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: December 31
Date of reporting period: June 30, 2010
Semiannual Report
(COLUMBIA MANAGEMENT LOGO)
TRI-CONTINENTAL CORPORATION
--------------------------------------------------------------------------------
SEMIANNUAL REPORT FOR THE PERIOD ENDED
JUNE 30, 2010
TRI-CONTINENTAL CORPORATION SEEKS FUTURE GROWTH OF BOTH CAPITAL AND INCOME,
WHILE PROVIDING REASONABLE CURRENT INCOME.
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
TABLE OF CONTENTS -------------------------------------------------------------
Your Fund at a Glance.............. 2
Portfolio of Investments........... 6
Statement of Assets and
Liabilities...................... 18
Statement of Capital Stock and
Surplus.......................... 19
Statement of Operations............ 20
Statements of Changes in Net
Assets........................... 21
Financial Highlights............... 22
Notes to Financial Statements...... 24
Approval of Investment Management
Services Agreement............... 39
Proxy Results...................... 42
Proxy Voting....................... 43
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
FUND SUMMARY
--------------------------------------------------------------------------------
> Tri-Continental Corporation (the Fund) Common Stock decreased 4.93% based on
net asset value, and 4.89% based on market price for the six months ended June
30, 2010.
> The Fund outperformed its benchmark, the Standard & Poor's (S&P) 500 Composite
Stock Price Index (S&P 500 Index), which fell 6.65% for the six-month period.
> The Fund also outperformed the Lipper Large-Cap Core Funds Index, which
declined 7.65% for the same period.
ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010)
--------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------
Tri-Continental
Corporation
Market Price -4.89% +20.17% -18.57% -4.01% -3.10%
-------------------------------------------------------------------------
Net Asset Value -4.93% +18.21% -15.21% -4.14% -3.64%
-------------------------------------------------------------------------
S&P 500 Index(1)
(unmanaged) -6.65% +14.43% -9.81% -0.79% -1.59%
-------------------------------------------------------------------------
Lipper Large-Cap Core
Funds Index(2)
(unmanaged) -7.65% +12.33% -9.56% -0.78% -2.17%
-------------------------------------------------------------------------
Lipper Large-Cap Core
Funds Average(3)
(unmanaged) -7.86% +12.11% -10.01% -1.11% -1.21%
-------------------------------------------------------------------------
* 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 tricontinental.com.
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.
The indices and the average 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.
--------------------------------------------------------------------------------
2 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
(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 Large-Cap Core Funds Index (the Lipper Index) includes the 30
largest open-end large-cap core funds tracked by Lipper Inc. The Lipper
Index's returns include net reinvested distributions.*
(3) The Lipper Large-Cap Core Funds Average (the Lipper 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 (which is calculated
by adding the capitalization weight of each stock in the Russell 3000 Index,
in descending order of market cap, until the 70(th) percentile of the total
capitalization is reached). 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 Lipper Average's returns
include net reinvested distributions.*
*On Oct. 1, 2009 the Lipper Index replaced the Lipper Average as the Fund's
secondary benchmark. The Lipper Average includes all funds categorized by
Lipper within the broad universe of open-end funds in the Lipper Average,
whereas the Lipper Index includes only a select group of open-end funds from
the Lipper Average, as described above. This change was made to bring the
selection of the secondary benchmark in line with the practice of the Fund
Family, which would permit a common stockholder experience and provide a
more focused peer group for performance comparison purposes. Information on
both the Lipper Index and the Lipper Average will be included for a one-year
transition period. Thereafter, only the Lipper Index will be included.
Although the Fund is a closed-end fund, the Lipper Index and the Lipper
Average are included because they provide a broader competitor base than the
equivalent Lipper closed-end universes.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
PRICE PER SHARE
--------------------------------------------------------------------------------
JUNE 30, 2010 MARCH 31, 2010 DEC. 31, 2009
----------------------------------------------------------------------------
Market price $10.87 $12.27 $11.52
----------------------------------------------------------------------------
Net asset value 12.95 14.53 13.73
----------------------------------------------------------------------------
DISTRIBUTIONS PAID PER COMMON SHARE(A)
--------------------------------------------------------------------------------
PAYABLE DATE PER SHARE AMOUNT
-----------------------------------------------------------------
March 29, 2010 $0.04
-----------------------------------------------------------------
June 21, 2010 0.05
-----------------------------------------------------------------
(a) Preferred Stockholders were paid dividends totaling $1.25 per share.
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.
--------------------------------------------------------------------------------
4 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN(1) (at June 30, 2010)
---------------------------------------------------------------------
STOCKS 99.8%
------------------------------------------------
Consumer Discretionary 9.0%
------------------------------------------------
Consumer Staples 10.8%
------------------------------------------------
Energy 11.6%
------------------------------------------------
Financials 15.7%
------------------------------------------------
Health Care 13.2%
------------------------------------------------
Industrials 11.1%
------------------------------------------------
Information Technology 19.3%
------------------------------------------------
Materials 2.4%
------------------------------------------------
Telecommunication Services 4.0%
------------------------------------------------
Utilities 2.7%
------------------------------------------------
LIMITED PARTNERSHIPS 0.2%
------------------------------------------------
(1) Portfolio holdings include industry sectors that can be comprised of
securities in several industries. Please refer to the section entitled
"Portfolio of Investments" for a complete listing. No single industry
exceeded 25% of portfolio assets.
Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
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.
TOP TEN HOLDINGS(1) (at June 30, 2010)
---------------------------------------------------------------------
Apple, Inc. 5.0%
------------------------------------------------
Chevron Corp. 3.9%
------------------------------------------------
ConocoPhillips 3.3%
------------------------------------------------
Microsoft Corp. 3.3%
------------------------------------------------
IBM Corp. 3.3%
------------------------------------------------
Pfizer, Inc. 2.9%
------------------------------------------------
AT&T, Inc. 2.4%
------------------------------------------------
Bank of America Corp. 2.3%
------------------------------------------------
Merck & Co., Inc. 2.3%
------------------------------------------------
General Electric Co. 2.2%
------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan).
