MID-YEAR REPORT 2001
TRI-CONTINENTAL
CORPORATION
AN INVESTMENT YOU CAN LIVE WITH
TRI-CONTINENTAL CORPORATION INVESTS TO
PRODUCE FUTURE GROWTH OF BOTH CAPITAL
AND INCOME, WHILE PROVIDING REASONABLE
CURRENT INCOME.
TY is Tri-Continental Corporation's symbol for its Common Stock on the New York
Stock Exchange.
TRI-CONTINENTAL CORPORATION
TO THE STOCKHOLDERS: August 17, 2001
For the six months ended June 30, 2001, Tri-Continental Corporation
returned -4.36% based on net asset value and 3.89% based on market price, while
the Standard & Poor's 500 Composite Stock Index (S&P 500) returned -6.70% and
the Lipper Closed-End Growth & Income Funds Average returned -1.13% for the same
time period.
The first half of 2001 was difficult for most segments of the stock market,
as the US economy continued to slow appreciably and, in general, companies'
earnings fell short of their targets. The current slowdown has been
characterized by a dramatic decrease in capital expenditures, particularly in
the technology area, a decrease in industrial production, weak corporate
earnings, and rising unemployment. However, both consumer spending and the
housing market have remained strong, and these factors have been crucial in
helping the economy avoid recession.
Technology companies in particular are struggling with overcapacity. During
the technology boom of the late 1990's, many technology companies took advantage
of readily available capital to build capacity, which, together with the recent
reduction in demand, has created a glut that is now hurting profits. For the
most part, industrial companies are in a better position than technology
companies, but their profits have been hurt as well by a strong dollar and weak
demand from abroad.
The Federal Reserve Board has responded aggressively to these
circumstances, lowering interest rates six times during the first six months of
2001, for a total of 275 basis points. The Fed hopes that monetary easing will
encourage increased business investment and stimulate growth. The Fed has
indicated that it considers near-term economic weakness to be more of a threat
to prosperity than any inflationary pressures brought about by monetary easing.
In fact, inflationary forces have remained benign, giving the Fed flexibility to
cut rates again later in the year.
Looking ahead to the remainder of 2001, we anticipate that the economy will
respond favorably to the Fed's series of interest rate cuts. Economic response
to changes in monetary policy typically has a lag time of six to nine months;
therefore, the economy should begin to respond to this stimulus. Consumer
spending could receive an additional boost from the federal tax rebate, as well
as from lower energy prices. Corporate earnings may well have bottomed out, and
profits could begin to recover as early as the end of 2001, but more likely in
2002. Improved profits should translate into both more spending by businesses
and more positive sentiment toward the stock market. Tri-
1
TRI-CONTINENTAL CORPORATION
Continental's portfolio is being repositioned to invest in sectors that should
benefit from a recovering economy, such as consumer cyclicals and certain areas
of technology.
Tri-Continental Corporation's Annual Stockholders' Meeting took place on
May 17, 2001, in Baltimore, Maryland. At the meeting, four directors were
elected and the selection of Deloitte & Touche LLP as auditors was ratified. For
complete results of the vote, please refer to page 23 of this report.
Tri-Continental Corporation's Annual Meetings are held in different
locations each year in order to give as many Stockholders as possible the
opportunity to attend. The Annual Meeting is an invaluable opportunity for us to
speak personally to Stockholders and listen to their feedback. The opinions of
Stockholders who were unable to attend the Annual Meeting are equally important
to us, however, and, for this reason, we have again included a Stockholder
survey in Tri-Continental's mid-year report. We hope you will take a few moments
to complete this anonymous survey. Thank you in advance for your participation.
Results of the survey will be included in a future Tri-Continental report.
The market volatility of recent years has demonstrated the importance of
relying on fundamental research and of maintaining a long-term perspective on
investing, tenets that are central to Tri-Continental's philosophy. We thank you
for your continued support of Tri-Continental Corporation, and look forward to
serving your investment needs for many years to come. A discussion with your
Portfolio Managers regarding the Corporation's results follows this letter.
By order of the Board of Directors,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
2
TRI-CONTINENTAL CORPORATION
INTERVIEW WITH YOUR PORTFOLIO MANAGERS
[PHOTO OMITTED]
GROWTH AND INCOME TEAM: (STANDING, FROM LEFT)
AMY FUJII, JOHN ROTH, MELANIE RAVENELL
(ADMINISTRATIVE ASSISTANT), (SEATED,
FROM LEFT) CHARLES SMITH (PORTFOLIO MANAGER),
RODNEY COLLINS (CO-PORTFOLIO MANAGER)
(NOT PICTURED) RAY LAM, BRIAN TURNER
WHAT WERE TRI-CONTINENTAL'S INVESTMENT RESULTS FOR THE FIRST HALF OF 2001?
For the six months ended June 30, 2001, Tri-Continental Corporation posted
a total return of -4.36% based on net asset value and 3.89% based on market
price. This compares to -6.70% for the Standard & Poor's 500 Composite Stock
Index (S&P 500) and -1.13% during the same period for the net asset value return
of the Corporation's peers, as measured by the Lipper Closed-End Growth & Income
Funds Average.
WHAT ECONOMIC AND MARKET FACTORS AFFECTED THE CORPORATION'S RESULTS DURING THIS
PERIOD?
The US economy was weak during the first half of 2001, with most of the
weakness caused by corporations cutting back sharply on their spending plans. In
that sense, it has been more of a business slowdown than a consumer slowdown,
given the fact that consumer spending has held up well throughout the period.
The dropoff in capital spending is largely attributable to the fact that many
companies invested heavily in technology in the late 1990's and into 2000.
Having spent so aggressively, and in light of the current economic weakness,
these same companies are now much more conservative in terms of making capital
expenditures. The current trend is to wait for a return on previous investments
before making further commitments. As a result, many corporations, particularly
in the technology sector, are struggling with both excess capacity and decreased
demand. This is a major reason why many companies' earnings have been under
pressure, along with weak demand overseas and a strong US dollar. The Federal
Reserve Board has attempted to counter the economic downturn through more
aggressive monetary policy. The Fed has lowered interest rates 275 basis points
so far in 2001, and has hinted that more rate cuts are contemplated. Since
inflation is stable, the Fed has the flexibility to continue to cut rates. The
Fed appears to be seeking to foster business investment, something that will
contribute greatly to renewed economic growth. If consumers continue to spend,
the rest of the economy should eventually respond to the Fed's monetary
stimulus.
WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS TIME?
