UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-00266
TRI-CONTINENTAL CORPORATION
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 12/31
Date of reporting period: 12/31
Annual Report (TY LOGO)
TRI-CONTINENTAL CORPORATION
ANNUAL REPORT FOR
THE PERIOD ENDED
DECEMBER 31, 2009
TRI-CONTINENTAL CORPORATION SEEKS FUTURE GROWTH OF
BOTH CAPITAL AND INCOME, WHILE PROVIDING REASONABLE
CURRENT INCOME.
TABLE OF CONTENTS --------------------------------------------------------------
Your Fund at a Glance.............. 3
Manager Commentary................. 7
Portfolio of Investments........... 12
Statement of Assets and
Liabilities...................... 24
Statement of Capital Stock and
Surplus.......................... 25
Statement of Operations............ 26
Statements of Changes in Net
Assets........................... 27
Financial Highlights............... 28
Notes to Financial Statements...... 30
Report of Independent Registered
Public Accounting Firm........... 48
Federal Income Tax Information..... 50
Board Members and Officers......... 51
Proxy Voting....................... 55
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2 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
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> Tri-Continental Corporation (the Fund) Common Stock gained 24.11% based on net
asset value, and 19.24% based on market price (excluding sales charge) for the
12 month period ended Dec. 31, 2009.
> The Fund underperformed its benchmark, the Standard & Poor's 500 Index, which
gained 26.46% for the 12-month period.
> The Fund underperformed the Lipper Large-Cap Core Funds Index, which rose
28.15% for the 12 months.
ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009)
--------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------
Tri-Continental Corporation
---------------------------------------------------------------------
Market Price +19.24% -12.59% -3.43% -3.30%
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Net Asset Value +24.11% -11.45% -3.51% -3.18%
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S&P 500 Index(1) (unmanaged) +26.46% -5.63% +0.42% -0.95%
---------------------------------------------------------------------
Lipper Large-Cap Core Funds
Index(2) +28.15% -4.91% +0.61% -1.20%
---------------------------------------------------------------------
Lipper Large-Cap Core Funds
Average(3) +27.13% -5.32% +0.46% -0.49%
---------------------------------------------------------------------
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when sold, may be worth more or
less than their original cost. Current performance may be lower or higher than
the performance information shown. You may obtain performance information
current to the most recent month-end by visiting seligman.com.
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.
(1) The Standard & Poor's 500 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 dividends.*
(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
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TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
(on a three-year weighted basis) above Lipper's U.S. Diversified Equity
large-cap floor. Large-cap core funds typically have an average price-to-
earnings ratio, price-to-book ratio, and three-year sales-per-share growth
value relative to the S&P 500 Index. The Lipper Average's returns include
net reinvested dividends.*
* 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
RiverSource Family of Funds, 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 transition period. Thereafter, only the Lipper Index will
be included.
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4 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
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PRICE PER SHARE
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DEC. 31, 2009 SEPT. 30, 2009 JUNE 30, 2009 MARCH 31, 2009 DEC. 31, 2008
----------------------------------------------------------------------------------------------
Market Price $11.52 $11.02 $ 9.19 $8.42 $ 9.86
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Net asset value 13.73 13.03 11.13 9.74 11.29
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DIVIDEND AND CAPITAL GAIN INFORMATION PER COMMON SHARE
(for year ended Dec. 31, 2009)
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CAPITAL GAIN (LOSS)(a)
------------------------------------------------
DISTRIBUTIONS PAID(b) REALIZED UNREALIZED GAIN(c) UNREALIZED LOSS(c)
---------------------------------------------------------------------------------
$0.19 $(2.05) $1.70 $(1.88)
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(a) Per share amounts based on outstanding Common shares as of Dec. 31, 2009.
(b) Preferred Stockholders were paid dividends totaling $2.50 per share.
(c) Represents the per Common share amount of gross unrealized gain or loss of
portfolio securities as of Dec. 31, 2009.
The net asset value of the Fund's shares may not always correspond to the market
price of such shares. Common stock of many closed-end funds frequently trade at
a discount from their net asset value. The Fund is subject to stock market risk,
which is the risk that stock prices overall will decline over short or long
periods, adversely affecting the value of an investment in the Fund.
Securities selected using quantitative methods may perform differently from the
market as a whole for many reasons, including the factors used in building the
quantitative analytical framework, the weights placed on each factor, and
changing sources of market returns, among others. There can be no assurance that
these methodologies will enable the Fund to achieve its objective.
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TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
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STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a fund, and may serve as a guideline for helping you
build a portfolio.
Investment products, including shares of funds, are not federally or FDIC-
insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
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6 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
MANAGER COMMENTARY -------------------------------------------------------------
On September 30, 2009, Ameriprise Financial, Inc., the parent company of
RiverSource Investments, LLC (RiverSource), the investment manager to Tri-
Continental Corporation (the Fund), announced the acquisition of the long-term
asset management business of Columbia Management Group, LLC, and its affiliated
companies (Columbia) (the Columbia Transaction). The Columbia Transaction is
subject to certain approvals and other conditions to closing, and is currently
expected to close in the spring of 2010 (the Closing).
In connection with the anticipated integration of the long-term asset management
businesses of Columbia and RiverSource following the Closing, RiverSource has
determined that the portfolio managers primarily responsible for overseeing the
Fund's investments, effective upon and subject to the Closing, will be Brian M.
Condon, Gina K. Mourtzinou, Ph.D. and Fred Copper, CFA. Please see the Fund's
current prospectus, as supplemented, for additional biographical information
about these portfolio managers. The Fund's current prospectus may be obtained by
contacting your financial advisor or RiverSource Service Corporation at 1(800)
221-2450.
Dear Stockholders,
The Fund's Common Stock advanced 24.11% based on net asset value and 19.24%
based on market price for the 12 months ended Dec. 31, 2009. The Fund
underperformed its benchmark, the S&P 500 Index, which gained 26.46% for the 12-
month period. The Fund underperformed the Lipper Large-Cap Core Funds Index,
which rose 28.15% for the same period.
SIGNIFICANT PERFORMANCE FACTORS
The fiscal year began amid fears that the U.S. economy would remain mired in the
economic downturn and that the country's banking system would become insolvent.
However, extraordinary policy response by the Federal Reserve Board and the U.S.
government managed to stabilize the financial system, and the economy once again
began to grow. In response, financial markets staged a powerful rally that
regained much, but not all, of the value lost in the downturn.
Because we believe no single measure of investment potential can be successful
all of the time, we use multiple quantitative models to select portfolio
holdings. Our strategy incorporates value, quality and
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
PORTFOLIO BREAKDOWN(1) (at Dec. 31, 2009)
---------------------------------------------------------------------
STOCKS 99.2%
------------------------------------------------
Consumer Discretionary 11.1%
------------------------------------------------
Consumer Staples 5.7%
------------------------------------------------
Energy 13.0%
------------------------------------------------
Financials 17.7%
------------------------------------------------
Health Care 17.2%
------------------------------------------------
Industrials 6.8%
------------------------------------------------
Information Technology 18.1%
------------------------------------------------
Materials 3.5%
------------------------------------------------
Telecommunication Services 3.9%
------------------------------------------------
Utilities 2.2%
------------------------------------------------
EQUITY-LINKED NOTES 0.4%
------------------------------------------------
OTHER(2) 0.4%
------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing. No single
industry exceeds 25% of portfolio assets.
Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan). The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
TOP TEN HOLDINGS(1) (at Dec. 31, 2009)
---------------------------------------------------------------------
Apple 6.0%
------------------------------------------------
Chevron 5.8%
------------------------------------------------
Pfizer 4.5%
------------------------------------------------
Johnson & Johnson 4.0%
------------------------------------------------
Home Depot 3.0%
------------------------------------------------
Goldman Sachs Group 2.8%
------------------------------------------------
Bank of America 2.3%
------------------------------------------------
Merck & Co 2.2%
------------------------------------------------
General Electric 2.2%
------------------------------------------------
ConocoPhillips 2.0%
------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan and Cash &
Cash Equivalents).
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
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8 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
momentum themes, providing style diversification that may help reduce risk and
improve potential for return consistency. During this past fiscal year, the
momentum and quality themes underperformed the S&P 500 Index, while the value
themes outperformed.
In terms of sector positioning, both allocation and security selection had an
unfavorable effect on return, relative to the S&P 500 Index. The portfolio's
weightings in utilities and telecommunications were smaller than those of the
S&P 500 Index, which was advantageous. Having a larger weighting in consumer
discretionary stocks also helped. However, having larger weightings in
financials and health care and a smaller weighting in information technology,
compared to the S&P 500 Index, had a negative effect on relative performance.
Stock selection in the materials and energy sectors added value, while selection
among consumer discretionary, financial and health care stocks detracted.
Among the largest individual contributors were digital entertainment technology
company ROVI, which was selected by our momentum theme, DOW CHEMICAL, which was
preferred by our value and quality themes, computer and audio/video products
maker APPLE, selected by our momentum theme, oil and gas services company
WEATHERFORD INTERNATIONAL, chosen by our momentum theme, and financial services
company MORGAN STANLEY, which was initially selected by our value theme and then
by the momentum theme as well.
Notable detractors included CITIGROUP, chosen by our value theme, pharmaceutical
firm PFIZER chosen by our value and quality themes, oil company CHEVRON, which
was preferred by our momentum and quality themes, MCDONALD'S, selected by our
momentum theme, and pharmaceutical firm, JOHNSON & JOHNSON, which was initially
preferred by the momentum and quality themes, and then by just the quality theme
later in the year.
CHANGES TO THE FUND'S PORTFOLIO
During the year, we enhanced our value theme by introducing the quality-adjusted
multifactor model. We now include more quality factors in an effort to reduce
volatility.
Because we use a disciplined, quantitative process to select stocks for the
portfolio, we do not emphasize or de-emphasize particular sectors based
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
on economic or equity market outlooks. However, individual stock selection by
our quantitative-based themes can lead to preferences for some sectors over
others. As of year-end, the portfolio continued to have larger weightings in the
financials, energy, health care and consumer discretionary sectors, compared to
the S&P 500 Index. The Fund's consumer staples weighting shifted from a small
overweight to an underweight, relative to the S&P 500 Index. Conversely, the
telecommunication services weighting increased from an underweight to an
overweight. Weightings in information technology and industrials also increased,
but remained underweight, relative to the S&P 500 Index.
OUR FUTURE STRATEGY
2009 was a rewarding year for those investors that stayed the course. Both U.S.
and global stocks advanced strongly, with riskier areas such as emerging market
equities and high-yield bonds gaining even more. The broad-based rally was
largely fueled by fiscal and monetary policies put in place to reignite the
global economy. Going forward, we expect returns to be more modest and
potentially more volatile as performance becomes more dependent on economic
factors. We think continued stabilization of the housing market and increased
business investment are needed to drive short-term growth.