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 -- 2010 SEMIANNUAL REPORT 5
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
JUNE 30, 2010 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
COMMON STOCKS (99.1%)
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (4.2%)
General Dynamics Corp. 77,707 $4,550,522
ITT Corp. 18,839(e) 846,248
Lockheed Martin Corp. 58,984 4,394,308
Northrop Grumman Corp. 29,636(e) 1,613,384
Raytheon Co. 311,984 15,096,906
Rockwell Collins, Inc. 21,939 1,165,619
The Boeing Co. 47,701(e) 2,993,238
United Technologies Corp. 125,207 8,127,186
---------------
Total 38,787,411
-------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.3%)
CH Robinson Worldwide, Inc. 16,264 905,254
FedEx Corp. 23,889 1,674,858
---------------
Total 2,580,112
-------------------------------------------------------------------------------------
AUTO COMPONENTS (0.1%)
Johnson Controls, Inc. 41,647 1,119,055
-------------------------------------------------------------------------------------
AUTOMOBILES (0.2%)
Harley-Davidson, Inc. 78,255 1,739,609
-------------------------------------------------------------------------------------
BEVERAGES (1.9%)
Brown-Forman Corp., Class B 20,369(e) 1,165,718
Coca-Cola Enterprises, Inc. 31,282 808,953
PepsiCo, Inc. 61,609 3,755,069
The Coca-Cola Co. 230,415 11,548,399
---------------
Total 17,278,139
-------------------------------------------------------------------------------------
BIOTECHNOLOGY (0.1%)
Cephalon, Inc. 13,389(b) 759,826
-------------------------------------------------------------------------------------
CAPITAL MARKETS (1.5%)
Franklin Resources, Inc. 33,962 2,927,185
Morgan Stanley 32,323 750,217
The Bank of New York Mellon Corp. 118,397 2,923,222
The Goldman Sachs Group, Inc. 54,434 7,145,551
---------------
Total 13,746,175
-------------------------------------------------------------------------------------
CHEMICALS (1.0%)
Air Products & Chemicals, Inc. 12,825 831,188
CF Industries Holdings, Inc. 9,852 625,109
Eastman Chemical Co. 23,702 1,264,739
EI du Pont de Nemours & Co. 31,327 1,083,601
PPG Industries, Inc. 26,162 1,580,446
The Dow Chemical Co. 112,713 2,673,553
The Sherwin-Williams Co. 15,478(e) 1,070,923
---------------
Total 9,129,559
-------------------------------------------------------------------------------------
COMMERCIAL BANKS (3.3%)
Comerica, Inc. 17,012 626,552
Fifth Third Bancorp 98,736 1,213,465
First Horizon National Corp. 78,132(b,e) 894,609
KeyCorp 63,371 487,323
M&T Bank Corp. 16,187(e) 1,375,086
PNC Financial Services Group, Inc. 205,785 11,626,853
SunTrust Banks, Inc. 102,300 2,383,590
US Bancorp 61,420 1,372,737
Wells Fargo & Co. 398,424 10,199,654
---------------
Total 30,179,869
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
6 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
COMMERCIAL SERVICES & SUPPLIES (0.8%)
Avery Dennison Corp. 27,121 $871,398
Pitney Bowes, Inc. 42,234(e) 927,459
RR Donnelley & Sons Co. 356,397 5,834,218
---------------
Total 7,633,075
-------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (0.8%)
Cisco Systems, Inc. 223,328(b) 4,759,120
Motorola, Inc. 255,021(b) 1,662,737
QUALCOMM, Inc. 17,150 563,206
---------------
Total 6,985,063
-------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (6.8%)
Apple, Inc. 179,321(b) 45,104,611
Dell, Inc. 351,104(b) 4,234,314
NetApp, Inc. 122,453(b) 4,568,721
Teradata Corp. 239,300(b) 7,293,864
Western Digital Corp. 22,385(b) 675,132
---------------
Total 61,876,642
-------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.1%)
Fluor Corp. 25,350(e) 1,077,375
-------------------------------------------------------------------------------------
CONSUMER FINANCE (0.6%)
Capital One Financial Corp. 44,635(e) 1,798,791
Discover Financial Services 169,896 2,375,146
SLM Corp. 129,265(b) 1,343,063
---------------
Total 5,517,000
-------------------------------------------------------------------------------------
DISTRIBUTORS (0.1%)
Genuine Parts Co. 29,421(e) 1,160,658
-------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.1%)
H&R Block, Inc. 77,095(e) 1,209,621
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (3.4%)
Bank of America Corp. 1,472,802 21,164,164
Citigroup, Inc. 2,617,393(b) 9,841,398
---------------
Total 31,005,562
-------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (4.0%)
AT&T, Inc. 921,094 22,281,264
Frontier Communications Corp. 266,265(e) 1,893,144
Verizon Communications, Inc. 379,598 10,636,336
Windstream Corp. 190,811(e) 2,014,964
---------------
Total 36,825,708
-------------------------------------------------------------------------------------
ELECTRIC UTILITIES (0.9%)
Edison International 29,772 944,368
Exelon Corp. 64,635 2,454,191
FirstEnergy Corp. 68,312(e) 2,406,632
Progress Energy, Inc. 53,552 2,100,309
---------------
Total 7,905,500
-------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.5%)
Emerson Electric Co. 86,057 3,759,831
Rockwell Automation, Inc. 11,913(e) 584,809
---------------
Total 4,344,640
-------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.8%)
Agilent Technologies, Inc. 86,701(b,e) 2,464,909
Corning, Inc. 139,805 2,257,851
Jabil Circuit, Inc. 88,650 1,179,045
Tyco Electronics Ltd. 70,765(c) 1,796,016
---------------
Total 7,697,821
-------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.1%)
Diamond Offshore Drilling, Inc. 24,222(e) 1,506,366
Ensco PLC, ADR 32,277(c,e) 1,267,841
FMC Technologies, Inc. 23,389(b) 1,231,665
Halliburton Co. 40,690 998,940
National Oilwell Varco, Inc. 40,999 1,355,837
Schlumberger Ltd. 74,653(e) 4,131,296
---------------
Total 10,491,945
-------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (0.8%)
Walgreen Co. 82,882 2,212,949
Wal-Mart Stores, Inc. 90,429 4,346,923
Whole Foods Market, Inc. 19,466(b,e) 701,165
---------------
Total 7,261,037
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 7
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FOOD PRODUCTS (2.2%)
Archer-Daniels-Midland Co. 150,534 $3,886,788
Campbell Soup Co. 18,500 662,855
ConAgra Foods, Inc. 38,017 886,556
General Mills, Inc. 82,342 2,924,788
Hormel Foods Corp. 23,467(e) 949,944
Sara Lee Corp. 85,249(e) 1,202,011
The Hershey Co. 203,500(e) 9,753,755
---------------
Total 20,266,697
-------------------------------------------------------------------------------------
GAS UTILITIES (0.1%)
Oneok, Inc. 22,637 979,050
-------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.2%)
Becton Dickinson and Co. 20,425(e) 1,381,139
CareFusion Corp. 28,672(b) 650,854
Intuitive Surgical, Inc. 9,595(b,e) 3,028,374
Medtronic, Inc. 116,706 4,232,926
Stryker Corp. 27,683(e) 1,385,811
---------------
Total 10,679,104
-------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (2.7%)
Aetna, Inc. 42,232 1,114,080
AmerisourceBergen Corp. 35,280 1,120,140
Cardinal Health, Inc. 35,379 1,189,088
CIGNA Corp. 125,553 3,899,676
Coventry Health Care, Inc. 46,172(b) 816,321
Humana, Inc. 24,709(b) 1,128,460
McKesson Corp. 16,234 1,090,275
UnitedHealth Group, Inc. 313,692 8,908,854
WellPoint, Inc. 107,698(b) 5,269,663
---------------
Total 24,536,557
-------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.6%)
Starbucks Corp. 108,835 2,644,690
Wyndham Worldwide Corp. 76,275 1,536,179
Wynn Resorts Ltd. 11,833(e) 902,503
---------------
Total 5,083,372
-------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.4%)
Newell Rubbermaid, Inc. 61,536(e) 900,887
Stanley Black & Decker, Inc. 37,860 1,912,687
Whirlpool Corp. 7,372(e) 647,409
---------------
Total 3,460,983
-------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.5%)
Clorox Co. 19,549(e) 1,215,166
Colgate-Palmolive Co. 11,085 873,055
Kimberly-Clark Corp. 40,800 2,473,703
---------------
Total 4,561,924
-------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.3%)
