Sept. 30, 2009:
FAIR VALUE AT SEPT. 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 $41,615,837 $-- $1,622,679 $43,238,516
All Other
Industries(a) 898,187,005 -- -- 898,187,005
----------------------------------------------------------------------------------------------
Total Equity Securities 939,802,842 -- 1,622,679 941,425,521
----------------------------------------------------------------------------------------------
Other
Equity-Linked Notes -- 3,934,035 -- 3,934,035
Affiliated Money Market
Fund(b) 2,655,700 -- -- 2,655,700
Investments of Cash
Collateral Received
for Securities on
Loan(c) 83,622,218 39,994,407 -- 123,616,625
----------------------------------------------------------------------------------------------
Total Other 86,277,918 43,928,442 -- 130,206,360
----------------------------------------------------------------------------------------------
Investments in Securities 1,026,080,760 43,928,442 1,622,679 1,071,631,881
Other Financial
Instruments(d) 11,727 -- -- 11,727
----------------------------------------------------------------------------------------------
Total $1,026,092,487 $43,928,442 $1,622,679 $1,071,643,608
----------------------------------------------------------------------------------------------
(a) All 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 Sept. 30, 2009.
(c) Asset categories for Investments of Cash Collateral are identified in the
Portfolio of Investments.
(d) Other Financial Instruments are derivative instruments, which are valued at
the unrealized appreciation (depreciation) on the instrument. Derivative
descriptions are located in the Investments in Derivatives section of the
Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT 17
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)* (270,447)
Net purchases (sales) --
Transfers in and/or out of Level 3 --
----------------------------------------------------------------
Balance as of Sept. 30, 2009 $1,622,679
----------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities
held at Sept. 30, 2009 was $(270,447).
--------------------------------------------------------------------------------
18 TRI-CONTINENTAL CORPORATION -- 2009 QUARTERLY REPORT
Item 2. Control 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 report, 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 control over financial
reporting that occurred during the registrant's last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 3. Exhibits.
Separate certification for the Registrant's principal executive officer and
principal financial officer as required by Rule 30a-2(a) under the Investment
Company Act of 1940.
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.
Tri-Continental Corporation
(Registrant)
By /s/ Patrick T. Bannigan
---------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date November 25, 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 November 25, 2009
By /s/ Jeffrey P. Fox
---------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date November 25, 2009