Longer term, we think consumers will have to play a bigger role in order to
sustain an economic recovery. We are also mindful that the global economy has
shifted away from debt-fueled growth toward new growth drivers such as consumers
in emerging nations and innovation in the biotechnology and alternative energy
areas. Overall, our strategy has been showing greater preference for stocks in
developed and emerging markets as the global economy picks up steam. We believe
stocks will outpace fixed-income and cash over the near term and we are
optimistic that 2010 can deliver solid equity performance, though we expect it
to be significantly lower than what we saw in 2009.
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10 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
(PHOTO - DIMITRIS BERTSIMAS, PhD) (PHOTO - GINA MOURTZINOU, PhD)
Dimitris J. Bertsimas Gina K. Mourtzinou
Senior Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any other person in the RiverSource organization. Any such views are subject to
change at any time based upon market or other conditions and RiverSource
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a fund in the
RiverSource Family of Funds are based on numerous factors, may not be relied on
as an indication of trading intent on behalf of any fund in the RiverSource
Family of Funds.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
DEC. 31, 2009
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
COMMON STOCKS (99.3%)
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (2.2%)
General Dynamics 96,271 $6,562,794
Goodrich 15,984(g) 1,026,972
ITT 18,839(g) 937,052
Lockheed Martin 58,984 4,444,444
Northrop Grumman 59,209 3,306,823
Raytheon 71,138 3,665,030
United Technologies 21,912 1,520,912
---------------
Total 21,464,027
-------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.2%)
CH Robinson Worldwide 26,764(g) 1,571,849
FedEx 4,668(g) 389,545
---------------
Total 1,961,394
-------------------------------------------------------------------------------------
AUTO COMPONENTS (--%)
Johnson Controls 10,469(g) 285,176
-------------------------------------------------------------------------------------
AUTOMOBILES (0.1%)
Harley-Davidson 47,514(g) 1,197,353
-------------------------------------------------------------------------------------
BEVERAGES (2.3%)
Brown-Forman Cl B 20,369 1,091,167
Coca-Cola 208,922 11,908,554
Coca-Cola Enterprises 91,210 1,933,652
Pepsi Bottling Group 26,646 999,225
PepsiCo 105,966 6,442,733
---------------
Total 22,375,331
-------------------------------------------------------------------------------------
BIOTECHNOLOGY (0.7%)
Amgen 71,779(b) 4,060,538
Biogen Idec 21,192(b) 1,133,772
Cephalon 31,037(b) 1,937,019
---------------
Total 7,131,329
-------------------------------------------------------------------------------------
BUILDING PRODUCTS (0.1%)
Masco 68,608(g) 947,476
-------------------------------------------------------------------------------------
CAPITAL MARKETS (5.8%)
Bank of New York Mellon 219,747 6,146,324
Franklin Resources 28,596 3,012,589
Goldman Sachs Group 160,531 27,104,054
Invesco 53,352 1,253,238
Morgan Stanley 468,016(g) 13,853,274
State Street 93,763 4,082,441
WCAS Capital Partners II LP 4,292,803(h,i) 1,927,202
---------------
Total 57,379,122
-------------------------------------------------------------------------------------
CHEMICALS (1.5%)
Air Products & Chemicals 27,099 2,196,645
CF Inds Holdings 9,852 894,365
Dow Chemical 269,313(g) 7,441,118
EI du Pont de Nemours & Co 70,716 2,381,008
PPG Inds 26,162 1,531,523
---------------
Total 14,444,659
-------------------------------------------------------------------------------------
COMMERCIAL BANKS (2.9%)
BB&T 70,863(g) 1,797,794
Comerica 50,712(g) 1,499,554
Fifth Third Bancorp 98,736(g) 962,676
First Horizon Natl 76,031(b,g) 1,018,822
KeyCorp 123,471(g) 685,264
Marshall & Ilsley 140,663(g) 766,613
PNC Financial Services Group 158,238(g) 8,353,384
SunTrust Banks 102,300 2,075,667
US Bancorp 61,420 1,382,564
Wells Fargo & Co 359,945 9,714,916
---------------
Total 28,257,254
-------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.2%)
Avery Dennison 27,121(g) 989,645
RR Donnelley & Sons 55,756 1,241,686
---------------
Total 2,231,331
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
12 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
COMMUNICATIONS EQUIPMENT (1.2%)
Cisco Systems 173,076(b) $4,143,439
Motorola 406,815 3,156,884
QUALCOMM 100,234 4,636,826
---------------
Total 11,937,149
-------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (8.2%)
Apple 281,292(b) 59,313,231
Dell 351,031(b) 5,040,805
IBM 62,823(e,g) 8,223,531
Lexmark Intl Cl A 64,655(b,g) 1,679,737
NetApp 84,538(b) 2,907,262
QLogic 9,925(b) 187,285
Western Digital 78,329(b) 3,458,225
---------------
Total 80,810,076
-------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.1%)
Fluor 25,350 1,141,764
-------------------------------------------------------------------------------------
CONSUMER FINANCE (0.7%)
American Express 29,059(g) 1,177,471
Capital One Financial 83,535(g) 3,202,732
Discover Financial Services 99,564 1,464,586
SLM 129,265(b,g) 1,456,817
---------------
Total 7,301,606
-------------------------------------------------------------------------------------
DISTRIBUTORS (0.1%)
Genuine Parts 29,421(g) 1,116,821
-------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.5%)
Apollo Group Cl A 45,020(b,g) 2,727,312
H&R Block 77,095(g) 1,743,889
---------------
Total 4,471,201
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (3.8%)
Bank of America 1,472,802(g) 22,180,398
Citigroup 2,617,393 8,663,571
IntercontinentalExchange 14,207(b) 1,595,446
JPMorgan Chase & Co 122,688 5,112,409
---------------
Total 37,551,824
-------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (3.5%)
AT&T 642,365 18,005,492
CenturyTel 36,445(g) 1,319,673
Frontier Communications 80,589(g) 629,400
Qwest Communications Intl 183,030 770,556
Verizon Communications 415,670 13,771,147
---------------
Total 34,496,268
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ELECTRIC UTILITIES (0.9%)
Edison Intl 29,772 1,035,470
Exelon 29,654 1,449,191
FirstEnergy 39,287 1,824,881
Pinnacle West Capital 30,607(g) 1,119,604
Progress Energy 84,011(g) 3,445,291
---------------
Total 8,874,437
-------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.2%)
Emerson Electric 43,778(g) 1,864,943
Rockwell Automation 1,979(g) 92,973
---------------
Total 1,957,916
-------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (1.3%)
Agilent Technologies 44,255(b,g) 1,375,003
Corning 403,276 7,787,259
Jabil Circuit 23,163 402,341
Tyco Electronics 121,885(c) 2,992,277
---------------
Total 12,556,880
-------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (2.1%)
Baker Hughes 67,743(g) 2,742,236
BJ Services 96,118 1,787,795
Cameron Intl 28,272(b) 1,181,770
Diamond Offshore Drilling 11,999(g) 1,180,942
Ensco Intl ADR 65,568(c) 2,618,786
FMC Technologies 23,389(b,g) 1,352,820
Halliburton 40,690 1,224,362
Nabors Inds 63,575(b,c,g) 1,391,657
Natl Oilwell Varco 76,799 3,386,067
Noble 62,178(c) 2,530,645
Smith Intl 29,906(g) 812,546
Weatherford Intl 11,912(b,c) 213,344
---------------
Total 20,422,970
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FOOD & STAPLES RETAILING (1.0%)
Walgreen 82,882 3,043,427
Wal-Mart Stores 90,429(g) 4,833,430
Whole Foods Market 74,273(b,g) 2,038,794
---------------
Total 9,915,651
-------------------------------------------------------------------------------------
FOOD PRODUCTS (0.9%)
Archer-Daniels-Midland 150,534 4,713,219
ConAgra Foods 57,717 1,330,377
Dean Foods 40,694(b) 734,120
Sara Lee 85,249 1,038,333
See accompanying Notes to Portfolio of Investments.
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TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FOOD PRODUCTS (CONT.)