Constellation Energy Group, Inc. 35,925 1,158,582
NRG Energy, Inc. 46,869(b,e) 994,091
The AES Corp. 72,143(b) 666,601
---------------
Total 2,819,274
-------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (3.0%)
3M Co. 87,751 6,931,451
General Electric Co. 1,379,615 19,894,049
Tyco International Ltd. 18,634(c) 656,476
---------------
Total 27,481,976
-------------------------------------------------------------------------------------
INSURANCE (5.3%)
Aflac, Inc. 136,212 5,812,166
AON Corp. 84,339 3,130,664
Assurant, Inc. 59,589 2,067,738
Chubb Corp. 141,105 7,056,661
Hartford Financial Services Group, Inc. 61,987 1,371,772
Lincoln National Corp. 49,430 1,200,655
Principal Financial Group, Inc. 62,611(e) 1,467,602
The Allstate Corp. 321,629 9,240,401
The Progressive Corp. 118,864 2,225,134
The Travelers Companies, Inc. 240,696 11,854,278
Torchmark Corp. 41,023(e) 2,031,049
Unum Group 57,272 1,242,802
---------------
Total 48,700,922
-------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.4%)
Expedia, Inc. 78,713(e) 1,478,230
priceline.com, Inc. 13,274(b,e) 2,343,392
---------------
Total 3,821,622
-------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (0.3%)
eBay, Inc. 129,136(b,e) 2,532,357
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
8 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
IT SERVICES (4.4%)
Automatic Data Processing, Inc. 79,712 $3,209,205
Cognizant Technology Solutions Corp., Class A 110,233(b) 5,518,264
Computer Sciences Corp. 15,028 680,017
IBM Corp. 241,800 29,857,464
SAIC, Inc. 54,719(b,e) 915,996
---------------
Total 40,180,946
-------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Mattel, Inc. 66,506 1,407,267
-------------------------------------------------------------------------------------
MACHINERY (1.0%)
Caterpillar, Inc. 61,219 3,677,425
Cummins, Inc. 15,908(e) 1,036,088
Eaton Corp. 12,205(e) 798,695
Flowserve Corp. 10,682 905,834
Illinois Tool Works, Inc. 39,314(e) 1,622,882
Ingersoll-Rand PLC 39,846(c,e) 1,374,289
---------------
Total 9,415,213
-------------------------------------------------------------------------------------
MEDIA (1.7%)
CBS Corp., Class B 316,926 4,097,853
DIRECTV, Class A 51,100(b) 1,733,312
Gannett Co., Inc. 143,205(e) 1,927,539
News Corp., Class A 337,587 4,037,541
The Walt Disney Co. 119,306(e) 3,758,139
---------------
Total 15,554,384
-------------------------------------------------------------------------------------
METALS & MINING (1.0%)
Alcoa, Inc. 99,936(e) 1,005,356
Freeport-McMoRan Copper & Gold, Inc. 123,344 7,293,331
United States Steel Corp. 30,531(e) 1,176,970
---------------
Total 9,475,657
-------------------------------------------------------------------------------------
MULTILINE RETAIL (0.7%)
Family Dollar Stores, Inc. 106,315 4,007,012
Macy's, Inc. 41,228 737,981
Nordstrom, Inc. 62,168 2,001,188
---------------
Total 6,746,181
-------------------------------------------------------------------------------------
MULTI-UTILITIES (1.4%)
Ameren Corp. 40,010 951,038
DTE Energy Co. 22,941(e) 1,046,339
Integrys Energy Group, Inc. 21,038 920,202
PG&E Corp. 54,364(e) 2,234,360
Public Service Enterprise Group, Inc. 239,300 7,497,269
---------------
Total 12,649,208
-------------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.1%)
Xerox Corp. 168,906 1,358,004
-------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (10.4%)
Chevron Corp. 525,242(g) 35,642,923
ConocoPhillips 612,914 30,087,948
Exxon Mobil Corp. 238,743 13,625,063
Hess Corp. 28,567 1,438,063
Marathon Oil Corp. 69,368 2,156,651
Murphy Oil Corp. 34,239 1,696,542
Occidental Petroleum Corp. 72,062 5,559,583
Pioneer Natural Resources Co. 11,289(e) 671,131
The Williams Companies, Inc. 44,359 810,883
Valero Energy Corp. 207,889 3,737,844
---------------
Total 95,426,631
-------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.4%)
International Paper Co. 146,334 3,311,538
-------------------------------------------------------------------------------------
PHARMACEUTICALS (9.1%)
Abbott Laboratories 253,106 11,840,299
Bristol-Myers Squibb Co. 72,690(e) 1,812,889
Eli Lilly & Co. 99,448 3,331,508
Forest Laboratories, Inc. 114,465(b) 3,139,775
Johnson & Johnson 269,544 15,919,269
King Pharmaceuticals, Inc. 64,212(b) 487,369
Merck & Co., Inc. 600,497 20,999,380
Pfizer, Inc. 1,857,854 26,492,997
---------------
Total 84,023,486
-------------------------------------------------------------------------------------
PROFESSIONAL SERVICES (0.3%)
Dun & Bradstreet Corp. 44,800(e) 3,006,976
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.5%)
Equity Residential 67,059 $2,792,337
Simon Property Group, Inc. 68,986 5,570,619
Ventas, Inc. 50,555(e) 2,373,557
Vornado Realty Trust 37,506(e) 2,736,063
---------------
Total 13,472,576
-------------------------------------------------------------------------------------
ROAD & RAIL (0.7%)
CSX Corp. 38,218(e) 1,896,759
Norfolk Southern Corp. 87,939 4,665,164
---------------
Total 6,561,923
-------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.2%)
Advanced Micro Devices, Inc. 175,014(b,e) 1,281,102
Analog Devices, Inc. 37,608 1,047,759
Broadcom Corp., Class A 51,952(e) 1,712,857
Microchip Technology, Inc. 68,008(e) 1,886,542
Micron Technology, Inc. 307,070(b,e) 2,607,024
Texas Instruments, Inc. 499,600(e) 11,630,689
---------------
Total 20,165,973
-------------------------------------------------------------------------------------
SOFTWARE (3.8%)
Intuit, Inc. 30,700(b) 1,067,439
Microsoft Corp. 1,299,994 29,912,862
Oracle Corp. 83,820 1,798,777
Rovi Corp. 45,089(b,e) 1,709,324
---------------
Total 34,488,402
-------------------------------------------------------------------------------------
SPECIALTY RETAIL (3.9%)
Bed Bath & Beyond, Inc. 12,498(b) 463,426
Best Buy Co., Inc. 57,352 1,941,939
GameStop Corp., Class A 616,400(b,e) 11,582,156
Home Depot, Inc. 166,543 4,674,862
Lowe's Companies, Inc. 21,413 437,253
Ltd. Brands, Inc. 591,630 13,057,275
The Gap, Inc. 46,869 912,071
Tiffany & Co. 25,740(e) 975,803
TJX Companies, Inc. 22,493(e) 943,581
Urban Outfitters, Inc. 31,988(b,e) 1,100,067
---------------
Total 36,088,433
-------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.5%)
Coach, Inc. 18,435(e) 673,799
Nike, Inc., Class B 53,138 3,589,472
---------------
Total 4,263,271
-------------------------------------------------------------------------------------
TOBACCO (5.4%)
Altria Group, Inc. 912,193 18,280,348
Lorillard, Inc. 213,964 15,401,129
Philip Morris International, Inc. 325,500 14,920,920
Reynolds American, Inc. 16,553 862,742
---------------
Total 49,465,139
-------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $997,484,695) $908,296,448
-------------------------------------------------------------------------------------
LIMITED PARTNERSHIP (0.2%)
ISSUER SHARES VALUE(a)
CAPITAL MARKETS
WCAS Capital Partners II LP 4,292,803(d,f) $1,720,272
-------------------------------------------------------------------------------------
TOTAL LIMITED PARTNERSHIPS
(Cost: $4,212,138) $1,720,272
-------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (7.4%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER YIELD MATURITY VALUE(a)
ASSET-BACKED COMMERCIAL PAPER (0.1%)
Thames Asset Global Securities
09-20-10 0.551% $994,570 $994,570
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (3.4%)
Banque Federative du Credit Mutuel
07-07-10 0.405 4,994,886 4,994,886
BNP Paribas
10-15-10 0.420 4,000,000 4,000,000
Credit Agricole
10-12-10 0.420 4,000,000 4,000,000
Credit Industrial et Commercial
08-02-10 0.460 4,000,000 4,000,000
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
10 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED
FOR SECURITIES ON LOAN (CONTINUED)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER YIELD MATURITY VALUE(a)
CERTIFICATES OF DEPOSIT (CONT.)