Since we expect an upturn in the economy by the beginning of the new year
(and the stock market will likely anticipate a recovery), our strategy has been
to ensure that Tri-Continental is invested in the stocks we think will benefit
most from an economic rebound. Instead of attempting to time the market, we
prefer to position Tri-Continental's portfolio according to how we think the
market is likely to react to signs of an economic upturn over the next several
months. At the beginning of the period under review, Tri-Continental's portfolio
was positioned defensively, but since then the portfolio has been moving from a
value bias to a more growth-oriented bias. This repositioning will probably
3
TRI-CONTINENTAL CORPORATION
INTERVIEW WITH YOUR PORTFOLIO MANAGERS (CONTINUED)
continue through the balance of 2001. The sectors we will favor include
technology, consumer cyclicals, communication services, and health care. Areas
we will emphasize less include utilities, energy, consumer staples, and basic
materials.
WHAT SECTORS CONTRIBUTED POSITIVELY TO PORTFOLIO PERFORMANCE?
Sectors that have contributed positively to Tri-Continental's performance
on an absolute basis include capital goods and communication services. Some of
our stock selections in the technology sector also helped results relative to
the benchmark, specifically our software and semiconductor picks. Our position
in office equipment stocks was also a positive contributor to total return.
WHAT SECTORS DETRACTED FROM PORTFOLIO PERFORMANCE?
On an absolute basis, the areas that have hurt performance most this year
are utilities, consumer staples, and health care. Some technology stocks hurt
the portfolio, specifically those in the telecommunications and computer
networking sectors, areas that have been experiencing difficulties due to
overcapacity issues.
WHAT IS YOUR OUTLOOK?
In the coming months, we expect the economy to be helped by the Fed's
interest rate cuts, the recent federal tax cut, lower energy prices, and efforts
by businesses to reduce excess inventory. The Fed may cut interest rates again
if conditions warrant, but we think that rates will remain fairly stable for the
balance of the year. In our view, corporate profits will bottom out between now
and the end of 2001. As we move into 2002, we expect the economy to begin to
stabilize and then accelerate modestly. It is unlikely, however, that the
economy will expand as rapidly as it did in the late 1990's. This is because
corporations are likely to be cautious in terms of increasing their capital
spending. Nonetheless, there is the possibility of a sharp increase in capital
expenditures, something that could boost the economy significantly. We believe
that consumer spending will remain robust, helped by relatively low
unemployment, lower energy prices, and a federal tax rebate. The stock market
has traditionally anticipated upswings in the economy, and we expect stocks to
move in advance of an economic recovery. For this reason, we think it is
important to be invested in the companies that are likely to benefit from the
anticipated upswing, and we have positioned Tri-Continental accordingly.
4
TRI-CONTINENTAL CORPORATION
INVESTMENT RESULTS PER COMMON SHARE
TOTAL RETURNS
FOR PERIODS ENDED JUNE 30, 2001
Average Annual
---------------------------
Three Six One Five 10
Months* Months* Year Years Years
------- ------- ---- ----- -----
MARKET PRICE** 6.19% 3.89% (1.44)% 13.09% 11.93%
NET ASSET VALUE** 5.84 (4.36) (12.04) 11.04 12.47
LIPPER CLOSED-END
GROWTH & INCOME
FUNDS AVERAGE*** 8.03 (1.13) 0.53 21.11 12.65
S&P 500*** 5.85 (6.70) (14.83) 14.47 15.10
PRICE PER SHARE
June 30, 2001 March 31, 2001 December 31, 2000
------------- -------------- -----------------
MARKET PRICE $ 21.77 $ 20.66 $21.1875
NET ASSET VALUE 24.47 23.30 25.87
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 2001
Capital Gain (Loss)
-----------------------------------------------
Dividends Paid+ Paid Realized Unrealized
-------------- --------- --------- ---------
$0.14 $0.10++ $(0.16) $1.68+++
----------------------------------------------------------------------------
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original cost.
Past performance is not indicative of future investment results. An investment
in this Corporation is not insured by the Federal Deposit Insurance Corporation
or any other government agency.
* Returns for periods of less than one year are not annualized.
** These rates of return reflect changes in market price or net asset value,
as applicable, and assume that all distributions within the period are
taken in additional shares.
*** The Lipper Closed-End Growth & Income Funds Average and the S&P 500 are
unmanaged benchmarks that assume investment of dividends. The Lipper
Closed-End Growth & Income Funds Average excludes the effect of any costs
associated with the purchase of shares, and the S&P 500 excludes the effect
of fees and sales charges. Investors cannot invest directly in an index or
an average.
+ Preferred Stockholders were paid dividends totaling $1.25 per share.
++ Represents realized capital gains from 2000, which were paid on
June 21, 2001.
+++ Represents the per share amount of net unrealized appreciation of portfolio
securities as of June 30, 2001.
5
TRI-CONTINENTAL CORPORATION
STOCKHOLDER SURVEY
Tri-Continental is conducting a survey in an effort to find out more about
the Corporation's Stockholders, particularly how they feel about their
investment. Please take a few moments to complete this survey. It is a self
mailer that can be folded, sealed, and mailed. Postage has already been paid,
and your responses are anonymous.
TRI-CONTINENTAL'S DISCOUNT
Closed-end funds, like Tri-Continental, usually trade at either a premium
or at a discount; in other words, their market price may be higher or lower than
net asset value. During the first six months of 2001, Tri-Continental's discount
narrowed from 18.1% on December 31, 2000, to 11.0% on June 30, 2001. This
resulted in a significant disparity between Tri-Continental's net asset value
return of -4.36% and its market price return of 3.89% during this time.
We are pleased that there has been a convergence between Tri-Continental's
market price and net asset value, creating a narrower discount. Many market
professionals believe that a discount represents a buying opportunity to acquire
a professionally managed portfolio, with a competitive long-term performance
history, at an attractive price. Of the six analysts who follow Tri-Continental
(Morgan Stanley Dean Witter, Merrill Lynch, PaineWebber, Salomon Smith Barney,
AG Edwards, and Everen Securities), all recommend the stock.
Tri-Continental's manager, J. & W. Seligman & Co. Incorporated, has taken
steps to reduce the discount including proactive contact with the sell-side
analyst community, increasing market awareness through www.tri-continental.com,
and maintaining an ongoing investor relations program, "Introduce
Tri-Continental to a Friend." Also, in November 2000, Tri-Continental renewed
and amended its share buyback program for up to 7.5% of shares outstanding as
long as the discount remains wider than 10%. While this program was not designed
specifically to narrow the discount, that may be a secondary effect. Our studies
show that closed-end funds with higher share count growth tend to have wider
discounts, and the buyback program reduces Tri-Continental's share count growth
by the number of shares repurchased.