Tyson Foods Cl A 79,202 $971,809
---------------
Total 8,787,858
-------------------------------------------------------------------------------------
GAS UTILITIES (0.2%)
Nicor 24,521(g) 1,032,334
Questar 22,473 934,203
---------------
Total 1,966,537
-------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.0%)
Becton Dickinson & Co 27,125 2,139,078
Boston Scientific 97,433(b) 876,897
CareFusion 28,672(b) 717,087
Intuitive Surgical 4,865(b) 1,475,652
Medtronic 59,523 2,617,821
St. Jude Medical 49,498(b) 1,820,536
---------------
Total 9,647,071
-------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (2.9%)
Aetna 82,760(g) 2,623,492
Cardinal Health 92,911 2,995,451
CIGNA 125,553(g) 4,428,254
Coventry Health Care 46,172(b,g) 1,121,518
Humana 24,709(b) 1,084,478
McKesson 39,454 2,465,875
UnitedHealth Group 281,928 8,593,165
WellPoint 81,596(b) 4,756,231
---------------
Total 28,068,464
-------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.6%)
Starbucks 242,514(b,g) 5,592,373
-------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.2%)
DR Horton 99,489(g) 1,081,445
Pulte Homes 81,133(g) 811,330
---------------
Total 1,892,775
-------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.3%)
Clorox 19,549 1,192,489
Colgate-Palmolive 23,052(g) 1,893,722
---------------
Total 3,086,211
-------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%)
AES 85,775(b) 1,141,665
Constellation Energy Group 35,925 1,263,483
---------------
Total 2,405,148
-------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (2.8%)
General Electric 1,448,031(g) 21,908,710
Textron 66,356(g) 1,248,156
Tyco Intl 115,005(c) 4,103,378
---------------
Total 27,260,244
-------------------------------------------------------------------------------------
INSURANCE (4.5%)
AFLAC 24,619 1,138,629
Allstate 353,880 10,630,555
Aon 84,339(g) 3,233,557
Assurant 28,410 837,527
Chubb 59,901(g) 2,945,931
Hartford Financial Services Group 61,987(g) 1,441,818
Lincoln Natl 49,430 1,229,818
MetLife 62,535 2,210,612
Principal Financial Group 62,611(g) 1,505,168
Progressive 196,964(b) 3,543,382
Prudential Financial 31,793(g) 1,582,020
Torchmark 41,023(g) 1,802,961
Travelers Companies 213,982 10,669,144
Unum Group 57,272(g) 1,117,949
---------------
Total 43,889,071
-------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (1.4%)
Amazon.com 62,858(b,g) 8,455,658
Expedia 78,713(b,g) 2,023,711
priceline.com 13,274(b,g) 2,900,369
---------------
Total 13,379,738
-------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (0.5%)
eBay 214,431(b) 5,047,706
-------------------------------------------------------------------------------------
IT SERVICES (1.1%)
Affiliated Computer Services Cl A 28,552(b) 1,704,269
Automatic Data Processing 79,712(g) 3,413,268
Cognizant Technology Solutions Cl A 73,684(b) 3,337,885
Computer Sciences 29,428(b) 1,692,993
Fiserv 20,080(b) 973,478
---------------
Total 11,121,893
-------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.1%)
Mattel 66,506 1,328,790
-------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.2%)
Life Technologies 44,319(b,g) 2,314,781
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
14 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
MACHINERY (1.0%)
Cummins 50,714(g) $2,325,744
Eaton 12,205 776,482
Flowserve 10,682 1,009,769
Illinois Tool Works 39,314 1,886,679
Ingersoll-Rand 69,449(c,g) 2,482,108
PACCAR 30,371(g) 1,101,556
---------------
Total 9,582,338
-------------------------------------------------------------------------------------
MEDIA (1.6%)
CBS Cl B 202,002(g) 2,838,128
Gannett 82,836(g) 1,230,115
News Corp Cl A 554,055(g) 7,585,013
Viacom Cl B 137,269(b) 4,081,007
---------------
Total 15,734,263
-------------------------------------------------------------------------------------
METALS & MINING (1.9%)
Alcoa 162,736(g) 2,623,304
Allegheny Technologies 24,486(g) 1,096,238
Freeport-McMoRan Copper & Gold 115,533(b) 9,276,145
Newmont Mining 61,778 2,922,717
Nucor 29,439 1,373,329
United States Steel 30,531(g) 1,682,869
---------------
Total 18,974,602
-------------------------------------------------------------------------------------
MULTILINE RETAIL (1.2%)
Family Dollar Stores 71,498(g) 1,989,789
JC Penney 29,136(g) 775,309
Kohl's 83,558(b) 4,506,284
Macy's 65,125(g) 1,091,495
Nordstrom 62,168(g) 2,336,273
Sears Holdings 11,412(b,g) 952,331
---------------
Total 11,651,481
-------------------------------------------------------------------------------------
MULTI-UTILITIES (0.8%)
Consolidated Edison 61,365(g) 2,787,812
PG&E 101,954(g) 4,552,246
SCANA 27,155(g) 1,023,200
---------------
Total 8,363,258
-------------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.1%)
Xerox 123,011 1,040,673
-------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (11.1%)
Chesapeake Energy 82,514(g) 2,135,462
Chevron 737,542(e) 56,783,358
ConocoPhillips 393,589 20,100,590
Exxon Mobil 96,108(g) 6,553,605
Hess 53,467 3,234,754
Marathon Oil 236,306 7,377,473
Murphy Oil 34,239 1,855,754
Occidental Petroleum 52,946 4,307,157
Range Resources 20,203(g) 1,007,120
Sunoco 24,149(g) 630,289
Tesoro 44,673(g) 605,319
Valero Energy 207,889 3,482,141
---------------
Total 108,073,022
-------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.1%)
Intl Paper 54,421 1,457,394
-------------------------------------------------------------------------------------
PHARMACEUTICALS (12.5%)
Abbott Laboratories 119,625 6,458,554
Allergan 19,489(g) 1,228,002
Bristol-Myers Squibb 72,690 1,835,423
Eli Lilly & Co 69,672 2,487,987
Forest Laboratories 114,465(b,g) 3,675,471
Johnson & Johnson 607,054 39,100,348
King Pharmaceuticals 64,212(b,g) 787,881
Merck & Co 600,497 21,942,160
Mylan 80,061(b,g) 1,475,524
Pfizer 2,404,208 43,732,543
---------------
Total 122,723,893
-------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.0%)
Analog Devices 37,608(g) 1,187,661
Broadcom Cl A 108,431(b,g) 3,410,155
Intel 743,067 15,158,567
MEMC Electronic Materials 75,552(b,g) 1,029,018
Microchip Technology 11,036(g) 320,706
Micron Technology 162,962(b,g) 1,720,879
NVIDIA 142,105(b,g) 2,654,521
Texas Instruments 162,715(g) 4,240,353
---------------
Total 29,721,860
-------------------------------------------------------------------------------------
SOFTWARE (2.6%)
BMC Software 17,722(b) 710,652
Intuit 59,727(b,g) 1,834,216
Microsoft 61,794 1,884,099
Red Hat 36,860(b,g) 1,138,974
Rovi 590,649(b,g) 18,823,984
Salesforce.com 20,842(b,g) 1,537,514
---------------
Total 25,929,439
-------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SPECIALTY RETAIL (4.7%)
Abercrombie & Fitch Cl A 42,922(g) $1,495,832
AutoNation 50,188(b,g) 961,100
AutoZone 8,613(b) 1,361,457
Bed Bath & Beyond 36,849(b,g) 1,423,477
Best Buy 29,960(g) 1,182,222
Gap 136,021 2,849,640
Home Depot 1,028,999 29,768,940
Limited Brands 48,380(g) 930,831
Lowe's Companies 63,968 1,496,212
O'Reilly Automotive 17,240(b,g) 657,189
Sherwin-Williams 60,838(g) 3,750,663
---------------
Total 45,877,563
-------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.7%)
Coach 47,997 1,753,330
Nike Cl B 53,138 3,510,828
VF 19,467 1,425,763
---------------
Total 6,689,921
-------------------------------------------------------------------------------------
TOBACCO (1.2%)
Altria Group 446,561 8,765,992
Lorillard 37,660 3,021,462
---------------
Total 11,787,454
-------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (--%)
Fastenal 23(g) 958
-------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
Sprint Nextel 933,158(b,g) 3,415,358
-------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $964,011,764) $977,041,152
-------------------------------------------------------------------------------------
EQUITY-LINKED NOTES (0.4%)(j)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
Lehman Brothers Holdings
Sr Unsecured
09-14-08 53.31% $14,844,000(b,d,f,h) $2,054,755
10-02-08 39.50 14,844,000(b,d,f,h) 2,279,912
-------------------------------------------------------------------------------------
TOTAL EQUITY-LINKED NOTES
(Cost: $29,688,000) $4,334,667
-------------------------------------------------------------------------------------
MONEY MARKET FUND (0.4%)
SHARES VALUE(a)
RiverSource Short-Term
Cash Fund, 0.18% 3,915,360(k) $3,915,360
-------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $3,915,360) $3,915,360
-------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (19.6%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND (--%)
JPMorgan Prime Money Market Fund 168,360 $168,360
-------------------------------------------------------------------------------------
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER YIELD MATURITY VALUE(a)
ASSET-BACKED COMMERCIAL PAPER (5.2%)
Antalis US Funding
01-05-10 0.28% $2,999,837 $2,999,837
01-20-10 0.23 4,997,988 4,997,988
Arabella Finance LLC
01-19-10 0.65 4,997,111 4,997,111
Belmont Funding LLC
01-04-10 0.48 4,998,867 4,998,867
Cancara Asset Securitisation LLC
01-20-10 0.28 5,995,752 5,995,752
Ebbets Funding LLC
01-07-10 0.56 4,997,278 4,997,278
Giro Balanced Funding
01-04-10 0.45 4,999,562 4,999,562
Grampian Funding LLC
01-04-10 0.25 3,999,056 3,999,056
01-14-10 0.27 4,998,988 4,998,988
Rhein-Main Securitisation
01-21-10 0.41 4,994,761 4,994,761
03-08-10 0.36 2,997,270 2,997,270
---------------
Total 50,976,470
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (11.0%)
Banco Espirito Santo e Commerciale
01-05-10 0.38 10,000,000 10,000,000
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
16 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (CONTINUED)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER YIELD MATURITY VALUE(a)
CERTIFICATES OF DEPOSIT (CONT.)
Banco Popular Espanol
01-06-10 0.32% $4,997,901 $4,997,901
Banco Santander Central Hispano
01-13-10 0.32 3,000,000 3,000,000
Banque Federative du Credit Mutuel
01-19-10 0.35 2,997,319 2,997,319
Bayrische Hypo-Und Vereinsbank
01-04-10 0.50 5,000,000 5,000,000
Caixa Geral de Deposit
01-15-10 0.30 5,000,000 5,000,000
Commerzbank
01-04-10 0.18 4,000,000 4,000,000
01-04-10 0.23 4,999,010 4,999,010
Credit Industrial et Commercial
03-04-10 0.38 5,000,000 5,000,000
Den Danske Bank
01-04-10 0.25 5,000,000 5,000,000
Dexia Bank
01-29-10 0.40 2,998,967 2,998,967
Erste Bank der Oesterreichischen Sparkassen
01-05-10 0.23 4,000,000 4,000,000
Hong Kong Shanghai Bank
01-04-10 0.29 4,000,000 4,000,000
KBC Bank
01-25-10 0.32 2,000,000 2,000,000
Norinchukin Bank
01-13-10 0.31 4,000,000 4,000,000
NyKredit Bank
01-05-10 0.45 4,000,000 4,000,000
03-22-10 0.44 5,000,000 5,000,000
03-29-10 0.43 1,000,000 1,000,000
Raiffeisen Zentralbank Oesterreich
01-06-10 0.28 5,000,000 5,000,000
Skandinaviska Enskilda Banken
01-05-10 0.40 10,000,000 10,000,000
State of Hessen
01-04-10 0.20 8,000,000 8,000,000
Sumitomo Mitsui Banking
02-19-10 0.31 5,000,000 5,000,000
02-22-10 0.31 3,000,000 3,000,000
---------------
Total 107,993,197
-------------------------------------------------------------------------------------
COMMERCIAL PAPER (1.4%)
BTM Capital
02-05-10 0.39 8,991,127 8,991,127
KBC Financial Products
01-11-10 0.43 4,997,910 4,997,910
---------------
Total 13,989,037
-------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (2.0%)(l)
Barclays Capital
dated 12-31-09, matures 01-04-10
repurchase price
$5,000,118 0.21 5,000,000 5,000,000
Natixis Financial Products
dated 12-31-09, matures 01-04-10
repurchase price
$15,000,938 0.56 15,000,000 15,000,000
---------------
Total 20,000,000
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $193,127,064) $193,127,064
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,190,742,188)(m) $1,178,418,243
-------------------------------------------------------------------------------------
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.