Natixis
07-01-10 0.360% $4,996,852 $4,996,852
Rabobank Group
10-27-10 0.397 1,000,000 1,000,000
Unicredit BK AG
07-02-10 0.400 5,000,000 5,000,000
07-12-10 0.420 3,000,000 3,000,000
---------------
Total 30,991,738
-------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (3.9%)(h)
Banc of America Securities LLC
dated 06-30-10, matures 07-01-10,
repurchase price
$10,000,014 0.050% 10,000,000 10,000,000
Goldman Sachs & Co.
dated 06-30-10, matures 07-01-10,
repurchase price
$13,660,806 0.030 13,660,795 13,660,795
Morgan Stanley
dated 01-21-10, matures 07-30-10,
repurchase price
$7,002,100 0.360 7,000,000 7,000,000
Pershing LLC
dated 06-30-10, matures 07-01-10,
repurchase price
$5,000,029 0.210 5,000,000 5,000,000
---------------
Total 35,660,795
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL
RECEIVED FOR SECURITIES ON LOAN
(Cost: $67,647,103) $67,647,103
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,069,343,936)(i) $977,663,823
=====================================================================================
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.
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT JUNE 30, 2010
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
------------------------------------------------------------------------------------
S&P 500 Index 1 $256,650 Sept. 2010 $(11,741)
NOTES TO PORTFOLIO OF INVESTMENTS
ADR -- American Depositary Receipt
(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, 2010, the
value of foreign securities, excluding short-term securities, represented
0.56% of net assets.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(d) At June 30, 2010, the Fund owned one limited partnership investment that
was purchased through a private offering and cannot be sold without prior
registration under the Securities Act of 1933 or pursuant to an exemption
therefrom. The investment is valued at fair value as determined in
accordance with procedures approved by the Board of Directors of the Fund.
The acquisition dates of investment in the limited partnership, along with
the cost and value at June 30, 2010, were as follows:
ACQUISITION
INVESTMENT DATES COST VALUE(A)
---------------------------------------------------------------------------
WCAS Capital Partners
II LP 01-09-95 thru 03-05-97 $4,212,138 $1,720,272
(e) At June 30, 2010, security was partially or fully on loan. See Note 7 to
the financial statements.
(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, 2010 was $1,720,272, representing 0.19% of net assets.
Information concerning such security holdings at June 30, 2010 was as
follows:
ACQUISITION
SECURITY DATES COST
----------------------------------------------------------------------
WCAS Capital Partners II LP 01-09-95 thru 03-05-97 $4,212,138
(g) At June 30, 2010, investments in securities included securities valued at
$651,795 that were partially pledged as collateral to cover initial margin
deposits on open stock index futures contracts.
(h) The table below represents securities received as collateral for repurchase
agreements. This collateral, which is generally high quality short-term
obligations, is deposited with the Fund's custodian and, pursuant to the
terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. The market value of securities held as collateral for repurchase
agreements is monitored on a daily basis to ensure the existence of the
proper level of collateral.
BANC OF AMERICA SECURITIES LLC (0.050%)
SECURITY DESCRIPTION VALUE(a)
-----------------------------------------------------------
Fannie Mae Pool $7,072,603
Freddie Mac Gold Pool 1,540,817
Freddie Mac Non Gold Pool 1,586,580
-----------------------------------------------------------
Total market value of collateral securities $10,200,000
-----------------------------------------------------------
--------------------------------------------------------------------------------
12 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF
INVESTMENTS (CONTINUED)
GOLDMAN SACHS & CO. (0.030%)
SECURITY DESCRIPTION VALUE(a)
-----------------------------------------------------------
Fannie Mae Pool $2,437,952
Government National Mortgage Association 11,496,059
-----------------------------------------------------------
Total market value of collateral securities $13,934,011
-----------------------------------------------------------
MORGAN STANLEY (0.360%)
SECURITY DESCRIPTION VALUE(a)
-----------------------------------------------------------
Allied Irish Banks $565,960
Amstel Funding Corp 874,880
Atlantic Asset Securitization LLC 154,502
Autobahn Funding Company 161,998
Compass Sec LLC 208,133
Ebury Finance Ltd 862,548
LMA LMA Americas 487,391
Nationwide Building Society 495,522
NRW Bank 806,429
Romulus Funding Corp 108,438
Scaldis & Scaldis 600,116
Scaldis Capital Ltd/LLC 349,789
Silver Tower US Fund 983,468
Surrey Funding Corp 329,018
White Point Funding Inc 361,808
-----------------------------------------------------------
Total market value of collateral securities $7,350,000
-----------------------------------------------------------
PERSHING LLC (0.210%)
SECURITY DESCRIPTION VALUE(a)
-----------------------------------------------------------
Fannie Mae Pool $1,845,609
Fannie Mae REMICS 428,017
Federal Farm Credit Bank 68,071
Federal Home Loan Banks 127,711
Federal Home Loan Mortgage Corp 72,139
Federal National Mortgage Association 87,395
Freddie Mac Gold Pool 1,273,797
Freddie Mac Non Gold Pool 106,838
Freddie Mac REMICS 267,760
Ginnie Mae I Pool 133,911
Ginnie Mae II Pool 83,625
United States Treasury Bill 450,845
United States Treasury Note/Bond 146,703
United States Treasury Strip Coupon 7,579
-----------------------------------------------------------
Total market value of collateral securities $5,100,000
-----------------------------------------------------------
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(i) At June 30, 2010, the cost of securities for federal income tax purposes
was approximately $1,069,344,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $42,543,000
Unrealized depreciation (134,223,000)
-----------------------------------------------------------
Net unrealized depreciation $(91,680,000)
-----------------------------------------------------------
--------------------------------------------------------------------------------
14 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
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 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
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
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, 2010:
FAIR VALUE AT JUNE 30, 2010
------------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL
----------------------------------------------------------------------------------------------
Equity Securities
Common Stocks $908,296,448 $-- $-- $908,296,448
----------------------------------------------------------------------------------------------
Total Equity Securities 908,296,448 -- -- 908,296,448
----------------------------------------------------------------------------------------------
Other
Limited Partnerships -- -- 1,720,272 1,720,272
Investments of Cash
Collateral Received
for Securities on
Loan -- 67,647,103 -- 67,647,103
----------------------------------------------------------------------------------------------
Total Other -- 67,647,103 1,720,272 69,367,375
----------------------------------------------------------------------------------------------
Investments in
Securities 908,296,448 67,647,103 1,720,272 977,663,823
Other Financial
Instruments(c) (11,741) -- -- (11,741)
----------------------------------------------------------------------------------------------
Total $908,284,707 $67,647,103 $1,720,272 $977,652,082
----------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not
indicated in the table.
(b) There were no significant transfers between Levels 1 and 2 during the
period.
(c) 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.
--------------------------------------------------------------------------------
16 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
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.
LIMITED PARTNERSHIPS
---------------------------------------------------------------------
Balance as of Dec. 31, 2009 $1,927,202
Accrued discounts/premiums --
Realized gain (loss) --
Change in unrealized appreciation
(depreciation)* (206,930)
Net purchases (sales) --
Transfers in and/or out of Level 3 --
---------------------------------------------------------------------
Balance as of June 30, 2010 $1,720,272
---------------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities
held at June 30, 2010 was $(206,930).
