Mid-Year Report 1996
TRI-CONTINENTAL
CORPORATION
an investment you can live with
<PAGE>
TRI-CONTINENTAL CORPORATION INVESTS
PRIMARILY TO PRODUCE LONG-TERM GROWTH OF BOTH CAPITAL
AND INCOME, WHILE PROVIDING REASONABLE
CURRENT INCOME.
TY is Tri-Continental's symbol for its Common Stock on the New Stock Exchange.
<PAGE>
TRI-CONTINENTAL CORPORATION
July 31, 1996
To the Stockholders:
Tri-Continental Corporation had a rewarding second quarter. For the six
months ended June 30, 1996, the Corporation outpaced the Standard & Poor's 500
Composite Stock Price Index (S&P 500) and the universe of Closed-End Growth &
Income Funds, as measured by Lipper Analytical Services, on both a net asset
value and market price basis. However, in mid-July, the Corporation, along with
most equity investors, was affected by the fluctuations in the equity markets
and gave back some of its second quarter gains.
In the first half of 1996, the Federal Reserve Board's continuing efforts to
achieve a "soft landing" -- a healthy moderation of economic growth that does
not slip into recession -- appeared to have come to fruition. Economic data for
the second quarter of 1996 indicated continued growth in output, employment, and
incomes. More than half the early corporate earnings reports reflected the
positive effects of the strong economy, and earnings estimates rose to higher
levels. Inflation remained low and, more important, commodity price indices
declined from their recent eight-year highs, which suggested that future
inflationary pressures were in check. Overall, the economy seemed quite healthy
at the end of the second quarter.
While fundamentals remained strong, a mid-July sell-off in the equity markets
was triggered by disappointing earnings reports from several important
technology and health care companies. This led to an overall negative assessment
that other corporate profits would fall short of expectations and economic
growth would slow, causing future earnings disappointments. A broad decline in
equity prices ensued, which was aggravated by uncertainty over the future
direction of interest rates. This culminated on July 15, when the price of five
out of six companies on the New York Stock Exchange declined.
Although the speed of such an event can unnerve even the most seasoned
investor, it is the very nature of equity markets to fluctuate over short
periods of time. Periodic corrections in stock market prices are an integral
part of US financial history -- the last significant correction in the S&P 500
was triggered by the start of the Gulf War in 1990. While viewpoints differ over
the likely direction of financial markets and the economy over the next year, we
believe that the longer-term outlook for the US economy and the equity markets
remains sound.
1
<PAGE>
TRI-CONTINENTAL CORPORATION
We therefore must reiterate the importance of long-term investing. Since the
ups and downs of the market are unavoidable, it benefits you, our Stockholders,
to adopt a long-term investment plan whenever possible. Time is a powerful
investment tool that succeeds where market timing often fails. If you invest
over the long term, short-term market swings, while uncomfortable, have less of
an impact on your overall financial goals. As investors, you have already taken
steps to reduce your overall risk by purchasing shares of a closed-end
investment company, which provides portfolio diversification by investing in
numerous issues and industries. With the help of your investment advisor, you
can formulate a long-term investment strategy that further reduces your risk and
increases your diversification.
For specific performance information and a discussion with your Portfolio
Manager about the second quarter of 1996, please refer to page 3.
By order of the Board of Directors,
/s/ William C. Morris
- -------------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-------------------
Brian T. Zino
President
2
<PAGE>
TRI-CONTINENTAL CORPORATION
- ----------------- Interview with Your Portfolio Manager,
Charles C. Smith, Jr.
PHOTO
HOW WERE TRI-CONTINENTAL'S INVESTMENT RESULTS?
The second quarter of 1996 was another strong period for
Tri-Continental Corporation. Both the net asset value and
market price outpaced the S&P 500 and the universe of
- ----------------- Closed-End Growth & Income Funds, as measured by Lipper
Analytical Services, for the six months ended June 30.
WHAT SPECIFIC ECONOMIC FACTORS INFLUENCED THE CORPORATION IN THE
SECOND QUARTER?
The economy's strength in the second quarter led to an improvement in the
expectations for corporate profits, which, in turn, increased the valuations of
many of the Corporation's holdings. However, the rise in interest rates seen in
the quarter negatively affected the Corporation's interest-sensitive positions,
such as in the financial and utility sectors.
WHAT MARKET TRENDS AFFECTED THE CORPORATION IN THE QUARTER?
In general, there were two identifiable trends in the equity markets. First, the
economy's changing strength created an irregular market as participants moved
among investment categories and asset classes, trying to anticipate the Federal
Reserve Board's next move. Second, investor preference for small-capitalized
issues (which generally don't distribute dividends), in lieu of
larger-capitalized issues (which generally do), became more pronounced.
Therefore, the NASDAQ Composite Index, which is composed mostly of small
companies, led the market indices, and the S&P 500, which contains a mixture of
capitalization sizes, outperformed the blue chips of the Dow Jones Industrial
Average (DJIA). Tri-Continental invests in larger-capitalized issues, which is
why it slightly lagged the S&P 500.
The international investments in the portfolio also affected the Corporation's
results. We invest in non-US markets to seek greater diversification, lessened
year-to-year volatility, and to realize a higher potential rate of return over
the long-term. In periods when international markets lag the US markets, as in
the second quarter, the international exposure can dampen overall results.
WHAT INDUSTRIES, SPECIFICALLY, PERFORMED WELL WITHIN THE PORTFOLIO?