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT DEC. 31, 2009
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
------------------------------------------------------------------------------------
S&P 500 Index 13 $3,609,775 March 2010 $(3,770)
NOTES TO PORTFOLIO OF INVESTMENTS
ADR -- American Depository 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 Dec. 31, 2009, the
value of foreign securities, excluding short-term securities, represented
1.66% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
may be determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Dec. 31,
2009, the value of these securities amounted to $4,334,667 or 0.44% of net
assets.
(e) At Dec. 31, 2009, investments in securities included securities valued at
$676,409 that were partially pledged as collateral to cover initial margin
deposits on open stock index futures contracts.
(f) This position is in bankruptcy.
(g) At Dec. 31, 2009, security was partially or fully on loan. See Note 7 to
the financial statements.
(h) Identifies issues considered to be illiquid as to their marketability (see
Note 2 to the financial statements). The aggregate value of such securities
at Dec. 31, 2009 was $6,261,869, representing 0.64% of net assets.
Information concerning such security holdings at Dec. 31, 2009 is as
follows:
ACQUISITION
SECURITY DATES COST
----------------------------------------------------------------------
Lehman Brothers Holdings
Sr Unsecured
53.51% 2008 03-07-08 $14,844,000
39.50% 2008 03-26-08 14,844,000
WCAS Capital Partners II LP 01-09-95 thru 03-05-97 4,212,138
--------------------------------------------------------------------------------
18 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(i) At Dec. 31, 2009, 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 Dec. 31, 2009, were as follows:
INVESTMENT ACQUISITION DATES COST VALUE(a)
--------------------------------------------------------------------------
WCAS Capital Partners
II LP 12-11-90 to 03-24-98 $4,292,803 $1,927,202
(J) Equity-Linked Notes (ELNs) are notes created by a counterparty, typically
an investment bank, that may bear interest at a fixed or floating rate. At
maturity, the notes must be exchanged for an amount based on the value of
one or more equity securities of third party issuers or the value of an
index. The exchanged value may be limited to an amount less than the actual
value of the underlying stocks or value of an index at the maturity date.
Any difference between the exchange amount and the original cost of the
notes will be a gain or loss.
(k) Affiliated Money Market Fund -- See Note 8 to the financial statements. The
rate shown is the seven-day current annualized yield at Dec. 31, 2009.
(l) The table below represents securities received as collateral subject to
repurchase agreements. This collateral 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. On a daily basis, the market value of
securities held as collateral for repurchase agreements is monitored to
ensure the existence of the proper level of collateral.
BARCLAYS CAPITAL (0.21%)
SECURITY DESCRIPTION VALUE(a)
----------------------------------------------------------
BCRR Trust $834,466
Bear Stearns Adjustable Rate Mortgage Trust 270,376
Citigroup Commercial Mortgage Trust 396,818
Greenwich Capital Commercial Funding Corp 342,359
Granite Master Issuer PLC 943,469
JP Morgan Chase Commercial Mortgage Securities
Corp 1,241,175
Morgan Stanley Capital I 463,969
Morgan Stanley Dean Witter Capital I 391,926
WaMu Mortgage Pass Through Certificates 365,442
----------------------------------------------------------
Total market value for collateralized
securities $5,250,000
----------------------------------------------------------
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIXIS FINANCIAL PRODUCTS (0.56%)
SECURITY DESCRIPTION VALUE(a)
-----------------------------------------------------------
A4 Funding LP $1,791,400
Fannie Mae Interest Strip 107,128
Fannie Mae Pool 390,844
Fannie Mae REMICS 894,384
Federal Home Loan Banks 115,741
Federal Home Loan Mortgage Corp 50,754
Federal Natl Mtge Assn 42,054
FHLMC-GNMA 7,659
Freddie Mac Gold Pool 32,351
Freddie Mac Non Gold Pool 106,500
Freddie Mac REMICS 1,281,340
Freddie Mac Strips 98,186
Ginnie Mae II Pool 112,406
Govt Natl Mtge Assn 241,059
SLM Student Loan Trust 10,004,410
US Treasury 361,763
-----------------------------------------------------------
Total market value for collateralized
securities $15,637,979
-----------------------------------------------------------
(m) At Dec. 31, 2009, the cost of securities for federal income tax purposes
was $1,213,299,153 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $117,250,878
Unrealized depreciation (152,131,788)
------------------------------------------------------------
Net unrealized depreciation $(34,880,910)
------------------------------------------------------------
--------------------------------------------------------------------------------
20 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL 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 -- 2009 ANNUAL REPORT 21
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 Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009
------------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
----------------------------------------------------------------------------------------------
Equity Securities
Common Stocks
Capital Markets $55,451,920 $-- $1,927,202 $57,379,122
All Other
Industries(a) 919,662,030 -- -- 919,662,030
----------------------------------------------------------------------------------------------
Total Equity Securities 975,113,950 -- 1,927,202 977,041,152
----------------------------------------------------------------------------------------------
Other
Equity-Linked Notes -- 4,334,667 -- 4,334,667
Affiliated Money
Market Fund(b) 3,915,360 -- -- 3,915,360
Investments of Cash
Collateral Received
for Securities on
Loan(c) 168,360 192,958,704 -- 193,127,064
----------------------------------------------------------------------------------------------
Total Other 4,083,720 197,293,371 -- 201,377,091
----------------------------------------------------------------------------------------------
Investments in
Securities 979,197,670 197,293,371 1,927,202 1,178,418,243
Other Financial
Instruments(d) (3,770) -- -- (3,770)
----------------------------------------------------------------------------------------------
Total $979,193,900 $197,293,371 $1,927,202 $1,178,414,473
----------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of
Investments.
(b) Money market fund that is a sweep investment for cash balances in the Fund
at Dec. 31, 2009.
(c) Asset categories for Investments of Cash Collateral are identified in the
Portfolio of Investments.
(d) Other Financial Instruments are derivative instruments, which are valued at
the unrealized appreciation (depreciation) on the instrument. Derivative
descriptions are located in the Investments in Derivatives section of the
Portfolio of Investments.
--------------------------------------------------------------------------------
22 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL 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.
COMMON STOCKS
--------------------------------------------------------------
Balance as of Dec. 31, 2008 $1,893,126
Accrued discounts/premiums --
Realized gain (loss) --
Change in unrealized appreciation
(depreciation)* 114,741
Net purchases (sales) --
Transfers in and/or out of Level 3 (80,665)
--------------------------------------------------------------
Balance as of Dec. 31, 2009 $1,927,202
--------------------------------------------------------------
* Change in unrealized appreciation (depreciation) relating to securities
held at Dec. 31, 2009 was $114,741.
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1(800) SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 23
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
DEC. 31, 2009
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $993,699,764) $ 981,375,819
Affiliated money market fund (identified cost $3,915,360) 3,915,360
Investment of cash collateral received for securities on loan
(identified cost $193,127,064) 193,127,064
----------------------------------------------------------------------------------------
Total investments (identified cost $1,190,742,188) 1,178,418,243
Dividends and accrued interest receivable 1,161,682
Common Stock receivable 11,657
Other assets 43,681
----------------------------------------------------------------------------------------
Total Assets 1,179,635,263
----------------------------------------------------------------------------------------
LIABILITIES
Preferred Stock dividends payable 470,463
Common Stock payable 363,945
Payable upon return of securities loaned 193,127,064
Variation margin payable on futures contracts 37,050
Accrued investment management services fees 294,933
Accrued Stockholder servicing and transfer agency fees 692,151
Accrued administrative services fees 47,817
Accrued Stockholders' meeting fees 47,239
Other accrued expenses 573,951
----------------------------------------------------------------------------------------
Total Liabilities 195,654,613
----------------------------------------------------------------------------------------
NET ASSETS 983,980,650
Preferred Stock 37,637,000
----------------------------------------------------------------------------------------
NET ASSETS FOR COMMON STOCK $ 946,343,650
----------------------------------------------------------------------------------------
Net assets per share of Common Stock
(Market value -- $11.52) $ 13.73
----------------------------------------------------------------------------------------
*Value of securities on loan $ 186,701,997
----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
24 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
STATEMENT OF CAPITAL STOCK AND SURPLUS -----------------------------------------
DEC. 31, 2009
CAPITAL STOCK
$2.50 Cumulative Preferred Stock, $50 par value, assets coverage
per share $1,307 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 -- 68,907,232 34,453,616
SURPLUS
Capital surplus 1,722,063,037
Excess of dividends over net investment income (87,300)
Accumulated net realized gain (loss) (797,757,988)
Net unrealized depreciation on investments (12,327,715)
---------------------------------------------------------------------------------
NET ASSETS $ 983,980,650
---------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 25
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME
Income:
Dividends $ 21,654,809
Interest 44,908
Income distributions from affiliated money market fund 13,231
Income from securities lending -- net 510,669
---------------------------------------------------------------------------
Total Income 22,223,617
---------------------------------------------------------------------------
Expenses:
Investment management services fees 3,255,497
Stockholder servicing and transfer agency fees 2,686,932
Administrative services fees 301,540
Custodian fees 146,443
Stockholders' meeting fees 201,981
Printing and postage 371,362
Licensing fees 2,363
Professional fees 156,149
Compensation of board members 25,423
Tender offer fees 479,860
Other 542,382
---------------------------------------------------------------------------
Total Expenses 8,169,932
---------------------------------------------------------------------------
Investment income (loss) -- net* 14,053,685
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (141,185,016)
Futures contracts 114,921
---------------------------------------------------------------------------
Net realized gain (loss) on investments (141,070,095)
Net change in unrealized depreciation on investments 296,146,938
Increase from payment by affiliate (Note 2) 3,120,206
---------------------------------------------------------------------------
Net gain (loss) on investments 158,197,049
---------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ 172,250,734
---------------------------------------------------------------------------
* Net investment income for Common Stock is $12,171,835, which is net of
Preferred Stock dividends of $1,881,850.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
26 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
YEAR ENDED DEC. 31, 2009 2008
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 14,053,685 $ 53,714,647
Net realized gain (loss) on investments (141,070,095) (937,438,211)
Net change in unrealized appreciation (depreciation) on
investments 296,146,938 (116,914,507)
Increase from payment by affiliate (Note 2) 3,120,206 --
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 172,250,734 (1,000,638,071)
--------------------------------------------------------------------------------------------
Distributions to Stockholders
Net investment income:
Preferred Stock (per share: $2.50 and $2.50) (1,881,850) (1,881,850)
Common Stock (per share: $0.17 and $0.50) (12,202,715) (51,832,797)
Net realized gain:
Common Stock (per share: $0 and $0.39) -- (40,184,455)
Return of Capital:
Common Stock (per share: $0.02 and $1.22) (1,225,024) (126,224,708)
--------------------------------------------------------------------------------------------
Decrease in net assets from distributions (15,309,589) (220,123,810)
--------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
Value of shares of Common Stock issued at market price in
distributions (554,284 and 4,651,557 shares) 5,227,483 70,865,000
Value of shares of Common Stock issued for investment plan
purchases (308,895 and 375,285 shares) 2,865,371 5,809,097
Cost of shares of Common Stock purchased from investment
plan participants (1,449,460 and 1,810,291 shares) (14,528,709) (27,998,020)
Cost of shares of Common Stock purchased in the open market
(452,907 and 1,463,111 shares) (5,047,340) (26,013,153)
Cost of shares of Common Stock purchased in in-kind tender
offer
(0 and 25,633,247 shares) -- (281,453,052)
Cost of shares of Common Stock purchased in cash tender
offer (9,247,000 and 0 shares) (93,024,820) --
Net proceeds from issuance of shares of
Common Stock upon exercise of warrants (12,095 and 23,516
shares) 11,248 22,362
--------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (104,496,767) (258,767,766)
--------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 52,444,378 (1,479,529,647)
Net assets at beginning of year 931,536,272 2,411,065,919
--------------------------------------------------------------------------------------------
Net assets at end of year $ 983,980,650 $ 931,536,272
--------------------------------------------------------------------------------------------
Excess of dividends over net investment income $ (87,300) $ (34,447)
--------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the
current year presentation.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 27
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 value or net asset value as of the beginning of
the period, invested all distributions paid, as provided for in the Fund's
Prospectus and Automatic Dividend Investment and Cash Purchase Plan, and then
sold their shares at the closing market value or net asset value per share on
the last day of the period. The computations do not reflect any sales charges or
transaction costs on your investment or taxes investors may incur on
distributions or on the sale of shares of the Fund, and are not annualized for
periods of less than one year.