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 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 800.221.2450.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 17
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
JUNE 30, 2010 (UNAUDITED)
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $1,001,696,833) $910,016,720
Investment of cash collateral received for securities on loan
(identified cost $67,647,103) 67,647,103
-------------------------------------------------------------------------------
Total investments (identified cost $1,069,343,936) 977,663,823
Receivable for investment securities sold 2,865,076
Dividends and accrued interest receivable 1,597,196
Common Stock receivable 40,073
Other receivable 4,256,330
Other assets 43,681
-------------------------------------------------------------------------------
Total Assets 986,466,179
-------------------------------------------------------------------------------
LIABILITIES
Bank overdraft 41,631
Preferred Stock dividends payable 470,463
Common Stock payable 425,444
Payable upon return of securities loaned 67,647,103
Variation margin payable on futures contracts 2,175
Accrued investment management services fees 9,001
Accrued Stockholder servicing and transfer agency fees 2,433
Accrued administrative services fees 1,463
Accrued Stockholders' meeting fees 77,753
Other accrued expenses 1,141,379
-------------------------------------------------------------------------------
Total Liabilities 69,818,845
-------------------------------------------------------------------------------
NET ASSETS 916,647,334
Preferred Stock 37,637,000
-------------------------------------------------------------------------------
Net assets for Common Stock $879,010,334
-------------------------------------------------------------------------------
Net assets per share of Common Stock $ 12.95
-------------------------------------------------------------------------------
Market price per share of Common Stock $ 10.87
-------------------------------------------------------------------------------
*Value of securities on loan $ 64,471,043
-------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
18 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
STATEMENT OF CAPITAL STOCK AND SURPLUS -----------------------------------------
JUNE 30, 2010 (UNAUDITED)
CAPITAL STOCK
$2.50 Cumulative Preferred Stock, $50 par value, assets coverage
per share $1,218
Shares issued and outstanding -- 752,740 $ 37,637,000
Common Stock, $0.50 par value:
Shares issued and outstanding -- 67,890,488 33,945,244
SURPLUS
Capital surplus 1,710,392,780
Undistributed net investment income 2,346,712
Accumulated net realized gain (loss) (775,982,548)
Net unrealized depreciation on investments (91,691,854)
---------------------------------------------------------------------------------
Net assets $ 916,647,334
---------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 19
STATEMENT OF OPERATIONS --------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME
Income:
Dividends $ 12,609,981
Interest 1,418
Income distributions from affiliated money market fund 2,807
Income from securities lending -- net 141,322
-------------------------------------------------------------------------------
Total Income 12,755,528
-------------------------------------------------------------------------------
Expenses:
Investment management services fees 1,760,810
Stockholder servicing and transfer agency fees 477,338
Administrative services fees 284,769
Custodian fees 9,050
Stockholders' meeting fees 172,153
Printing and postage 35,200
Professional fees 28,988
Compensation of board members 15,461
Other 188,758
-------------------------------------------------------------------------------
Total Expenses 2,972,527
-------------------------------------------------------------------------------
Investment income (loss) -- net* 9,783,001
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions 21,632,230
Futures contracts 143,210
-------------------------------------------------------------------------------
Net realized gain (loss) on investments 21,775,440
Net change in unrealized depreciation on investments (79,364,139)
-------------------------------------------------------------------------------
Net gain (loss) on investments (57,588,699)
-------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(47,805,698)
-------------------------------------------------------------------------------
* Net investment income for Common Stock is $8,842,076, which is net of
Preferred Stock dividends of $940,925.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
20 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DEC. 31, 2009
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 9,783,001 $ 14,053,685
Net realized gain (loss) on investments 21,775,440 (141,070,095)
Net change in unrealized appreciation (depreciation) on
investments (79,364,139) 296,146,938
Increase from payment by affiliate (Note 2) -- 3,120,206
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (47,805,698) 172,250,734
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO STOCKHOLDERS
Net investment income:
Preferred Stock (940,925) (1,881,850)
Common Stock (6,408,064) (12,202,715)
Return of Capital:
Common Stock -- (1,225,024)
--------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (7,348,989) (15,309,589)
--------------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
Value of shares of Common Stock issued for distributions (194,535
and 554,284 shares) 2,308,102 5,227,483
Value of shares of Common Stock issued for investment plan
purchases (84,865 and 308,895 shares) 976,735 2,865,371
Cost of shares of Common Stock purchased from investment plan
participants (883,442 and 1,449,460 shares) (10,493,401) (14,528,709)
Cost of shares of Common Stock purchased in the open market
(412,702 and 452,907 shares) (4,970,065) (5,047,340)
Cost of shares of Common Stock purchased in cash tender offer (0
and 9,247,000 shares) -- (93,024,820)
Net proceeds from issuance of shares of Common Stock upon
exercise of warrants (0 and 12,095 shares) -- 11,248
--------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (12,178,629) (104,496,767)
--------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (67,333,316) 52,444,378
Net assets at beginning of period 983,980,650 931,536,272
--------------------------------------------------------------------------------------------------
Net assets at end of period $916,647,334 $ 983,980,650
--------------------------------------------------------------------------------------------------
Undistributed (excess of dividends over) net investment income $ 2,346,712 $ (87,300)
--------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 21
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
Per share operating performance data is designed to allow investors to trace the
operating performance, on a per Common share 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 Common shares outstanding during the period.
Total return measures the Fund's performance assuming that investors purchased
shares of the Fund at the market price 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 assets for
Common Stock for the periods presented do not reflect the effect of dividends
paid to Preferred Stockholders.
--------------------------------------------------------------------------------
22 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED DEC. 31,
ENDED JUNE 30, -------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 2010 2009 2008 2007 2006 2005
(UNAUDITED)
Net asset value, beginning of period $13.73 $11.29 $23.03 $25.66 $22.16 $21.87
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .12 .20 .52 .84 .33 .26
Net gains (losses) (both realized and
unrealized) (.81) 2.42 (9.88) (1.01) 3.47 .29
------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from investment
operations (.69) 2.62 (9.36) (.17) 3.80 .55
------------------------------------------------------------------------------------------------------------------------------
LESS:
Dividends paid on Preferred Stock (.01) (.03) (.02) (.02) (.02) (.02)
Dividends paid on Common Stock (.08) (.17) (.50) (.87) (.28) (.24)
Distributions from realized gains -- -- (.39) (1.57) -- --
Distributions from return of capital -- (.02) (1.22) -- -- --
Issuance of Common Stock in distributions -- -- (.25) -- -- --
------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.22) (2.38) (2.46) (.30) (.26)
------------------------------------------------------------------------------------------------------------------------------
Payment from affiliate -- .04 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.95 $13.73 $11.29 $23.03 $25.66 $22.16
------------------------------------------------------------------------------------------------------------------------------
Adjusted net asset value, end of period(a) $12.91 $13.69 $11.26 $22.98 $25.60 $22.10
Market price, end of period $10.87 $11.52 $9.86 $20.90 $22.38 $18.58
------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN
Based upon net asset value (4.93%) 24.11%(b) (43.77%) (.52%) 17.38% 2.66%
Based upon market price (4.89%) 19.24% (45.89%) 3.51% 22.10% 2.98%
------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses to average net assets for Common
Stock .62%(c) .98% .73% .66% .80% .65%
Net investment income to average net assets
for Common Stock 1.85%(c) 1.46% 2.96% 3.22% 1.40% 1.20%
------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (IN MILLIONS):
For Common Stock $879 $946 $894 $2,373 $2,657 $2,392
For Preferred Stock 38 38 38 38 38 38
------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $917 $984 $932 $2,411 $2,695 $2,430
------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 49% 70% 111% 123% 122% 71%
------------------------------------------------------------------------------------------------------------------------------
(a) Assumes the exercise of outstanding warrants.