WWW.TRI-CONTINENTAL.COM
Up-to-date information about Tri-Continental -- including daily net asset
values, monthly fact sheets, portfolio manager commentary, recent reports, and
more -- are now available at www.tri-continental.com. This website was developed
for the convenience of current Stockholders and to publicize Tri-Continental.
STOCK REPURCHASE PROGRAM
In November 1998, the Board of Directors authorized a share repurchase
program for up to 7.5% of the Corporation's shares over a 12-month period. This
program was reauthorized in November 1999, and reauthorized and amended on
November 17, 2000. The Board's decision benefits all Stockholders, allowing them
to continue to enjoy the advantages of Tri-Continental's closed-end structure,
while reducing the number of shares outstanding and increasing the net asset
value of the remaining shares.
From November 18, 2000 through June 30, 2001, the Corporation repurchased
4,778,537 shares, representing approximately 3.87% of the shares outstanding on
the date the program was reauthorized. During this time, the Corporation
purchased as many shares in the open market as possible under federal
regulations. Corporations are subject to certain restrictions regarding the
amount of their own stock they can repurchase in the open market. The repurchase
of additional shares is expected to take place through November 2001, as long as
the discount remains wider than 10%. The Board of Directors will then consider
continuing the program.
6
TRI-CONTINENTAL CORPORATION
HIGHLIGHTS OF THE FIRST HALF
JUNE 30, DECEMBER 31,
ASSETS: 2001 2000
-------------- --------------
Total assets ............................... $3,252,041,713 $3,537,559,628
6,769,578 41,914,001
-------------- --------------
NET INVESTMENT ASSETS ...................... $3,245,272,135 $3,495,645,627
Preferred Stock, at par value .............. 37,637,000 37,637,000
-------------- --------------
Net Assets for Common Stock ................ $3,207,635,135 $3,458,008,627
============== ==============
Common shares outstanding .................. 131,077,105 133,643,365
NET ASSETS BEHIND EACH COMMON SHARE ........ $24.47 $25.87
SIX MONTHS ENDED JUNE 30,
--------------------------------
2001 2000
-------------- --------------
TAXABLE GAIN:
Net capital gain (loss) realized ........... $ (20,865,366) $ 92,321,555
Per Common share ........................... $(0.16) $0.74
Unrealized capital gains, end of period .... $ 219,608,199 $1,004,270,869
Per Common share, end of period ............ $1.68 $8.02
DISTRIBUTION OF GAIN:
Per Common share ........................... $0.10 $0.56
INCOME:
Total income earned ........................ $ 25,108,488 $ 31,270,745
Expenses ................................... 9,826,227 10,796,891
Preferred Stock dividends .................. 940,925 940,925
-------------- --------------
Income for Common Stock .................... $ 14,341,336 $ 19,532,929
============== ==============
Expenses to average net
investment assets ........................ 0.60%* 0.54%*
Expenses to average net assets for
Common Stock ............................. 0.60%* 0.55%*
DIVIDENDS PER COMMON SHARE ................. $0.14 $0.17
With December 2000 gain distribution
taken in shares .......................... $0.16 --
----------
* Annualized.
7
TRI-CONTINENTAL CORPORATION
DIVERSIFICATION OF NET INVESTMENT ASSETS
The diversification of portfolio holdings by industry on June 30, 2001, was as
follows. Individual securities owned are listed on pages 10 to 13.
PERCENT OF
NET INVESTMENT
ASSETS
----------------------
JUNE 30, DECEMBER 31,
ISSUES COST VALUE 2001 2000
-- -------------- -------------- ------- ------------
NET CASH AND
SHORT-TERM HOLDINGS 5 $ 358,251,835 $ 358,251,835 11.0% 7.8%
TRI-CONTINENTAL
FINANCIAL DIVISION 2 10,010,987 8,662,794 0.3 0.3
-- -------------- -------------- ----- -----
7 $ 368,262,822 $ 366,914,629 11.3% 8.1%
-- -------------- -------------- ----- -----
Common Stocks:
Basic Materials 1 $ 16,519,456 $ 16,271,424 0.5% --
Biotechnology 1 15,032,833 19,048,070 0.6 --
Chemicals - -- -- -- 0.5%
Communication Equipment 5 171,282,546 49,516,218 1.5 2.9
Communications 5 236,356,661 180,619,185 5.6 4.6
Consumer Goods and Services 3 103,091,460 105,975,860 3.3 6.4
Drugs and Health Care 7 304,700,371 416,120,013 12.8 14.2
Electric and Gas Utilities 3 95,522,557 115,242,982 3.6 5.9
Electronic Technology 13 543,650,781 418,331,837 12.9 13.1
Energy 5 169,168,363 198,654,207 6.1 7.8
Finance and Insurance 7 214,451,478 448,771,595 13.8 17.4
Leisure and Hotels 1 16,526,061 17,253,184 0.5 --
Machinery and
Industrial Equipment 2 136,449,785 223,787,883 6.9 6.5
Media 4 134,249,835 136,341,735 4.2 0.9
Office Equipment 1 90,041,646 85,124,520 2.6 1.9
Paper and Forest Products 1 14,599,866 13,740,982 0.4 0.5
Retail Trade 5 172,842,362 188,501,957 5.8 3.4
Technology Services 4 222,915,053 245,055,854 7.6 5.9
-- -------------- -------------- ----- -----
68 $2,657,401,114 $2,878,357,506 88.7% 91.9%
-- -------------- -------------- ----- -----
NET INVESTMENT ASSETS 75 $3,025,663,936 $3,245,272,135 100.0% 100.0%
== ============== ============== ===== =====
8
TRI-CONTINENTAL CORPORATION
LARGEST PORTFOLIO CHANGES
APRIL 1 TO JUNE 30, 2001
TEN LARGEST PURCHASES TEN LARGEST SALES
--------------------- -----------------
Kraft Foods Inc. Class "A" American General Corporation**
Dynegy Inc. Class "A"* Merck & Co., Inc.**
Bristol-Myers Squibb Company* Novellus Systems Inc.
Pfizer Inc. Williams Companies, Inc. (The)**
Clear Channel Communications, Inc.* Praxair Inc.**
Viacom Inc. Class "B"* Guidant Corporation.**
Starwood Hotels & Resorts Worldwide, Inc.* Procter & Gamble Company (The)**
Masco Corporation* Xilinx, Inc.