The ratios of expenses and net investment income to average net assets for
Common Stock for the periods presented do not reflect the effect of dividends
paid to Preferred Stockholders.
--------------------------------------------------------------------------------
28 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
YEAR ENDED DEC. 31,
-------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 2009 2008 2007 2006 2005
Net asset value, beginning of period $11.29 $23.03 $25.66 $22.16 $21.87
----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .20 .52 .84 .33 .26
Net gains (losses) (both realized and
unrealized) 2.42 (9.88) (1.01) 3.47 .29
----------------------------------------------------------------------------------------------------------
Increase (decrease) from investment
operations 2.62 (9.36) (.17) 3.80 .55
----------------------------------------------------------------------------------------------------------
LESS:
Dividends paid on Preferred Stock (.03) (.02) (.02) (.02) (.02)
Dividends paid on Common Stock (.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 (.22) (2.38) (2.46) (.30) (.26)
----------------------------------------------------------------------------------------------------------
Payment from affiliate .04 -- -- -- --
----------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.73 $11.29 $23.03 $25.66 $22.16
----------------------------------------------------------------------------------------------------------
Adjusted net asset value, end of period(a) $13.69 $11.26 $22.98 $25.60 $22.10
Market value, end of period $11.52 $9.86 $20.90 $22.38 $18.58
----------------------------------------------------------------------------------------------------------
TOTAL RETURN
Based upon market value 19.24% (45.89%) 3.51% 22.10% 2.98%
Based upon net asset value 24.11%(b) (43.77%) (.52%) 17.38% 2.66%
----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses to average net assets for Common
Stock .98% .73% .66% .80% .65%
Net investment income to average net assets
for Common Stock 1.46% 2.96% 3.22% 1.40% 1.20%
----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (IN MILLIONS):
For Common Stock $946 $894 $2,373 $2,657 $2,392
For Preferred Stock 38 38 38 38 38
----------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $984 $932 $2,411 $2,695 $2,430
----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 70% 111% 123% 122% 71%
----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Assumes the exercise of outstanding warrants.
(b) During the year ended Dec. 31, 2009, the Fund received a payment by an
affiliate. Had the Fund not received this payment, the total return would
have been lower by 0.47%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
Tri-Continental Corporation (the Fund) is registered under the Investment
Company Act of 1940, as amended (1940 Act) as a diversified, closed-end
management investment company. The Fund has 1 million authorized shares of
preferred capital stock and 159 million authorized shares of common stock which
trades primarily on the New York Stock Exchange (NYSE) under the symbol "TY".
The Fund invests primarily for the longer term and its objective is to produce
future growth of both capital and income while providing reasonable current
income.
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
ADOPTION OF NEW ACCOUNTING STANDARD
In June 2009, the Financial Accounting Standards Board (FASB) established the
FASB Accounting Standards Codification(TM) (Codification) as the single source
of authoritative accounting principles recognized by the FASB in the preparation
of financial statements in conformity with U.S. generally accepted accounting
principles (GAAP). The Codification supersedes existing non-grandfathered, non-
SEC accounting and reporting standards. The Codification did not change GAAP but
rather organized it into a hierarchy where all guidance within the Codification
carries an equal level of authority. The Codification became effective for
financial statements issued for interim and annual periods ending after Sept.
15, 2009. The Codification did not have an effect on the Fund's financial
statements.
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.
--------------------------------------------------------------------------------
30 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
VALUATION OF SECURITIES
All securities are valued at the close of business of the NYSE. Securities
traded on national securities exchanges or included in national market systems
are valued at the last quoted sales price. Debt securities are generally traded
in the over-the-counter market and are valued by an independent pricing service
using an evaluated bid. When market quotes are not readily available, the
pricing service, in determining fair values of debt securities, takes into
consideration such factors as current quotations by broker/dealers, coupon,
maturity, quality, type of issue, trading characteristics, and other yield and
risk factors it deems relevant in determining valuations. Foreign securities are
valued based on quotations from the principal market in which such securities
are normally traded. The procedures adopted by the Fund's Board of Directors
(the Board) generally contemplate the use of fair valuation in the event that
price quotations or valuations are not readily available, price quotations or
valuations from other sources are not reflective of market value and thus deemed
unreliable, or a significant event has occurred in relation to a security or
class of securities (such as foreign securities) that is not reflected in price
quotations or valuations from other sources. A fair value price is a good faith
estimate of the value of a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource
Investments, LLC (RiverSource Investments or the Investment Manager), as
administrator to the Fund, will fair value foreign securities pursuant to
procedures adopted by the Board, including utilizing a third party pricing
service to determine these fair values. These procedures take into account
multiple factors, including movements in the U.S. securities markets, to
determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the NYSE.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61(st) day before maturity. Short-term securities
maturing in 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is an approximation of market value. Investments in money market
funds are valued at net asset value.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
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. On a daily basis, the market value of securities
held as collateral for repurchase agreements is monitored to ensure the
existence of the proper level of collateral.
ILLIQUID SECURITIES
At Dec. 31, 2009, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at Dec. 31, 2009 was
$6,261,869 representing 0.64% 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 BY 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
--------------------------------------------------------------------------------
32 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income (which includes net short-term capital gains) to
Stockholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all the tax returns filed for the last three
years.
RECENT ACCOUNTING PRONOUNCEMENT
On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the
amendment), Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements, which provides guidance on how
investment assets and liabilities are to be valued and disclosed. Specifically,
the amendment requires reporting entities to disclose the input and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements for Level 2 or Level 3 positions. The amendment also requires
that transfers between all levels (including Level 1 and Level 2) be disclosed
on a gross basis (i.e., transfers out must be disclosed separately from
transfers in), and the reason(s) for the transfer. Additionally purchases,
sales, issuances and settlements must be disclosed on a gross basis in the Level
3 rollforward. The effective date of the amendment is for interim and annual
periods beginning after Dec. 15, 2009, however, the requirement to provide the
Level 3 activity for purchases, sales, issuances and settlements on a gross
basis will be effective for interim and annual periods beginning after Dec. 15,
2010. At this time the Fund is evaluating the implications of the amendment and
the impact to the financial statements.
DIVIDENDS TO STOCKHOLDERS
Effective Jan. 8, 2009, the Fund adopted 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.
Prior to Jan. 8, 2009, the Fund had a level rate distribution policy under which
the Fund paid quarterly distributions to holders of Common Stock equal to 2.75%
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
of the net asset value attributable to a share of the Fund's Common Stock on the
last business day of the preceding calendar quarter (or approximately 11%
annually) consisting of distributions of income and one or both of net realized
capital gains and returns of capital.
Dividends and other distributions to Stockholders are recorded on ex-dividend
dates.
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 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
--------------------------------------------------------------------------------
34 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
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 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
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
option is exercised. The Fund's maximum payout in the case of written put option
contracts represents the maximum potential amount of future payments
(undiscounted) that the Fund could be required to make as a guarantor for
written put options. For OTC options contracts, the transaction is also subject
to counterparty credit risk. The maximum payout amount may be offset by the
subsequent sale, if any, of assets obtained upon the exercise of the put options
by holders of the option contracts or proceeds received upon entering into the
contracts.
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 DEC. 31, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------- -------------------------------------
STATEMENT OF ASSETS STATEMENT OF ASSETS
RISK EXPOSURE AND LIABILITIES AND LIABILITIES
CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE
-------------------------------------------------------------------------------------------
Equity contracts Net
assets -- unrealiz-
ed depreciation on
N/A N/A investments $3,770*
-------------------------------------------------------------------------------------------
Total N/A $3,770
-------------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as
reported in the Futures Contracts Outstanding table following the Portfolio
of Investments. Only the current day's variation margin is reported in
receivables or payables in the Statement of Assets and Liabilities.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DEC. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
-----------------------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES OPTIONS TOTAL
-----------------------------------------------------------------------------
Equity contracts $114,921 $(13,629,094) $(13,514,173)
-----------------------------------------------------------------------------
Total $114,921 $(13,629,094) $(13,514,173)
-----------------------------------------------------------------------------
--------------------------------------------------------------------------------
36 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN
INCOME
-----------------------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES OPTIONS TOTAL
-----------------------------------------------------------------------------
Equity contracts $(3,770) $13,368,643 $13,364,873
-----------------------------------------------------------------------------
Total $(3,770) $13,368,643 $13,364,873
-----------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY
FUTURES
The gross notional amount of long contracts outstanding was $3.6 million at Dec.
31, 2009. The monthly average gross notional amount for long contracts was $4.4
million for the year ended Dec. 31, 2009. The fair value of such contracts on
Dec. 31, 2009 is set forth in the table above.
OPTIONS
At Dec. 31, 2009, the Fund had no outstanding options contracts. During the year
ended Dec. 31, 2009, the Fund's transactions in options contracts were limited
to the expiration of those contracts open at the beginning of the year.