(b) During the year ended Dec. 31, 2009, the Fund received a payment from an
affiliate. Had the Fund not received this payment, the total return would
have been lower by 0.47%.
(c) Annualized.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 23
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS OF JUNE 30, 2010)
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 (Preferred Stock) and 159 million authorized shares of
common stock (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.
Tri-Continental Corporation's Preferred Stock is entitled to two votes and the
Common Stock is entitled to one vote per share at all meetings of Stockholders.
In the event of a default in payments of dividends on the Preferred Stock
equivalent to six quarterly dividends, the Preferred Stockholders are entitled,
voting separately as a class to the exclusion of Common Stockholders, to elect
two additional directors, such right to continue until all arrearages have been
paid and current Preferred Stock dividends are provided for. Generally, the vote
of Preferred Stockholders is required to approve certain actions adversely
affecting their rights.
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 from the primary exchange. 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 Fund's Board of Directors
--------------------------------------------------------------------------------
24 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
(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 Columbia
Management Investment Advisers, LLC (formerly known as RiverSource Investments,
LLC) (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. The fair value of a
security is likely to be different from the quoted or published price, if
available.
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
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 25
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
translation gains or losses on dividends, interest income and foreign
withholding taxes.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. Generally, securities received as
collateral subject to repurchase agreements are deposited with the Fund's
custodian and, pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. The market value of securities held as collateral
for repurchase agreements is monitored on a daily basis to ensure the existence
of the proper level of collateral.
ILLIQUID SECURITIES
At June 30, 2010, 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, 2010 was
$1,720,272 representing 0.19% of net assets. Certain illiquid securities may be
valued, in good faith, by management at fair value according to procedures
approved by the Board. According to Board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 15%
limitation specified 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 AFFILIATE
During the year ended Dec. 31, 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.
--------------------------------------------------------------------------------
26 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
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 tax returns filed for the last three years.
FOREIGN CAPITAL GAINS TAXES
Realized gains in certain countries may be subject to foreign taxes at the fund
level, at rates ranging from approximately 10% to 15%. The Fund pays such
foreign taxes on net realized gains at the appropriate rate for each
jurisdiction.
DIVIDENDS TO STOCKHOLDERS
The Fund has an earned distribution policy. Under this policy, the Fund intends
to make quarterly 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.
Dividends and other distributions to Stockholders are recorded on ex-dividend
dates.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. 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. Investments in
derivative instruments may expose the Fund to certain additional risks,
including those detailed below.
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
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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.
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
--------------------------------------------------------------------------------
28 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
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. The maximum payout amount may be offset by the
subsequent sale, if any, of assets obtained upon the exercise of the put options
by holders of the option contracts or proceeds received upon entering into the
contracts. For OTC options contracts, the transaction is also subject to
counterparty credit risk. At June 30, 2010, and for the six months then ended,
the Fund had no 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, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------- -------------------------------------
STATEMENT OF ASSETS STATEMENT OF ASSETS
RISK EXPOSURE AND LIABILITIES AND LIABILITIES
CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE
-------------------------------------------------------------------------------------------
Net
assets -- unrealiz-
ed depreciation on
Equity contracts N/A N/A investments $11,741*
-------------------------------------------------------------------------------------------
* 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.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN
INCOME
-----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
-----------------------------------------------------------------
Equity contracts $143,210
-----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
-----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
-----------------------------------------------------------------
Equity contracts $(7,971)
-----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY
FUTURES
The gross notional amount of long contracts outstanding was approximately
$256,650 at June 30, 2010. The monthly average gross notional amount for long
contracts was $2.6 million for the six months ended June 30, 2010. The fair
value of such contracts at June 30, 2010 is set forth in the table above.
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. The management fee charged by the Investment Manager is 0.355% of the
Fund's average daily net assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial
an annual 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% as the
Fund's net assets increase The fee for the six months ended June 30, 2010 was
0.06% of the Fund's average daily net assets.
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, 2010, other expenses paid to this company were $346.
--------------------------------------------------------------------------------
30 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
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 RiverSource, Seligman and
Threadneedle funds. The Fund's liability for these amounts is adjusted for
market value changes and remains in the funds until distributed in accordance
with the Plan.
STOCKHOLDER SERVICING FEES
Under a Stockholder Service Agent Agreement, Columbia Management Investment
Services Corp. (formerly known as RiverSource Service Corporation) (the
Stockholder Servicing Agent) maintains Fund Stockholder accounts and records and
provides Fund Stockholder services. Under the Agreement, 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.
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 Seligman
Data Corp. (SDC), the Fund's former Stockholder servicing agent, including the
payment of rent by SDC (the Guaranty). The lease and the Guaranty expire in
January 2019. At June 30, 2010, the Fund's total potential future obligation
over the life of the Guaranty is $1,140,700. The liability remaining at June 30,
2010 for Non-Recurring Charges amounted to $583,674 and is included within other
accrued expenses in the Statement of Assets and Liabilities. SDC is owned by six
associated investment companies, including the Fund. The Fund's ownership
interest in SDC at June 30, 2010 is included in other assets in the Statement of
Assets and Liabilities at a cost of $43,681.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $479,491,474 and $489,488,901, respectively, for the six
months ended June 30, 2010. 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 deducting the amount of such dividends and all unpaid
dividends declared on Preferred Stock, equal at least $100 per share of
Preferred Stock outstanding. The Preferred Stock is subject to redemption at the
Fund's
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 dividends accrued or in arrears, as the case
may be.
AUTOMATIC DIVIDEND AND CASH PURCHASE PLAN
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, 2010, the Fund purchased 883,442 shares of Common Stock from Plan
participants at a cost of $10,493,401, which represented a weighted average
discount of 15.3% from the net asset value of those acquired shares. A total of
84,865 shares were issued to Plan participants during the period for proceeds of
$976,735, a weighted average discount of 15.9% from the net asset value of those
shares. In addition, a total of 194,535 shares were issued at market price in
distributions during the period for proceeds of $2,308,102, a weighted average
discount of 15.4% from the net asset value of those shares.
For Stockholder accounts established after June 1, 2007, unless the Stockholder
Servicing Agent is otherwise instructed by the Stockholder, distributions on the
Common Stock are paid in book shares of Common Stock which are entered in the
Stockholder's account as "book credits." Each Stockholder may also elect to
receive distributions 75% in shares and 25% in cash, 50% in shares and 50% in
cash, or 100% in cash. Any such election must be received by the Stockholder
Servicing Agent by the record date for a distribution. If the Stockholder holds
shares of Common Stock through a financial intermediary (such as a broker), the
Stockholder should contact the financial intermediary to discuss reinvestment
and distribution options. Elections received after a record date for a
distribution will be effective in respect of the next distribution. Shares
issued to the Stockholder in respect of distributions will be at a price equal
to the lower of: (i) the closing sale price of the Common Stock on the NYSE on
the ex-dividend date or (ii) the greater of net asset value per share of Common
Stock and 95% of the closing price of the Common Stock on the NYSE on the ex-
dividend date. The issuance of Common Stock at less than net asset value per
share will dilute the net asset value of all Common Stock outstanding at that
time.
For the six months ended June 30, 2010, the Fund purchased 412,702 shares of its
Common Stock in the open market at an aggregate cost of $4,970,065, which
represented a weighted average discount of 15.5% from the net asset value of
those acquired shares. Shares of Common Stock repurchased to satisfy Plan
requirements or in the open market are retired and no longer outstanding.