Adelphia Communications Corporation Class "A" Citrix Systems, Inc.
Jabil Circuit, Inc.* McData Corporation**
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities, listed in
descending order.
----------
* Position added during the period.
** Position eliminated during the period.
TEN LARGEST HOLDINGS
JUNE 30, 2001
PERCENT OF
SECURITY VALUE NET INVESTMENT ASSETS
-------- ------------ ---------------------
Microsoft Corporation $136,876,752 4.2%
General Electric Company 126,018,750 3.9
St. Jude Medical, Inc. 97,800,000 3.0
United Technologies Corporation 97,769,133 3.0
Citigroup Inc. 87,186,000 2.7
Pitney Bowes Inc. 85,124,520 2.6
Baxter International Inc. 83,809,600 2.6
American International Group, Inc. 81,863,400 2.5
Exxon Mobil Corporation 78,615,000 2.4
Pfizer Inc. 75,558,330 2.3
9
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS JUNE 30, 2001
SHARES VALUE
------- --------------
COMMON STOCKS 88.7%
BASIC MATERIALS - 0.5%
MASCO CORPORATION 651,900 $ 16,271,424
Retailer and installer of home improvement --------------
and building products
BIOTECHNOLOGY - 0.6%
GENENTECH, INC.* 345,700 $ 19,048,070
Provider of pharmaceuticals and --------------
biotechnology products
COMMUNICATION EQUIPMENT - 1.5%
CIENA CORPORATION* 198,600 $ 7,547,793
Provider of multiplexing systems for
fiber optics communications networks
JDS UNIPHASE CORPORATION* 331,450 4,191,185
Worldwide provider of fiber optic
components and modules for the cable
television and communications industries
LUCENT TECHNOLOGIES, INC 990,000 6,138,000
Manufacturer of telecommunications equipment
NORTEL NETWORKS CORPORATION (CANADA) 881,550 8,013,290
Provider of telecommunications equipment
QUALCOMM INC.* 415,000 23,625,950
--------------
Developer, manufacturer, and marketer of
communications systems and products
$ 49,516,218
--------------
COMMUNICATIONS - 5.6%
AT&T CORP 1,334,500 $ 29,359,000
Provider of telecommunications services
SBC COMMUNICATIONS, INC 1,493,480 59,828,809
Provider of telephone services
SPRINT FON GROUP 750,000 16,020,000
Provider of telecommunications services
VERIZON COMMUNICATIONS 1,355,822 72,536,477
Provider of telephone services, systems,
and equipment
WILLIAMS COMMUNICATIONS GROUP, INC.* 974,542 2,874,899
Operator of nationwide fiber --------------
optic networks $ 180,619,185
--------------
CONSUMER GOODS AND SERVICES - 3.3%
AOL TIME WARNER INC.* 706,500 $ 37,444,500
Provider of Internet access, as well as
electronic mail, entertainment,
reference, and interactive publications
KRAFT FOODS INC. CLASS "A"* 1,240,000 38,440,000
Provider of food and beverage products
PEPSICO, INC 680,800 30,091,360
Manufacturer and marketer of soft drinks and --------------
consumer products $ 105,975,860
--------------
DRUGS AND HEALTH CARE - 12.8%
ABBOTT LABORATORIES 892,100 $ 42,829,721
Developer and manufacturer of diversified
health care products
AMERICAN HOME PRODUCTS CORPORATION 705,800 41,246,952
Developer and manufacturer of pharmaceuticals,
food, and housewares
BAXTER INTERNATIONAL INC 1,710,400 83,809,600
Manufacturer and distributor of hospital and
laboratory products
BRISTOL-MYERS SQUIBB COMPANY 556,700 29,115,410
Developer and manufacturer of health and
personal care products
----------
See footnotes on page 13.
10
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 2001
SHARES VALUE
------- --------------
DRUGS AND HEALTH CARE (CONTINUED)
JOHNSON & JOHNSON 915,200 $ 45,760,000
Developer and manufacturer of health
care products
PFIZER INC 1,886,600 75,558,330
Manufacturer of health care consumer
products and specialty chemicals
ST. JUDE MEDICAL, INC.* 1,630,000 97,800,000
Provider of medical devices for the --------------
cardiovascular market $ 416,120,013
--------------
ELECTRIC AND GAS UTILITIES - 3.6%
CALPINE CORPORATION* 1,012,400 $ 38,268,720
Developer, marketer, and operator of power
generation facilities
DYNEGY INC. CLASS "A" 755,000 35,107,500
Provider of energy and communications
solutions
EL PASO CORPORATION 796,855 41,866,762
Owner of natural gas --------------
pipeline systems $ 115,242,982
--------------
ELECTRONIC TECHNOLOGY - 12.9%
AGERE SYSTEMS INC. CLASS "A"* 5,754,800 $ 43,161,000
Manufacturer of optical components
AGILENT TECHNOLOGIES, INC.* 788,700 25,632,750
Designer of test and monitoring instruments,
and semiconductors
for diversified industries
ANALOG DEVICES, INC.* 1,002,300 43,349,475
Manufacturer of analog semiconductors and
digital signal processors
CISCO SYSTEMS, INC.* 1,475,000 26,830,250
Manufacturer of computer network products
COMPAQ COMPUTER CORPORATION 1,944,100 30,114,109
Global PC manufacturer
EMC CORPORATION* 306,900 8,915,445
Manufacturer of enterprise storage devices
INTEL CORPORATION 2,047,800 62,109,774
Manufacturer of microprocessors and
memory circuits
INTERNATIONAL BUSINESS MACHINES CORPORATION 614,950 69,489,350
Diversifed technology provider
JABIL CIRCUIT, INC.* 104,900 3,237,214
Contract manufacturer of electronic
components
MICRON TECHNOLOGY, INC.* 497,500 20,447,250
Manufacturer of DRAMmemory circuits
NOVELLUS SYSTEMS, INC.* 680,500 38,648,997
Manufacturer of semiconductor processing
equipment
PALM, INC.* 1,321,750 8,029,631
Provider of hand-held computing devices
XILINX, INC.* 937,600 38,366,592
Supplier of field-programmable --------------
gate arrays $ 418,331,837
--------------
ENERGY - 6.1%
BAKER HUGHES, INC 530,500 $ 17,771,750
Provider of products and services to explore
for, extract, recover, and process oil
and gas
BP PLC (ADRS) (UNITED KINGDOM) 742,550 37,016,117
Explorer, producer, refiner, and retailer
of petroleum products
EXXON MOBIL CORPORATION 900,000 78,615,000
Explorer and producer of natural gas, oil,
and petroleum products
----------
See footnotes on page 13.