4. EXPENSES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines on behalf of the Fund which securities will be purchased, held or
sold. Effective June 15, 2009, the management fee charged by the Investment
Manager is 0.355% of the Fund's average daily net assets. Prior to June 15,
2009, the Investment Manager received an annual fee equal to 0.40% of the Fund's
average daily net assets. The management fee for the year ended Dec. 31, 2009
was 0.39% of the Fund's average daily net assets. The reduction in the
investment management services fee on June 15, 2009 is related to the
elimination of the administrative portion of the management fee that is now
being charged separately to the Fund through the Administrative Services
Agreement with Ameriprise Financial. See Administrative services fees below for
more information.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, effective June 15, 2009, the Fund
pays Ameriprise Financial 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. For the period
from June 15, 2009 through Dec. 31, 2009, the fee was 0.04% of the Fund's
average daily net assets for the year ended Dec. 31, 2009. Prior to June 15,
2009, Ameriprise Financial administered certain aspects of the Fund's business
and other affairs for no additional fee. The fees payable under the
Administrative
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Services Agreement beginning on June 15, 2009 are offset by corresponding
decreases in the investment management fees charged to the Fund and the
elimination of separate fees that were previously payable to State Street Bank
and Trust Company, in its capacity as the Fund's prior administrative agent.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended Dec. 31,
2009, other expenses paid to this company were $6,026.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the Fund under the 1940 Act may defer receipt of their
compensation. Deferred amounts are treated as though equivalent dollar amounts
had been invested in shares of the Fund or other funds in the RiverSource Family
of Funds. The Fund's liability for these amounts is adjusted for market value
changes and remains in the Fund until distributed in accordance with the Plan.
STOCKHOLDER SERVICING FEES
Effective June 15, 2009, under a Stockholder Service Agent Agreement,
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.
Prior to June 15, 2009, Seligman Data Corp. (SDC), owned by six associated
investment companies, including the Fund, provided Stockholder servicing and
transfer agency services to the Fund, as well as certain other Seligman funds.
The Fund's ownership interest in SDC at Dec. 31, 2009 is included in other
assets in the Statement of Assets and Liabilities at a cost of $43,681. In
January 2009, the Board approved the Fund's termination of the Stockholder
servicing and transfer agency relationship with SDC and the engagement of
RiverSource Service Corporation to provide Stockholder account and transfer
agency services to the Fund. As a result of the Board's termination of the
Stockholder servicing and transfer agency relationship with SDC (which was SDC's
sole business), SDC has exited the Stockholder servicing and transfer agent
business, effective June 15, 2009.
--------------------------------------------------------------------------------
38 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
For the period from Jan. 1, 2009 to June 15, 2009, SDC charged the Fund $915,850
for Stockholder account and transfer agency services in accordance with a
methodology approved by the Fund's Board.
In connection with the termination of the Fund's relationship with SDC, the Fund
incurred certain non-recurring charges including charges relating to the
remaining periods of SDC's leases (the Non-Recurring Charges). These Non-
Recurring Charges were incurred over a period from Jan. 28, 2009 to June 12,
2009, and amounted to $1,174,205, or 0.14% of the Fund's average daily net
assets for the year ended Dec. 31, 2009. These Non-Recurring Charges are
included in the Stockholder servicing and transfer agency fees in the Statement
of Operations.
The Fund and certain other associated investment companies (together, the
Guarantors) have severally but not jointly guaranteed the performance and
observance of all the terms and conditions of a lease entered into by SDC,
including the payment of rent by SDC (the Guaranty). The lease and the Guaranty
expire in January 2019. At Dec. 31, 2009, the Fund's total potential future
obligation over the life of the Guaranty is $1,193,579. The liability remaining
at Dec. 31, 2009 for Non-Recurring Charges amounted to $612,254 and is included
within accrued Stockholder servicing and transfer agency fees in the Statement
of Assets and Liabilities.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $592,341,154 and $662,297,164, respectively, for the
year ended Dec. 31, 2009. Realized gains and losses are determined on an
identified cost basis.
6. CAPITAL STOCK TRANSACTIONS
Under the Fund's Charter, dividends on Common Stock cannot be declared unless
net assets, after 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 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 year ended Dec. 31,
2009, the Fund purchased 1,449,460 shares of Common Stock from
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Plan participants at a cost of $14,528,709, which represented a weighted average
discount of 15.1% from the net asset value of those acquired shares. A total of
308,895 shares were issued to Plan participants during the period for proceeds
of $2,865,371, a weighted average discount of 14.9% from the net asset value of
those shares. In addition, a total of 554,284 shares were issued at market price
in distributions during the period for proceeds of $5,227,483, a weighted
average discount of 15.7% 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 New York
Stock Exchange 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 New York Stock Exchange 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 year ended Dec. 31, 2009, the Fund purchased 452,907 shares of its
Common Stock in the open market at an aggregate cost of $5,047,340, which
represented a weighted average discount of 15.7% 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 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.
--------------------------------------------------------------------------------
40 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
WARRANTS
At Dec. 31, 2009, the Fund reserved 229,587 shares of Common Stock for issuance
upon exercise of 9,491 Warrants, each of which entitled the holder to purchase
24.19 shares of Common Stock at $0.93 per share.
Assuming the exercise of all Warrants outstanding at Dec. 31, 2009, net assets
would have increased by $213,516 and the net asset value of the Common Stock
would have been $13.69 per share. The number of Warrants exercised during the
year ended Dec. 31, 2009 and 2008 was 500 and 994, 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
Effective May 15, 2009, 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 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 balance 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 Dec. 31, 2009, securities valued at $186,701,997 were
on loan, secured by cash collateral of $193,127,064 invested in short-term
securities or in cash equivalents.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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
$510,669 earned from securities lending for the year ended Dec. 31, 2009, 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 funds in the
RiverSource Family of Funds and other institutional clients of RiverSource
Investments. The cost of the Fund's purchases and proceeds from sales of shares
of RiverSource Short-Term Cash Fund aggregated $61,506,037 and $57,590,677,
respectively, for the year ended Dec. 31, 2009. The income distributions
received with respect to the Fund's investment in RiverSource Short-Term Cash
Fund can be found in the Statement of Operations and the Fund's invested balance
in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the
Portfolio of Investments.
9. LEHMAN BROTHERS HOLDINGS INC. EQUITY-LINKED NOTES
At Dec. 31, 2009, the Fund held two Lehman Brothers Holdings Inc. (Lehman
Brothers) equity-linked notes that went into default as of their respective
maturity dates, Sept. 14, 2008 and Oct. 2, 2008, each with a principal amount of
$14.8 million. Lehman Brothers filed a Chapter 11 bankruptcy petition on Sept.
15, 2008. It is likely that the Fund will receive less than the maturity value
of the notes (amounting to $20.9 million) pending the outcome of the bankruptcy
proceedings. These holdings have been determined to be illiquid.
The notes are being valued by the Investment Manager at an estimate of the
amount recoverable based on the maturity value of the notes discounted by the
--------------------------------------------------------------------------------
42 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
observable price of Lehman Brothers senior notes. At Dec. 31, 2009, the
aggregate value of the notes was $4.3 million which represented 0.44% of the
Fund's net assets.
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 (losses) were recorded by the Fund.
In the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, excess of dividends over net investment income has been increased
by $21,973 and accumulated net realized loss has been decreased by $964,727
resulting in a net reclassification adjustment to decrease capital surplus by
$942,754.
The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED DEC. 31, 2009 2008
------------------------------------------------------------------
Ordinary income $14,084,565 $ 73,638,768
Long-term capital gain -- 20,260,334
Tax return of capital 1,225,024 126,224,708
At Dec. 31, 2009, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income................. $ --
Undistributed accumulated long-term gain...... $ --
Accumulated realized loss..................... $(775,272,636)
Unrealized appreciation (depreciation)........ $ (34,900,367)
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
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 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 Feb. 22, 2010, 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
--------------------------------------------------------------------------------
44 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
States District Court for the District of Minnesota (the District Court). In
response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court,
asking the U.S. Supreme Court to stay the District Court proceedings while the
U.S. Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise
Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In
late 2003, Seligman conducted an extensive internal review concerning mutual
fund trading practices. Seligman's review, which covered the period 2001-2003,
noted one arrangement that permitted frequent trading in certain open-end
registered investment companies managed by Seligman (the Seligman Funds); this
arrangement was in the process of being closed down by Seligman before September
2003. Seligman identified three other arrangements that permitted frequent
trading, all of which had been terminated by September 2002. In January 2004,
Seligman, on a voluntary basis, publicly disclosed these four arrangements to
its clients and to shareholders of the
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Seligman Funds. Seligman also provided information concerning mutual fund
trading practices to the SEC and the Office of the Attorney General of the State
of New York (NYAG).
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund
Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the
Seligman Parties), alleging, in substance, that the Seligman Parties permitted
various persons to engage in frequent trading and, as a result, the prospectus
disclosure used by the registered investment companies then managed by Seligman
was and had been misleading. The NYAG included other related claims and also
claimed that the fees charged by Seligman to the Seligman Funds were excessive.
On March 13, 2009, without admitting or denying any violations of law or
wrongdoing, the Seligman Parties entered into a stipulation of settlement with
the NYAG and settled the claims made by the NYAG. Under the terms of the
settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement
resolved all outstanding matters between the Seligman Parties and the NYAG. In
addition to the foregoing matter, the New York staff of the SEC indicated in
September 2005 that it was considering recommending to the Commissioners of the
SEC the instituting of a formal action against Seligman and Seligman Advisors,
Inc. relating to frequent trading in the Seligman Funds. Seligman responded to
the staff in October 2005 that it believed that any action would be both
inappropriate and unnecessary, especially in light of the fact that Seligman had
previously resolved the underlying issue with the Independent Directors of the
Seligman Funds and made recompense to the affected Seligman Funds. There have
been no further developments with the SEC on this matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
--------------------------------------------------------------------------------
46 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
TRI-CONTINENTAL CORPORATION:
We have audited the accompanying statement of assets and liabilities and the
statement of capital stock and surplus of Tri-Continental Corporation (the Fund)
including the portfolio of investments, as of December 31, 2009, and the related
statements of operations, changes in net assets, and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets and financial highlights of the
Fund for the years presented through December 31, 2008, were audited by other
auditors whose report dated February 27, 2009, expressed an unqualified opinion
on those financial statements and financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2009, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audit provides a reasonable basis
for our opinion.
--------------------------------------------------------------------------------
48 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
In our opinion, the 2009 financial statements and financial highlights audited
by us as referred to above present fairly, in all material respects, the
financial position of Tri-Continental Corporation at December 31, 2009, the
results of its operations, the changes in its net assets, and the financial
highlights for the year then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 22, 2010
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 49
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
Stockholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Stockholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended Dec. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 100%
Dividends Received Deduction for corporations................ 100%
U.S. Government Obligations.................................. 0.00%
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
Stockholders on the sale of shares.