Under the Fund's stock repurchase program for 2009, the amount of the Fund's
outstanding Common Stock that the Fund may repurchase from Stockholders and
--------------------------------------------------------------------------------
32 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
in the open market is 5%, provided that, with respect to shares purchased in the
open market, the discount must be greater than 10%. The intent of the stock
repurchase program is, among other things, to moderate the growth in the number
of shares outstanding, increase the NAV of the Fund's outstanding shares, reduce
the dilutive impact on stockholders who do not take capital gain distributions
in additional shares and increase the liquidity of the Fund's Common Stock in
the marketplace.
WARRANTS
At June 30, 2010, 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.
Assuming the exercise of all Warrants outstanding at June 30, 2010, net assets
would have increased by $213,516 and the net asset value of the Common Stock
would have been $12.91 per share. The number of Warrants exercised during the
six months ended June 30, 2010 and for the year ended Dec. 31, 2009 was 0 and
500, respectively.
CASH TENDER OFFER
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. LENDING OF PORTFOLIO SECURITIES
The Fund has entered into a Master Securities Lending Agreement (the Agreement)
with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement
authorizes JPMorgan as lending agent to lend securities to authorized borrowers
in order to generate additional income on behalf of the Fund. Pursuant to the
Agreement, the securities loaned are secured by cash or U.S. government
securities equal to at least 100% of the market value of the loaned securities.
Any additional collateral required to maintain those levels due to market
fluctuations of the loaned securities is delivered the following business day.
Cash collateral received is invested by the lending agent on behalf of the Fund
into
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
authorized investments pursuant to the Agreement. The investments made with the
cash collateral are listed in the Portfolio of Investments. The values of such
investments and any uninvested cash collateral are disclosed in the Statement of
Assets and Liabilities along with the related obligation to return the
collateral upon the return of the securities loaned. At June 30, 2010,
securities valued at $64,471,043 were on loan, secured by cash collateral of
$67,647,103 and secured by U.S. government securities valued at $28,468 invested
in short-term securities or in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Net income of
$141,322 earned from securities lending for the six months ended June 30, 2010,
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
8. 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 RiverSource, Seligman
and Threadneedle funds and other institutional clients of the Investment
Manager. The cost of the Fund's purchases and proceeds from sales of shares of
RiverSource Short-Term Cash Fund aggregated $18,332,549 and $22,247,909,
respectively, for the six months ended June 30, 2010. 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.
9. LEHMAN BROTHERS HOLDINGS INC. EQUITY-LINKED NOTES
The Fund holds investments in two equity-linked notes (notes) for which Lehman
Brothers Holdings Inc. (Lehman Brothers) is the counterparty. The notes (with an
aggregate principal amount of $29.7 million) defaulted as of their respective
--------------------------------------------------------------------------------
34 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
maturity dates, Sept. 14, 2008 and Oct. 2, 2008. Lehman Brothers filed a Chapter
11 bankruptcy petition on Sept. 15, 2008, and as such, it is likely that the
Fund will receive less than the maturity value of the notes, pending the outcome
of the bankruptcy proceedings. Based on the bankruptcy proceedings, the Fund
recorded receivables aggregating $2.9 million based on the estimated amounts
recoverable for the notes and recognized realized losses of $26.8 million. The
estimates of the amounts recoverable for the notes are periodically adjusted by
the Investment Manager based on the observable trading price of Lehman Brothers
senior notes, which provide an indication of amounts recoverable through the
bankruptcy proceedings. Any changes to the receivable balances resulting from
such adjustments are recorded as a component of interest income in the Statement
of Operations. At June 30, 2010, the value of the receivable balances were $4.3
million, which represented 0.46% of the Fund's net assets. The receivable
balances for the notes are reported as other receivables in the Statement of
Assets and Liabilities.
10. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures and options
contracts, passive foreign investment company (PFIC) holdings, re-
characterization of real estate investment trust (REIT) distributions,
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 were recorded by the Fund.
For federal income tax purposes, the Fund had a capital loss carry-over of
$774,327,301 at Dec. 31, 2009, that if not offset by capital gains, will expire
as follows:
2016 2017
$217,818,494 $556,508,807
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, 2009 and its fiscal year end (post-October loss)
as occurring on the first day of the following tax year. At Dec. 31, 2009, the
Fund
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
had a post-October loss of $945,335 that is treated for income tax purposes as
occurring on Jan. 1, 2010.
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.
11. 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.
12. 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 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.
13. 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
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
--------------------------------------------------------------------------------
36 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
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 (the Supreme
Court), asking the Supreme Court to stay the District Court proceedings while
the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v.
Harris Associates and on April 5, 2010, the Supreme Court vacated the Eighth
Circuit's decision in the Gallus case and remanded the case to the Eighth
Circuit for further consideration in light of the Supreme Court's decision in
Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the
Gallus case to the District Court for further consideration in light of the
Supreme Court's decision in Jones v. Harris Associates.
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, Seligman and Threadneedle
funds' Boards of Directors/Trustees.
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
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 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.
--------------------------------------------------------------------------------
38 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT --------------------------
Columbia Management Investment Advisers, LLC ("Columbia Management" or the
"investment manager"), formerly known as RiverSource Investments, LLC, a wholly-
owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves
as the investment manager to the Fund. Under an investment management services
agreement (the "IMS Agreement"), Columbia Management provides investment advice
and other services to the Fund and the funds distributed by Columbia Management
Investment Distributors, Inc. (collectively, the "Funds").
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
the IMS Agreement. Columbia Management prepared detailed reports for the Board
and its Contracts Committee in March and April 2010, including reports based on
data provided by independent organizations and a comprehensive response to each
item of information requested by independent legal counsel to the Independent
Directors ("Independent Legal Counsel") in a letter to the investment manager,
to assist the Board in making this determination. All of the materials presented
in March and April 2010 were first supplied in draft form to designated
representatives of the Independent Directors, i.e., Independent Legal Counsel,
the Chair of the Board and the Chair of the Contracts Committee, and the final
materials were revised to reflect comments provided by these Board
representatives. In addition, throughout the year, the Board (or its committees)
reviews information prepared by Columbia Management addressing the services
Columbia Management provides and Fund performance. The Board accords particular
weight to the work, deliberations and conclusions of the Contracts Committee,
the Investment Review Committee and the Compliance Committee in determining
whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board
meeting, Independent Legal Counsel reviewed with the Independent Directors,
including in an executive session without management, various factors relevant
to the Board's consideration of advisory agreements and the Board's legal
responsibilities related to such consideration. Following an analysis and
discussion of the factors identified below, the Board, including all of the
Independent Directors, approved renewal of the IMS Agreement.
Nature, Extent and Quality of Services Provided by Columbia Management: The
Board analyzed various reports and presentations it had received detailing the
services performed by Columbia Management, as well as its expertise, resources
and capabilities. The Board specifically considered many developments during the
past year concerning the services provided by Columbia Management, including, in
particular, the continued investment in, and resources dedicated to, the Fund's
operations, most notably, management's announcement of the massive
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 39
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ---------------------------------------------------------
investment made in the acquisition of the long-term asset management business of
Columbia Management Group, LLC (the "Columbia Transaction") and the completed
integration of J. & W. Seligman & Co. Incorporated, acquisitions which should
continue to enhance investment capabilities and provide access to a greater
depth of experienced portfolio managers in key categories. The Board noted, in
particular, that upon the close of the Columbia Transaction, the investment
manager will have grown to 10 investment offices (compared to 6 in 2009). In
addition, the Board reviewed information concerning the investment manager's new
Chief Investment Officer upon the close of the Columbia Transaction, including
the application of his particular investment philosophy, which is intended to
enhance the risk and portfolio management oversight of the Funds.