11
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 2001
SHARES VALUE
------- --------------
ENERGY (CONTINUED)
ROYAL DUTCH PETROLEUM COMPANY (NY SHARES)
(NETHERLANDS) 636,500 $ 37,088,855
Provider of international oil services
SCHLUMBERGER LTD 534,900 28,162,485
--------------
Worldwide provider of
energy services $ 198,654,207
--------------
FINANCE AND INSURANCE - 13.8%
AMERICAN INTERNATIONAL GROUP, INC 951,900 $ 81,863,400
Provider of insurance
BANK OF NEW YORK COMPANY, INC 1,363,000 65,424,000
Commercial bank
CHUBB CORPORATION (THE) 904,000 69,996,720
International holding company specializing
in property and casualty insurance
CITIGROUP INC 1,650,000 87,186,000
Provider of diversified financial services
FANNIE MAE 726,500 61,861,475
Provider of mortgage financing
MERRILL LYNCH & CO. INCORPORATED 560,000 33,180,000
Provider of financial services
XL CAPITAL LTD. CLASS "A" (BERMUDA) 600,000 49,260,000
--------------
Insurance provider $ 448,771,595
--------------
LEISURE AND HOTELS - 0.5%
STARWOOD HOTELS & RESORTS WORLDWIDE, INC 462,800 $ 17,253,184
--------------
Hotel operator
MACHINERY AND INDUSTRIAL EQUIPMENT - 6.9%
GENERAL ELECTRIC COMPANY 2,585,000 $ 126,018,750
Provider of electrical equipment
UNITED TECHNOLOGIES CORPORATION 1,334,550 97,769,133
Manufacturer of elevators, jet engines, --------------
flight systems, and automotive parts $223,787,883
--------------
MEDIA - 4.2%
ADELPHIA COMMUNICATIONS CORPORATION CLASS "A"* 1,210,500 $ 49,206,825
Cable television operator
CLEAR CHANNEL COMMUNICATIONS, INC.* 276,600 17,342,820
Owner and operator of radio and television
stations
COMCAST CORPORATION CLASS "A"* 1,230,600 53,408,040
Developer, manager, and operator of hybrid
fiber-coaxial broadband
cable communications networks
VIACOM INC. CLASS "B"* 316,600 16,384,050
Worldwide entertainment --------------
company $136,341,735
--------------
OFFICE EQUIPMENT - 2.6%
PITNEY BOWES INC 2,021,000 $ 85,124,520
Retailer of mailing equipment and supplies --------------
PAPER AND FOREST PRODUCTS - 0.4%
MEAD CORPORATION (THE) 506,300 $ 13,740,982
Manufacturer of paper, lumber, and --------------
wood products
RETAIL TRADE - 5.8%
COSTCO WHOLESALE CORPORATION* 832,800 $ 34,198,932
Discount retailer
HOME DEPOT, INC. (THE) 691,100 32,170,705
Retailer of building materials and home
improvement products
----------
See footnotes on page 13.
12
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 2001
SHARES OR
PRINCIPAL AMOUNT VALUE
---------------- --------------
RETAIL TRADE (continued)
LIMITED INC. (THE) 1,922,600 shs. $ 31,761,352
Clothing retailer
MAY DEPARTMENT STORES COMPANY 904,800 30,998,448
Department store operator
WAL-MART STORES, INC. 1,216,650 59,372,520
--------------
Discount retailer $ 188,501,957
--------------
TECHNOLOGY SERVICES - 7.6%
CITRIX SYSTEMS, INC.* 1,323,550 $ 46,291,161
Provider of thin-client service software
ELECTRONIC DATA SYSTEMS CORPORATION 669,950 41,871,875
Provider of management consulting and
technology services
MICROSOFT CORPORATION* 1,905,300 136,876,752
Provider of personal computer operating
systems and
application software products
ORACLE CORPORATION* 1,053,200 20,016,066
--------------
Provider of computer software $ 245,055,854
--------------
TOTAL COMMON STOCKS
(COST $2,657,401,114) $2,878,357,506
--------------
TRI-CONTINENTAL FINANCIAL DIVISION+ - 0.3%
(COST $10,010,987) $ 8,662,794
--------------
FIXED TIME DEPOSITS 9.8%
BANK OF AMERICA, GRAND CAYMAN $ 68,000,000 $ 68,000,000
4%, 7/2/01
BANK OF MONTREAL, GRAND CAYMAN 65,000,000 65,000,000
4%, 7/2/01
BAYERISCHE HYPO-UND VEREINSBANK, GRAND CAYMAN 70,000,000 70,000,000
4.125%, 7/2/01
BNP PARIBAS, GRAND CAYMAN 55,000,000 55,000,000
4.125%, 7/2/01
HSBC BANK USA, GRAND CAYMAN 62,000,000 62,000,000
--------------
4%, 7/2/01
TOTAL FIXED TIME DEPOSITS
(COST $320,000,000) $ 320,000,000
--------------
TOTAL INVESTMENTS - 98.8%
(COST $2,987,412,101) $3,207,020,300
OTHER ASSETS LESS LIABILITIES - 1.2% 38,251,835
--------------
NET INVESTMENT ASSETS - 100.0% $3,245,272,135
==============
----------
* Non-income producing security.
+ Restricted security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
13
TRI-CONTINENTAL CORPORATION
STATEMENT OF ASSETS AND LIABILITIES June 30, 2001
ASSETS:
Investments at value:
Common stocks (cost--$2,657,401,114) ........ $2,878,357,506
Tri-Continental Financial Division
(cost--$10,010,987) ......................... 8,662,794
Short-term holdings (cost--$320,000,000) .... 320,000,000
--------------
Total Investments (cost--$2,987,412,101) ..................... $3,207,020,300
Cash ......................................................... 239,804
Receivable for securities sold ............................... 41,534,240
Receivable for dividends and interest ........................ 2,771,924
Investment in, and expenses prepaid to,
stockholder service agent .................................. 431,658
Other ........................................................ 43,787
--------------
TOTAL ASSETS ................................................. $3,252,041,713
--------------
LIABILITIES:
Payable for securities purchased ............................. $ 2,937,808
Management fee payable ....................................... 1,065,823
Preferred dividends payable .................................. 470,463
Payable for Common Stock repurchased ......................... 460,768
Accrued expenses and other ................................... 1,834,716
--------------
TOTAL LIABILITIES ............................................ $ 6,769,578
--------------
NET INVESTMENT ASSETS ........................................ $3,245,272,135
Preferred Stock, at $50 par value ............................ 37,637,000
--------------
NET ASSETS FOR COMMON STOCK .................................. $3,207,635,135
==============
NET ASSETS PER SHARE OF COMMON STOCK
(MARKET VALUE--$21.77) ..................................... $24.47
======
STATEMENT OF CAPITAL STOCK AND SURPLUS June 30, 2001
CAPITAL STOCK:
$2.50 Cumulative Preferred Stock, $50 par value,
asset coverage per share--$4,311.54
Shares authorized--1,000,000; issued
and outstanding--752,740 .................................. $ 37,637,000
Common Stock, $0.50 par value:
Shares authorized--159,000,000; issued
and outstanding--131,077,105 ............................ 65,538,553
SURPLUS:
Capital surplus ............................................. 2,943,929,262
Dividends in excess of net investment income ................ (5,090,279)
Accumulated net realized loss ............................... (16,350,600)
Net unrealized appreciation of investments .................. 219,608,199
--------------
NET INVESTMENT ASSETS ........................................ $3,245,272,135
==============
----------
See Notes to Financial Statements.