--------------------------------------------------------------------------------
50 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Stockholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
The RiverSource Family of Funds that each Board member oversees consists of 132
funds, which includes 100 RiverSource funds and 32 Seligman funds. Fund Board
members serve until their terms expire and until their successors are elected
and qualify, until he or she reaches the mandatory retirement age established by
the Board or until the fifteenth anniversary of the first Fund Board meeting
they attended as members of the Board.
INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 2008 Attorney
Minneapolis, MN 55402
Age 55
------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None
901 S. Marquette Ave. 2008 Governor of Minnesota
Minneapolis, MN 55402
Age 75
------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 2008 Leadership (consulting company)
Minneapolis, MN 55402
Age 55
------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 2008 College; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 59
------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 2008
Minneapolis, MN 55402
Age 75
------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive
901 S. Marquette Ave. 2008 Insurance
Minneapolis, MN 55402
Age 74
------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 2008, College Inc. (manufactures
Minneapolis, MN 55402 Board member since irrigation systems)
Age 71 2008
------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 51
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member since Retired President and Chief Executive Officer and None
901 S. Marquette Ave. 2006 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 66
------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 2008 real estate and asset management company)
Minneapolis, MN 55402
Age 57
------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. 2000 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 68 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 2008 since 2003 (biotechnology); former President, Aquila Pharmaceuticals,
Minneapolis, MN 55402 Biopharmaceuticals Inc.
Age 65 (biotechnology);
Healthways, Inc.
(health management
programs)
------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
52 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None
53600 Ameriprise 2008, Officer, Ameriprise Financial, Inc. since 2005;
Financial Center Vice President since President, Chairman of the Board and Chief Investment
Minneapolis, MN 55474 2008 Officer, RiverSource Investments, LLC since 2001;
Age 49 Director, President and Chief Executive Officer,
Ameriprise Certificate Company since 2006; Chairman of
the Board and Chief Executive Officer, RiverSource
Distributors, Inc. since 2006 and of RiverSource Fund
Distributors, Inc. since 2008; Senior Vice
President -- Chief Investment Officer, Ameriprise
Financial, Inc., 2001-2005
------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling the RiverSource Family of
Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting
seligman.com.
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------
Patrick T. Bannigan President since 2008 Director and Senior Vice President -- Asset Management,
172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC
Center and Director and Vice President -- Asset Management,
Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc.
Age 44 since 2006 and of RiverSource Fund Distributors, Inc.
since 2008; Managing Director and Global Head of
Product, Morgan Stanley Investment Management, 2004-
2006; President, Touchstone Investments, 2002-2004
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 53
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
FUND OFFICERS (CONTINUED)
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income,
172 Ameriprise Financial 2008 Ameriprise Financial, Inc. and RiverSource Investments,
Center LLC since 2006; Vice President -- Investments,
Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice
Age 45 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
--------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments,
5228 Ameriprise Financial 2008 LLC since 2009; Vice President -- Asset Management and
Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC,
55474 2006-2009; Vice President -- Operations and Compliance,
Age 44 RiverSource Investments, LLC, 2004-2006; Director of
Product Development -- Mutual Funds, Ameriprise
Financial, Inc., 2001-2004
--------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since 2008 Vice President -- Investment Accounting, Ameriprise
105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer,
Center RiverSource Distributors, Inc. since 2006 and of
Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008
Age 54
--------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management,
5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel,
Center Secretary since 2008 RiverSource Distributors, Inc. and Chief Legal Officer
Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC
Age 50 since 2006; Chief Counsel, RiverSource Fund
Distributors, Inc. since 2008; Vice President, General
Counsel and Secretary, Ameriprise Certificate Company
since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc., 2004-2005;
Senior Vice President and Chief Compliance Officer,
USBancorp Asset Management, 2002-2004
--------------------------------------------------------------------------------------------------------
Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC,
100 Park Avenue Officer since 2004 Ameriprise Certificate Company and RiverSource Service
New York, NY 10010 Corporation since 2009; Chief Compliance Officer for
Age 58 each of the Seligman funds since 2004; Money Laundering
Prevention Officer and Identity Theft Prevention
Officer for each of the Seligman funds, 2008-2009;
Managing Director, J. & W. Seligman & Co. Incorporated
and Vice-President for each of the Seligman funds,
2004-2008
--------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer,
Center since 2008 and Ameriprise Financial, Inc. since 2005; Compliance
Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008
Age 46 Prevention Officer
since 2008
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
54 TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL 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 RiverSource Family of Funds at 1(800) 221-2450; visiting
seligman.com; or searching the website of the Securities and Exchange Commission
(SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies
relating to portfolio securities is filed with the SEC by August 31 for the most
recent 12-month period ending June 30 of that year, and is available without
charge by visiting seligman.com; or searching the website of the SEC at
www.sec.gov.
--------------------------------------------------------------------------------
TRI-CONTINENTAL CORPORATION -- 2009 ANNUAL REPORT 55
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 RiverSource
Service Corporation at 1(800) 221-2450. The prospectus
should be read carefully before investing in the Fund. Tri-
Continental Corporation is managed by RiverSource
Investments, LLC. This material is distributed by
RiverSource Fund Distributors, Inc. Member FINRA.
(TY LOGO) (C)2010 RiverSource Investments, LLC. SL-9912 A (3/10)
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P.
Jones, each qualify as audit committee financial experts.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP
for professional services rendered for the audit of the annual
financial statements for Tri-Continental Corporation were as follows:
2009 - $61,625
(b) Audit-Related Fees. The fees for the year ended Dec. 31, to Ernst &
Young LLP for additional audit-related services rendered related to the
semiannual financial statement review, the transfer agent 17Ad-13
review, the representations to the NYSE relating to internal controls
over transfer agency and registrar functions and other consultations
and services required to complete the audit for Tri-Continental
Corporation were as follows:
2009 - $32,792
(c) Tax Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for
tax compliance related services rendered for Tri-Continental
Corporation were as follows:
2009 - $4,048
(d) All Other Fees. The fees for the year ended Dec. 31, to Ernst & Young
LLP for additional professional services rendered for Tri-Continental
Corporation were as follows:
2009 - $0
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by Ernst & Young
LLP for the registrant and to the registrant's investment adviser and
any entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant must
be pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above
during 2009 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees for the year ended Dec. 31, to Ernst & Young
LLP by the registrant for non-audit fees and by the registrant's
investment adviser, and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant were as follows:
2009 - $835,526
(h) 100% of the services performed in item (g) above during 2009 were
pre-approved by the Ameriprise Financial Audit Committee and/or the
RiverSource Mutual Funds Audit Committee.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. Investments.
(a) The complete schedule of investments 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.
GENERAL GUIDELINES, POLICIES AND PROCEDURES
The funds uphold a long tradition of supporting sound and principled corporate
governance. The Board, which consists of a majority of independent Board
members, determines policies and votes proxies. The funds' investment manager,
RiverSource Investments, and the funds' administrator, Ameriprise Financial,
provide support to the Board in connection with the proxy voting process.
GENERAL GUIDELINES
CORPORATE GOVERNANCE MATTERS -- The Board supports proxy proposals that it
believes are tied to the interests of shareholders and votes against proxy
proposals that appear to entrench management. For example:
- The Board generally votes in favor of proposals for an independent
chairman or, if the chairman is not independent, in favor of a lead
independent director.
- The Board supports annual election of all directors and proposals to
eliminate classes of directors.
- In a routine election of directors, the Board will generally vote with
management's recommendations because the Board believes that
management and nominating committees of independent directors are in
the best position to know what qualifications are required of
directors to form an effective board. However, the Board will
generally vote against a nominee who has been assigned to the audit,
compensation, or nominating committee if the nominee is not
independent of management based on established criteria. The Board
will also withhold support for any director who fails to attend 75% of
meetings or has other activities that appear to interfere with his or
her ability to commit sufficient attention to the company and, in
general, will vote against nominees who are determined to have been
involved in options backdating.
- The Board generally supports proposals requiring director nominees to
receive a majority of affirmative votes cast in order to be elected to
the board, and opposes cumulative voting based on the view that each
director elected should represent the interests of all shareholders.
- Votes in a contested election of directors are evaluated on a
case-by-case basis. In general, the Board believes that incumbent
management and nominating committees, with access to more and better
information, are in the best position to make strategic business
decisions. However, the Board will consider an opposing slate if it
makes a compelling business case for leading the company in a new
direction.
SHAREHOLDER RIGHTS PLANS -- The Board generally supports shareholder rights
plans based on a belief that such plans force uninvited bidders to negotiate
with a company's board. The Board believes these negotiations allow time for the
company to maximize value for shareholders by forcing a higher premium from a
bidder, attracting a better bid from a competing bidder or allowing the company
to pursue its own strategy for enhancing shareholder value. The Board supports
proposals to submit shareholder rights plans to shareholders and supports
limiting the vote required for approval of such plans to a majority of the votes
cast.
AUDITORS -- The Board values the independence of auditors based on established
criteria. The Board supports a reasonable review of matters that may raise
concerns regarding an auditor's service that may cause the Board to vote against
a management recommendation, including, for example, auditor involvement in
significant financial restatements, options backdating, material weaknesses in
control, attempts to limit auditor liability or situations where independence
has been compromised.
STOCK OPTION PLANS AND OTHER MANAGEMENT COMPENSATION ISSUES -- The Board expects
company management to give thoughtful consideration to providing competitive
long-term employee incentives directly tied to the interest of shareholders. The
Board votes against proxy proposals that it believes dilute shareholder value
excessively. The Board believes that equity compensation awards can be a useful
tool, when not abused, for retaining employees and giving them incentives to
engage in conduct that will improve the performance of the company. In this
regard, the Board generally favors minimum holding periods of stock obtained by
senior management pursuant to an option plan and will vote against compensation
plans for executives that it deems excessive.
SOCIAL AND CORPORATE POLICY ISSUES -- The Board believes proxy proposals should
address the business interests of the corporation. Shareholder proposals
sometime seek to have the company disclose or amend certain business practices
based purely on social or environmental issues rather than compelling business
arguments. In general, the Board recognizes our fund shareholders are likely to
have differing views of social and environmental issues and believes that these
matters are primarily the responsibility of a company's management and its board
of directors.
POLICIES AND PROCEDURES
The policy of the Board is to vote all proxies of the companies in which a fund
holds investments. Because of the volume and complexity of the proxy voting
process, including inherent inefficiencies in the process that are outside the
control of the Board or the Proxy Team (below), not all proxies may be voted.
The Board has implemented policies and procedures that have been reasonably
designed to vote proxies and to ensure that there are no conflicts between
interests of a fund's shareholders and those of the funds' principal
underwriters, RiverSource Investments, or other affiliated persons. In
exercising its proxy voting responsibilities, the Board may rely upon the
research or recommendations of one or more third party service providers.