Moreover, in connection with the Board's evaluation of the overall package of
services provided by Columbia Management, the Board considered the quality of
the administrative and stockholder services provided by Columbia Management's
affiliates to the Fund. The Board also reviewed the financial condition of
Columbia Management and its affiliates, and each entity's ability to carry out
its responsibilities. Further, the Board considered Columbia Management's
ability to retain key personnel in certain targeted areas and its expectations
in this regard. The Board also discussed the acceptability of the terms of the
IMS Agreement (including the relatively broad scope of services required to be
performed by Columbia Management). The Board concluded that the services being
performed under the IMS Agreement were of a reasonably high quality.
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that Columbia Management and its
affiliates were in a position to continue to provide a high quality and level of
services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund based on net asset value, market
price and the trading price of its common stock compared to net asset value. In
this regard, the Board considered detailed reports containing data prepared by
an independent organization showing, for various periods, the performance of the
Fund, the performance of a benchmark index, the percentage ranking of the Fund
among its comparison group and the net assets of the Fund. The Board observed
that the Fund's investment performance was appropriate in light of the
particular management style. Further, the Board noted measures taken
--------------------------------------------------------------------------------
40 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
--------------------------------------------------------------------------------
to address the Fund's performance, including the anticipated change in portfolio
managers for the Fund. In this regard, the Board reviewed a detailed report
illustrating the performance and track record of the new portfolio manager
expected to assume responsibilities for the Fund upon the close of the Columbia
Transaction.
Comparative Fees, Costs of Services Provided and the Profits Realized By
Columbia Management and its Affiliates from their Relationships with the Fund:
The Board reviewed comparative fees and the costs of services to be provided
under the IMS Agreement. The Board members considered detailed comparative
information set forth in an annual report on fees and expenses, including, among
other things, data (prepared by an independent organization) showing a
comparison of the Fund's expenses with median expenses paid by funds in its peer
group, as well as data showing the Fund's contribution to Columbia Management's
profitability. They also reviewed information in the report showing the fees
charged by Columbia Management to other client accounts (with similar investment
strategies to those of the Fund).
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the complex of Funds, while assuring that the overall fees for each
Fund (with few defined exceptions) are generally in line with the "pricing
philosophy" (i.e., that the total expense ratio of each Fund, with few
exceptions, is at or below the median expense ratio of funds in the same
comparison group). The Board also reviewed information they received with
respect to the Fund indicating that although its fee structure falls outside of
the pricing philosophy, its expense ratio is lower than the median ratio for a
peer group of open-end funds in a comparable asset class. Based on its review,
the Board concluded that the Fund's management fee, which was reduced in 2009,
was fair and reasonable in light of the extent and quality of services that the
Fund receives.
The Board also considered the expected profitability of Columbia Management and
its affiliates in connection with Columbia Management providing investment
management services to the Fund. In this regard, the Board referred to a
detailed profitability report, discussing the profitability to Columbia
Management and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability over the past two years. In
this regard, the Board observed slightly reduced profitability in 2009 as
compared with 2008. The Board also considered the services acquired by the
investment manager through the use of commission dollars paid by the Fund on
portfolio transactions. The Board noted that the fees paid by the Fund should
permit the investment
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 41
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ---------------------------------------------------------
manager to offer competitive compensation to its personnel, make necessary
investments in its business and earn an appropriate profit. The Board concluded
that profitability levels were reasonable.
Economies of Scale to be Realized: The Board noted that the management fee
schedule for the Fund does not contain breakpoints that reduce the fee rate on
assets above specified levels. However, due to the Fund's closed-end structure,
the Board did not view the potential for realization of economies of scale as
the Fund's assets grow to be a material factor in their deliberations.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 8, 2010, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement for an additional annual period.
PROXY RESULTS -----------------------------------------------------------------
The 80(th) Annual Meeting of Stockholders of the Fund was held on April 8, 2010.
Stockholders voted in favor of each of the Board's two proposals. The
description of each proposal and number of shares voted are as follows:
PROPOSAL 1
To elect five Directors to the Fund's Board, one of which (Ms. Jones) to hold
office until the 2012 annual meeting of Stockholders and four of which to hold
office until the 2013 annual meeting of Stockholders and all until their
successors are elected and qualify:
DIRECTOR FOR WITHHELD
-----------------------------------------------
Arne H. Carlson 46,002,826 4,390,426
Anne P. Jones 45,947,732 4,445,519
John F. Maher 46,308,516 4,084,735
Leroy C. Richie 46,136,594 4,256,658
William F. Truscott 46,184,410 4,208,841
-----------------------------------------------
PROPOSAL 2
To ratify the selection of Ernst & Young LLP as the Fund's independent
registered public accounting firm for 2010:
FOR AGAINST ABSTAINING
------------------------------------------------
48,123,239 1,153,068 756,948
------------------------------------------------
--------------------------------------------------------------------------------
42 TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT
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 Fund at 800.221.2450; contacting your financial intermediary;
visiting tricontinental.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 tricontinental.com; or searching the
website of the SEC at www.sec.gov.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2010 SEMIANNUAL REPORT 43
TRI-CONTINENTAL CORPORATION
734 Ameriprise Financial Center
Minneapolis, MN 55474
TRICONTINENTAL.COM
You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing.
A prospectus containing information about the Fund
(including its investment objectives, risks, charges,
expenses and other information about the Fund) may be
obtained by contacting your financial advisor or Columbia
Management Investment Services Corp. (formerly RiverSource
Service Corporation) at 800.221.2450. The prospectus should
be read carefully before investing in the Fund. Tri-
Continental is managed by Columbia Management Investment
Advisers, LLC (formerly RiverSource Investments, LLC). This
material is distributed by Columbia Management Investment
Distributors, Inc. (formerly RiverSource Fund Distributors,
Inc.) member FINRA.
(COLUMBIA MANAGEMENT LOGO) (C)2010 Columbia Management Investment Advisers, LLC SL-9948 C (8/10)
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. Investments.
(a) The registrant's "Schedule 1 - Investments in securities of
unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in
Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not
applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Total Number
of Shares Maximum Number
Purchased as of Shares that
Part of Publicly May Yet Be
Total Number of Average Price Announced Plans Purchased Under the
Period Shares Purchased Paid Per Share or Programs(1) Plans or Programs(1)
------------------ ---------------- -------------- ---------------- --------------------
1-01-10 to 1-31-10 95,435 $11.62 95,435 3,349,927
2-01-10 to 2-28-10 208,897 11.25 208,897 3,141,030
3-01-10 to 3-31-10 176,621 11.79 176,621 2,964,409
4-01-10 to 4-30-10 340,021 12.67 340,021 2,624,387
5-01-10 to 5-31-10 299,920 12.02 299,920 2,324,468
6-01-10 to 6-30-10 175,250 11.45 175,250 2,149,218
(1) The registrant has a stock repurchase program. For 2010, 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%.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedure by which shareholders
may recommend nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal
financial officer, based on their evaluation of the registrant's
disclosure controls and procedures as of a date within 90 days of the
filing of this report, have concluded that such controls and
procedures are adequately designed to ensure that information required
to be disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There was no change in the registrant's internal controls over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this 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) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable for semi annual reports.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
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/ J. Kevin Connaughton
-----------------------------------
J. Kevin Connaughton
President and Principal Executive Officer
Date September 7, 2010
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/ J. Kevin Connaughton
-----------------------------------
J. Kevin Connaughton
President and Principal Executive Officer
Date September 7, 2010
By /s/ Jeffrey P. Fox
-----------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date September 7, 2010