14
TRI-CONTINENTAL CORPORATION
STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2001
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld
of $107,150) ............................ $ 17,479,120
Interest .................................. 7,629,368
--------------
TOTAL INVESTMENT INCOME .................................... $ 25,108,488
EXPENSES:
Management fee ............................ $ 6,530,453
Stockholder account and registrar
services ................................ 2,068,219
Stockholder reports and communications .... 411,806
Stockholders' meeting ..................... 232,604
Custody and related services .............. 203,500
Directors' fees and expenses .............. 141,442
Auditing and legal fees ................... 115,944
Registration .............................. 67,145
Miscellaneous ............................. 55,114
--------------
TOTAL EXPENSES ............................................. 9,826,227
--------------
NET INVESTMENT INCOME ...................................... $ 15,282,261*
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments .......... $ (20,865,366)
Net change in unrealized appreciation
of investments ........................... (155,906,695)
--------------
NET LOSS ON INVESTMENTS .................................... (176,772,061)
--------------
DECREASE IN NET INVESTMENT ASSETS
FROM OPERATIONS ........................................... $ (161,489,800)
==============
----------
* Net investment income available for Common Stock is $14,341,336, which is net
of Preferred Stock dividends of $940,925.
See Notes to Financial Statements.
15
TRI-CONTINENTAL CORPORATION
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2001 2000
---------------- ---------------
OPERATIONS:
Net investment income ...................... $ 15,282,261 $ 43,250,751
Net realized gain (loss) on investments .... (20,865,366) 352,066,264
Net change in unrealized appreciation
of investments ........................... (155,906,695) (777,024,822)
--------------- ---------------
DECREASE IN NET INVESTMENT ASSETS
FROM OPERATIONS .......................... $ (161,489,800) $ (381,707,807)
--------------- ---------------
DECREASE STOCKHOLDERS:
Net investment income:
Preferred Stock (per share: $1.25
and $2.50) ............................... $ (940,925) $ (1,881,850)
Common Stock (per share: $0.14 and $0.33) (18,431,075) (40,881,373)
--------------- ---------------
$ (19,372,000) $ (42,763,223)
Net realized gain on investments:
Common Stock (per share: $0.10 and $3.30) (13,444,335) (407,048,103)
--------------- ---------------
DECREASE IN NET INVESTMENT ASSETS
FROM DISTRIBUTIONS ....................... $ (32,816,335) $ (449,811,326)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued
at market price in gain distributions
(435,137 and 12,645,131 shares) .......... $ 9,694,852 $ 286,065,681
Value of shares of Common Stock issued
for investment plans (793,516 and
1,600,582 shares) ........................ 17,302,441 39,883,293
Cost of shares of Common Stock purchased
from investment plan participants
(1,107,837 and 2,360,838 shares) ......... (24,189,943) (59,186,968)
Cost of shares of Common Stock purchased
in the open market (2,687,400 and
3,478,200 shares) ........................ (58,875,044) (87,100,541)
Net proceeds from issuance of shares of
Common Stock upon exercise of
Warrants (324 and 2,487 shares) .......... 337 2,811
--------------- ---------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS
FROM CAPITAL SHARE TRANSACTIONS .......... $ (56,067,357) $ 179,664,276
--------------- ---------------
DECREASE IN NET INVESTMENT ASSETS .......... $ (250,373,492) $ (651,854,857)
NET INVESTMENT ASSETS:
Beginning of period ........................ 3,495,645,627 4,147,500,484
--------------- ---------------
END OF PERIOD (including dividends in excess
of net investment income of $5,090,279
and $1,000,540, respectively) ............ $ 3,245,272,135 $ 3,495,645,627
=============== ===============
----------
See Notes to Financial Statements.
16
TRI-CONTINENTAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which require management to make certain estimates and
assumptions at the date of the financial statements. The following summarizes
the significant accounting policies of the Corporation:
A. SECURITY VALUATION -- Investments in stocks, limited partnership
interests, and short-term holdings maturing in more than 60 days are
valued at current market values or, in their absence, fair value
determined in accordance with procedures approved by the Board of
Directors. Securities traded on an exchange are valued at last sales
prices or, in their absence and in the case of over-the-counter
securities, at the mean of bid and asked prices. Short-term holdings
maturing in 60 days or less are valued at amortized cost.
B. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the
Corporation are maintained in US dollars. The market value of
investment securities, other assets and liabilities denominated in
foreign currencies are translated into US dollars at the daily rate of
exchange as reported by a pricing service. Purchases and sales of
investment securities, income, and expenses are translated into US
dollars at the rate of exchange prevailing on the respective dates of
such transactions.
The Corporation separates that portion of the results of
operations resulting from changes in the foreign exchange rates from
the fluctuations arising from changes in the market prices of
securities held in the portfolio. Similarly, the Corporation separates
the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of portfolio securities sold
during the period.
C. FEDERAL TAXES -- There is no provision for federal income tax. The
Corporation has elected to be taxed as a regulated investment company
and intends to distribute substantially all taxable net income and net
gain realized.
D. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statements and federal
income tax purposes. Dividends receivable and payable are recorded on
ex-dividend dates, except that certain dividends from foreign
securities where the ex-dividend dates may have passed are recorded as
soon as the Corporation is informed of the dividend. Interest income
is recorded on the accrual basis.