The administration of the proxy voting process is handled by the RiverSource
Proxy Administration Team ("Proxy Team"). In exercising its responsibilities,
the Proxy Team may rely upon one or more third party service providers. The
Proxy Team assists the Board in identifying situations where its guidelines do
not clearly require a vote in a particular manner and assists in researching
matters and making voting recommendations. RiverSource Investments may recommend
that a proxy be voted in a manner contrary to the Board's guidelines. In making
recommendations to the Board about voting on a proposal, the investment manager
relies on its own investment personnel (or the investment personnel of a fund's
subadviser(s)) and information obtained from an independent research firm. The
investment manager makes the recommendation in writing. The process requires
that Board members who are independent from the investment manager consider the
recommendation and decide how to vote the proxy proposal or establish a protocol
for voting the proposal.
On an annual basis, or more frequently as determined necessary, the Board
reviews recommendations to revise the existing guidelines or add new guidelines.
Recommendations are based on, among other things, industry trends and the
frequency that similar proposals appear on company ballots.
The Board considers management's recommendations as set out in the company's
proxy statement. In each instance in which a fund votes against management's
recommendation (except when withholding votes from a nominated director), the
Board sends a letter to senior management of the company explaining the basis
for its vote. This permits both the company's management and the Board to have
an opportunity to gain better insight into issues presented by the proxy
proposal(s).
VOTING IN COUNTRIES OUTSIDE THE UNITED STATES (NON-U.S. COUNTRIES) -- Voting
proxies for companies not domiciled in the United States may involve greater
effort and cost due to the variety of regulatory schemes and corporate
practices. For example, certain non-U.S. countries require securities to be
blocked prior to a vote, which means that the securities to be voted may not be
traded within a specified number of days before the shareholder meeting. The
Board typically will not vote securities in non-U.S. countries that require
securities to be blocked as the need for liquidity of the securities in the
funds will typically outweigh the benefit of voting. There may be additional
costs associated with voting in non-U.S. countries such that the Board may
determine that the cost of voting outweighs the potential benefit.
SECURITIES ON LOAN -- The Board will generally refrain from recalling securities
on loan based upon its determination that the costs and lost revenue to the
funds, combined with the administrative effects of recalling the securities,
generally outweigh the benefit of voting the proxy. While neither the Board nor
the funds' administrator assesses the economic impact and benefits of voting
loaned securities on a case-by-case basis, situations may arise where the Board
requests that loaned securities be recalled in order to vote a proxy. In this
regard, if a proxy relates to matters that may impact the nature of a company,
such as a proposed merger or acquisition, and the funds' ownership position is
more significant, the Board has established a guideline to direct the funds'
administrator to use its best efforts to recall such securities based upon its
determination that, in these situations, the benefits of voting such proxies
generally outweigh the costs or lost revenue to the funds, or any potential
adverse administrative effects to the funds, of not recalling such securities.
INVESTMENT IN AFFILIATED FUNDS -- Certain funds may invest in shares of other
Seligman funds (referred to in this context as "underlying funds") and may own
substantial portions of these underlying funds. The proxy policy of the funds is
to ensure that direct public shareholders of underlying funds control the
outcome of any shareholder vote. To help manage this potential conflict of
interest, recognizing that the direct public shareholders of these underlying
funds may represent only a minority interest, the policy of the funds is to vote
proxies of the underlying funds in the same proportion as the vote of the direct
public shareholders. If there are no direct public shareholders of an underlying
fund, the policy is to cast votes in accordance with instructions from the
independent members of the Board.
A note with respect to underlying funds: The underlying funds and the
funds-of-funds share the same officers, Board members, and investment manager,
RiverSource Investments. The funds-of-funds do not invest in an underlying fund
for the purpose of exercising management or control; however, from time to time,
investments by the funds-of-funds in a fund may represent a significant portion
of a fund. Because the funds-of-funds may own a substantial portion of the
shares of a fund, procedures have been put into place to assure that public
shareholders will determine the outcome of all actions taken at underlying fund
shareholder meetings.
Information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30, is available
(i) without charge upon request by calling toll free (800) 221-2450 in the US or
collect (212) 682-7600 outside the US and (ii) on the SEC's website at
www.sec.gov. Information for each new 12-month period ending June 30 will be
available no later than August 31 of that year.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Information pertaining to the portfolio managers of the registrant, as of Dec.
31, 2009, is set forth below.
OTHER ACCOUNTS ASSETS UNDER PERFORMANCE BASED SECURITIES
PORTFOLIO MANAGER MANAGED(a) MANAGEMENT ACCOUNTS OWNERSHIP
--------------------- -------------------- --------------- ----------------- ----------
Dimitris J. Bertsimas 29 RICs $10.64 billion 8 RICs ($8.44 B) None
1 PIV $591.86 million
14 other accounts(b) $2.57 billion
Gina K. Mourtzinou 9 RICs $8.11 billion 7 RICS ($7.92 B) None
4 other accounts $114.32 million
(a) RIC refers to a Registered Investment Company; PIV refers to a Pooled
Investment Vehicle.
(b) Reflects each wrap program strategy as a single client rather than counting
each participant in the program as a separate client.
Compensation:
Portfolio manager compensation is typically comprised of (i) a base salary, (ii)
an annual cash bonus, and (iii) an equity incentive award in the form of stock
options and/or restricted stock. The annual cash bonus and equity incentive
awards are paid from a team bonus pool that is based on the performance of the
accounts managed by the portfolio management team, which might include mutual
funds, wrap accounts, institutional portfolios and hedge funds. Funding for the
bonus pool is determined by a percentage of the aggregate assets under
management in the accounts managed by the portfolio managers, including the
fund, and by the short term (typically one-year) and long-term (typically
three-year, five-year and ten-year) performance of those accounts in relation to
the relevant peer group universe. Funding for the bonus pool would also include
a
percentage of any performance fees earned on long/short mutual funds managed by
the Team. With respect to hedge funds and separately managed accounts that
follow a hedge fund mandate, funding for the bonus pool is a percentage of
performance fees earned on the hedge funds or accounts managed by the portfolio
managers. Senior management of RiverSource Investments has the discretion to
increase or decrease the size of the part of the bonus pool and to determine the
exact amount of each portfolio manager's bonus paid from this portion of the
bonus pool based on his/her performance as an employee. In addition, where
portfolio managers invest in a hedge fund managed by the investment manager,
they receive a cash reimbursement for the investment management fees charged on
their hedge fund investments. RiverSource Investments portfolio managers are
provided with a benefits package, including life insurance, health insurance,
and participation in a company 401(k) plan, comparable to that received by other
RiverSource Investments employees. Certain investment personnel are also
eligible to defer a portion of their compensation. An individual making this
type of election can allocate the deferral to the returns associated with one or
more products they manage or support or to certain other products managed by
their investment team. Depending upon their job level, RiverSource Investments
portfolio managers may also be eligible for other benefits or perquisites that
are available to all RiverSource Investments employees at the same job level.
Conflicts of Interest:
RiverSource Investments portfolio managers may manage one or more mutual funds
as well as other types of accounts, including hedge funds, proprietary accounts,
separate accounts for institutions and individuals, and other pooled investment
vehicles. Portfolio managers make investment decisions for an account or
portfolio based on its investment objectives and policies, and other relevant
investment considerations. A portfolio manager may manage another account whose
fees may be materially greater than the management fees paid by the Fund and may
include a performance-based fee. Management of multiple funds and accounts may
create potential conflicts of interest relating to the allocation of investment
opportunities, competing investment decisions made for different accounts and
the aggregation and allocation of trades. In addition, RiverSource Investments
monitors a variety of areas (e.g., allocation of investment opportunities) and
compliance with the firm's Code of Ethics, and places additional investment
restrictions on portfolio managers who manage hedge funds and certain other
accounts.
RiverSource Investments has a fiduciary responsibility to all of the clients for
which it manages accounts. RiverSource Investments seeks to provide best
execution of all securities transactions and to aggregate securities
transactions and then allocate securities to client accounts in a fair and
equitable basis over time. RiverSource Investments has developed policies and
procedures, including brokerage and trade allocation policies and procedures,
designed to mitigate and manage the potential conflicts of interest that may
arise from the management of multiple types of accounts for multiple clients.
In addition to the accounts above, portfolio managers may manage accounts in a
personal capacity that may include holdings that are similar to, or the same as,
those of the fund.
The investment manager's Code of Ethics is designed to address conflicts and,
among other things, imposes restrictions on the ability of the portfolio
managers and other "investment access persons" to invest in securities that may
be recommended or traded in the fund and other client accounts.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Total Average Total Number of Shares Maximum Number of Shares
Number Price Purchased as Part of that May Yet Be Purchased
of Shares Paid Per Publicly Announced Under the Plans or
Period Purchased Share Plans or Programs(1) Programs(1)
-------------------- --------- -------- ---------------------- -------------------------
7-01-09 to 7-31-09 107,593 $ 9.54 107,593 3,222,266
8-01-09 to 8-31-09 127,212 10.69 127,212 3,095,054
9-01-09 to 9-30-09 108,788 10.84 108,788 2,986,266
10-01-09 to 10-31-09 379,373 11.21 379,373 2,606,893
11-01-09 to 11-30-09 341,536 11.16 341,536 2,265,357
12-01-09 to 12-31-09 208,658 11.40 208,658 2,056,699
(1) On January 8, 2009, the registrant's Board renewed a modified version of
the registrant's stock repurchase program. For 2009, the registrant is
authorized to repurchase up to 5% of its outstanding Common Stock directly
from stockholders and in the open market, provided that, with respect to
shares repurchased in the open market the excess of the net asset value of
a share of Common Stock over its market price (the discount) is greater
than 10%. The registrant's 2008 stock repurchase program allowed the
registrant to repurchase up to 5% of the registrant's outstanding Common
Stock during the period directly from stockholders and in the open market,
provided that, with respect to shares purchased in the open market, the
discount was greater than 5%.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls
and procedures as conducted within 90 days of the filing date of this
Form N-CSR, the registrant's Principal Financial Officer and Principal
Executive Officer have concluded that those disclosure controls and
procedures provide reasonable assurance that the material information
required to be disclosed by the registrant on this report is recorded,
processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the Registrant's principal
executive officer and principal financial officer, as required to be
disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(a)(2) Separate certification for the Registrant's principal executive
officer and principal financial officer, as required by Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Tri-Continental Corporation
By /s/ Patrick T. Bannigan
-----------------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date March 5, 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/ Patrick T. Bannigan
-----------------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date March 5, 2010
By /s/ Jeffrey P. Fox
-----------------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date March 5, 2010