E. DISTRIBUTIONS TO STOCKHOLDERS -- The treatment for financial statement
purposes of distributions made during the year from net investment
income or net realized gains may differ from their ultimate treatment
for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense or capital gain, and the
recharacterization of foreign exchange gains or losses to either
ordinary income or realized capital gain for federal income tax
purposes. Where such differences are permanent in nature, they are
reclassified in the components of net investment assets based on their
ultimate characterization for federal income tax purposes. Any such
reclassification will have no effect on net assets, results of
operations, or net asset value per share of the Corporation.
2. CAPITAL STOCK TRANSACTIONS -- Under the Corporation's Charter, dividends on
the Common Stock cannot be declared unless net assets, after such dividends and
dividends on Preferred Stock, equal at least $100 per share of Preferred Stock
outstanding. The Preferred Stock is subject to redemption at the Corporation's
option at any time on 30 days' notice at $55 per share (or a total of
$41,400,700 for the shares outstanding) plus accrued dividends, and entitled in
liquidation to $50 per share plus accrued dividends.
17
TRI-CONTINENTAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)
The Corporation, 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, 2001, 1,107,837 shares were purchased from Plan
participants at a cost of $24,189,943, which represented a weighted average
discount of 11.98% from the net asset value of those acquired shares. A total of
793,516 shares were issued to Plan participants during the six months ended June
30, 2001, for proceeds of $17,302,441, at a discount of 11.75% from the net
asset value of those shares.
The Corporation may make additional purchases of its Common Stock in the
open market and elsewhere at such prices in such amounts as the Board of
Directors may deem advisable. For the six months ended June 30, 2001, the
Corporation purchased 2,687,400 shares of its Common Stock in the open market at
an aggregate cost of $58,875,044, which represented a weighted average discount
of 11.97% from the net asset value of those acquired shares.
At June 30, 2001, 289,907 shares of Common Stock were reserved for issuance
upon exercise of 13,403 Warrants, each of which entitled the holder to purchase
21.63 shares of Common Stock at $1.04 per share. Assuming the exercise of all
Warrants outstanding at June 30, 2001, net investment assets would have
increased by $301,503 and the net asset value of the Common Stock would have
been $24.42 per share. The number of Warrants exercised during the six months
ended June 30, 2001, and the year ended December 31, 2000, was 15 and 125,
respectively.
3. PURCHASES AND SALES OF SECURITIES-- Purchases and sales of portfolio
securities, excluding USGovernment obligations and short-term investments,
amounted to $1,138,109,243 and $1,296,292,917, respectively. At June 30, 2001,
the cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes, and the tax basis gross
unrealized appreciation and depreciation of portfolio securities amounted to
$615,333,233 and $395,725,034, respectively.
4. MANAGEMENT FEE,ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the
Corporation and provides for the necessary personnel and facilities.
Compensation of all officers of the Corporation, all directors of the
Corporation who are employees or consultants of the Manager, and all personnel
of the Corporation and the Manager is paid by the Manager. The Manager receives
a fee, calculated daily and payable monthly, equal to a percentage of the
Corporation's daily net assets at the close of business on the previous business
day. The management fee rate is calculated on a sliding scale of 0.45% to
0.375%, based on average daily net assets of all the investment companies
managed by the Manager. The management fee for the six months ended June 30,
2001, was equivalent to an annual rate of 0.40% of the average daily net assets
of the Corporation.
Seligman Data Corp., owned by the Corporation and certain associated
investment companies, charged the Corporation at cost $2,042,589 for stockholder
account services. The Corporation's investment in Seligman Data Corp. is
recorded at a cost of $43,681.
Certain officers and directors of the Corporation are officers or directors
of the Manager and/or Seligman Data Corp.
The Corporation has a compensation arrangement under which directors who
receive fees may elect to defer receiving such fees. Directors may elect to have
their deferred fees accrue interest or earn a return based on the performance of
the Corporation or other funds in the Seligman Group of Investment Companies.
The cost of such fees and earnings accrued thereon is included in directors'
fees and expenses, and the accumulated balance thereof at June 30, 2001, of
$354,621 is included in other liabilities. Deferred fees and related accrued
earnings are not deductible for federal income tax purposes until such amounts
are paid.
18
TRI-CONTINENTAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)
5. RESTRICTED SECURITIES -- At June 30, 2001, the Tri-Continental Financial
Division of the Corporation was comprised of two investments that were purchased
through private offerings and cannot be sold without prior registration under
the Securities Act of 1933 or pursuant to an exemption therefrom. These
investments are valued at fair value as determined in accordance with procedures
approved by the Board of Directors of the Corporation. The acquisition dates of
investments in the limited partnerships, along with their cost and values at
June 30, 2001, are as follows:
Investments Acquisition Date(s) Cost Value
--------------------------- ------------------- ----------- -----------
WCAS Capital Partners II, L.P. 12/11/90 to 3/24/98 $ 5,962,340 $ 4,884,111
Whitney Subordinated
Debt Fund, L.P. 7/12/89 to 11/10/98 4,048,647 3,778,683
----------- -----------
Total $10,010,987 $ 8,662,794
=========== ===========
19
TRI-CONTINENTAL CORPORATION
FINANCIAL HIGHLIGHTS
The Corporation's financial highlights are presented below. "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 shares outstanding.
"Total investment return" measures the Corporation's performance assuming
that investors purchased shares of the Corporation at the market value or net
asset value as of the beginning of the period, invested dividends and capital
gains paid, as provided for in the Corporation'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 commissions investors may incur in
purchasing or selling shares of the Corporation. The total investment returns
for periods of less than one year are not annualized.
The ratios of expenses and net investment income to average net investment
assets and to average net assets for Common Stock for the periods presented do
not reflect the effect of dividends paid to Preferred Stockholders.
Six Months Year Ended December 31,
Ended ------------------------------------------------------------
June 30, 2001 2000 1999 1998 1997 1996
------------- ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD ............................ $25.87 $32.82 $34.13 $32.06 $29.28 $27.58
------ ------- ------- ------ ------- -------
Net investment income .......................... 0.12 0.35 0.48 0.54 0.60 0.68
Net realized and unrealized
investment gain (loss) ......................... (1.26) (3.25) 2.90 7.01 6.94 4.84
Net realized and unrealized loss
from foreign currency transactions ............. -- -- -- (0.01) (0.17) (0.02)
------ ------- ------- ------ ------- -------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................... (1.14) (2.90) 3.38 7.54 7.37 5.50
Dividends paid on Preferred Stock .............. (0.01) (0.02) (0.02) (0.02) (0.02) (0.02)
Dividends paid on Common Stock ................. (0.14) (0.33) (0.48) (0.52) (0.60) (0.66)
Distributions from net gain realized ........... (0.10) (3.30) (3.79) (4.28) (3.45) (2.72)
Issuance of Common Stock
in gain distributions .......................... (0.01) (0.40) (0.40) (0.65) (0.52) (0.40)
------ ------- ------- ------ ------- -------
NET INCREASE (DECREASE)
IN NET ASSET VALUE ............................. (1.40) (6.95) (1.31) 2.07 2.78 1.70
------ ------- ------- ------ ------- -------
NET ASSET VALUE,
END OF PERIOD .................................. $24.47 $25.87 $32.82 $34.13 $32.06 $29.28
====== ======= ======= ====== ======= =======
ADJUSTED NET ASSET VALUE,
END OF PERIOD* ................................. $24.42 $25.82 $32.75 $34.06 $31.99 $29.22
MARKET VALUE, END OF PERIOD .................... $21.77 $21.1875 $27.875 $28.50 $26.6875 $24.125
----------
See footnotes on page 21.
20
TRI-CONTINENTAL CORPORATION
FINANCIAL HIGHLIGHTS (continued)
Six Months Year Ended December 31,
Ended ---------------------------------------------------------------
June 30, 2001 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN:
Based upon market value .......... 3.89% (11.56)% 12.57% 26.19% 27.96% 21.98%
Based upon net asset value ....... (4.36)% (8.29)% 10.67% 25.80% 26.65% 21.45%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
investment assets .............. 0.60%+ 0.54% 0.56% 0.58% 0.60% 0.62%
Expenses to average net assets for
Common Stock ................... 0.60%+ 0.54% 0.56% 0.58% 0.60% 0.63%
Net investment income to
average net investment assets .. 0.93%+ 1.10% 1.36% 1.59% 1.80% 2.27%
Net investment income to average
net assets for Common Stock .... 0.94%+ 1.11% 1.38% 1.60% 1.82% 2.31%
Portfolio turnover rate .......... 37.58% 54.13% 42.83% 63.39% 83.98% 53.96%
NET INVESTMENT ASSETS,
END OF PERIOD (000s omitted):
For Common Stock ................. $3,207,635 $3,458,009 $4,109,863 $4,002,516 $3,391,816 $2,835,026
For Preferred Stock .............. 37,637 37,637 37,637 37,637 37,637 37,637
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET INVESTMENT ASSETS ...... $3,245,272 $3,495,646 $4,147,500 $4,040,153 $3,429,453 $2,872,663
========== ========== ========== ========== ========== ==========
----------
* Assumes the exercise of outstanding warrants.
+ Annualized
See Notes to Financial Statements.
21
TRI-CONTINENTAL CORPORATION
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SECURITY HOLDERS,
Tri-Continental Corporation:
We have audited the accompanying statements of assets and liabilities of
Tri-Continental Corporation, including the portfolio of investments as of June
30, 2001, of capital stock and surplus of Tri-Continental Corporation as of June
30, 2001, and the related statements of operations for the six months then
ended, and of changes in net investment assets for the six months then ended and
for the year ended December 31, 2000, and the financial highlights for the six
months then ended and for each of the years in the five-year period ended
December 31, 2000. These financial statements and financial highlights are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2001, by correspondence with the Corporation's
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tri-Continental Corporation as of June 30, 2001, the results of its operations,
the changes in its net investment assets and the financial highlights for all
the respective stated periods in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & Touche LLP
New York, New York
August 17, 2001
22
TRI-CONTINENTAL CORPORATION
PROXY RESULTS
Tri-Continental Corporation Stockholders voted on the following proposals
at the Annual Meeting of Stockholders on May 17, 2001, in Baltimore, Maryland.
The description of each proposal and the voting results are stated below. Each
nominee for Director was elected and the selection of Deloitte & Touche LLP as
auditors for 2001 was ratified.
For Withheld
--------- ---------
Election of Directors:
Alice S. Ilchman 98,502,853 2,971,455
Frank A. McPherson 98,634,179 2,840,129
Leroy C. Richie 98,298,465 3,175,843
Brian T. Zino 98,667,093 2,807,215
For Against Abstain
----------- ------- ---------
Ratification of Deloitte &
Touche LLP as auditors 100,196,702 757,443 1,235,845
23
TRI-CONTINENTAL CORPORATION
BOARD OF DIRECTORS
JOHN R. GALVIN (2,4)
DIRECTOR, Raytheon Company
DEAN EMERITUS, Fletcher School of Law and
Diplomacy at Tufts University
ALICE S. ILCHMAN (3,4)
CHAIRMAN, The Rockefeller Foundation
TRUSTEE, Committee for Economic
Development
FRANK A. MCPHERSON (3,4)
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW (2,4)
DIRECTOR, Commonwealth Industries, Inc.
TRUSTEE, New York-Presbyterian Hospital
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
BETSY S. MICHEL (2,4)
TRUSTEE, The Geraldine R. Dodge Foundation
WILLIAM C. MORRIS (1)
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY (3,4)
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch,
Law Firm
LEROY C. RICHIE (2,4)
CHAIRMAN AND CEO, Q Standards
Worldwide, Inc.
JAMES Q. RIORDAN (3,4)
DIRECTOR, KeySpan Corporation
TRUSTEE, Committee for Economic
Development
DIRECTOR, Public Broadcasting Service
ROBERT L. SHAFER (3,4)
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON (2,4)
DIRECTOR AND CONSULTANT,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO (1)
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
VICE CHAIRMAN, ICI Mutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
FRED E. BROWN
DIRECTOR EMERITUS
----------
Member:
(1) Executive Committee
(2) Audit Committee
(3) Director Nominating Committee
(4) Board Operations Committee
24
TRI-CONTINENTAL CORPORATION
EXECUTIVE OFFICERS
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
CHARLES W. KADLEC
VICE PRESIDENT
THOMAS G. ROSE
VICE PRESIDENT
CHARLES C. SMITH, JR.
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT AND TREASURER
FRANK J. NASTA
SECRETARY
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FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
STOCKHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) TRI-1092 Stockholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated
Telephone Access Service
25
TRI-CONTINENTAL CORPORATION
MANAGED BY
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
INVESTMENT MANAGERS AND ADVISORS
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
www.tri-continental.com
This report is intended only for the information of stockholders or those
who have received the current prospectus covering shares of Common
Stock of Tri-Continental Corporation, which contains information about
management fees and other costs.
CETR13 6/01