Certain areas within technology did very well in the quarter. We have seen a
healthy correction in this sector which began in the third quarter of 1995 and
continued into the second quarter of 1996. We therefore took advantage of the
attractive valuations and increased our technology weighting throughout the
quarter. We added to, and purchased, the larger-capitalization technology stocks
which continued to offer strong long-term earnings prospects and remained
reasonably valued, such as Sun Microsystems and Compaq Computers.
3
<PAGE>
TRI-CONTINENTAL CORPORATION
Interview with Your Portfolio Manager (continued)
Additionally, both consumer staples and consumer cyclical stocks did well. Some
market participants, driven by fears of inflation and an economic slowdown,
purchased solid consumer staples companies with good dividend growth records as
a defensive move. Therefore, food, beverage, and personal care products
companies such as PepsiCo, Coca-Cola, and Procter & Gamble, all did well.
Other market participants chose to capitalize on the current strength and
earnings power of consumer cyclicals. Overall, consumer cyclicals were depressed
in 1995 but greatly benefited from the atmosphere of economic growth in 1996.
This trend brought strong performances in textiles and in retailers such as
Wal-Mart and Woolworth. Woolworth's performance can also be attributed to its
restructuring efforts and new management. Finally, the oil services and natural
gas industries rounded out the portfolio's strong performers, where prices
remained high as utilities began to replenish inventories after the long, cold
winter.
WHAT INDUSTRIES WERE WEAK IN THE SECOND QUARTER?
Financial issues, such as banks, had a poor quarter due to the strong economy
and the corresponding rise in interest rates. Within this sector, we reallocated
the assets to increase diversification and, more important for the short term,
to protect the portfolio from further interest rate erosion. Currently, the
portfolio's financial holdings are concentrated in broadly diversified companies
whose businesses are not primarily dependent on lending, including Bank of New
York Company and Mellon Bank Corporation. These companies should perform
particularly well if interest rates begin to fall. As a result of our emphasis
on diversified financial companies, Tri-Continental's financial holdings
actually outpaced the overall industry results for the quarter.
WHAT IS YOUR OUTLOOK?
Investor uncertainty could continue through the end of the year, as the Fed may
be reluctant to further adjust rates in an election year. However, over the
course of the next 12 months, we anticipate a moderation in economic growth that
could bring on an easing of interest rates, which, in turn, may benefit many of
the Corporation's holdings.
Over the course of the next several years, the long-term investor should benefit
from our diversified common stock holdings, as equities historically produce
better returns than fixed-income securities. The positive cash inflows, which
continue to provide support to the markets, arise from increased public
awareness of the greater return potential associated with stocks, and may grow
even stronger as baby boomers increase their savings. Our overall strategy will
continue to focus on individual stock selection, seeking companies in all
industry groups with solid fundamentals, attractive valuations, and good
long-term earnings growth.
4
<PAGE>
TRI-CONTINENTAL CORPORATION
- --------------------------------------------------------------------------------
INVESTMENT RESULTS PER COMMON SHARE
TOTAL RETURNS
For Periods Ended June 30, 1996
<TABLE>
<CAPTION>
Average Annual
-----------------------------------
Three Six One Five 10
Months Months Year Years Years
------ ------ ---- ----- -------
<S> <C> <C> <C> <C> <C>
Market Price 3.61% 10.11% 21.68% 10.79% 10.92%
Net Asset Value 4.09 11.29 24.85 13.92 11.85
S&P 500* 4.49 10.10 26.00 15.73 13.79
</TABLE>
<TABLE>
<CAPTION>
PRICE PER SHARE June 30, 1996 March 31, 1996 December 31, 1995
------------- -------------- -----------------
<S> <C> <C> <C>
Market Price $24.00 $23.875 $22.625
Net Asset Value $29.57 $29.28 $27.58
</TABLE>
DIVIDENDS AND CAPITAL GAIN INFORMATION
For the Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
CAPITAL GAIN
CAPITAL GAIN -----------------------------
Dividends Paid Paid Realized Unrealized**
--------------------- ------------------ -------- ------------
<S> <C> <C> <C>
$0.34 $0.572 $1.80 $6.27
</TABLE>
* The S&P 500 is an unmanaged index that assumes reinvestment of estimated
dividends, and does not reflect fees and expenses. Investors may not invest
directly in an index.
** Represents the per share amount of net unrealized appreciation of portfolio
securities as of June 30, 1996.
----------------------------------------------------------------------
These rates of return reflect changes in market price or net asset value, as
applicable, and assume that all distributions within the period are reinvested
in additional shares. The rates of return will vary and the principal value of
an investment will fluctuate. Shares, if redeemed, may be worth more or less
than their original cost. Past performance is not indicative of future
investment results.
- --------------------------------------------------------------------------------
5
<PAGE>
TRI-CONTINENTAL CORPORATION
HIGHLIGHTS OF THE FIRST HALF
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
Assets: -------------- --------------
<S> <C> <C>
Total assets ................................. $2,756,571,671 $2,528,405,417
79,812,380 21,619,659
-------------- --------------
Net Investment Assets ........................ $2,676,759,291 $2,506,785,758
Preferred Stock, at par value .............. 37,637,000 37,637,000
-------------- --------------
Net assets for Common Stock .................. $2,639,122,291 $2,469,148,758
============== ==============
Common shares outstanding .................... 89,252,991 89,512,184
Net Assets Behind Each
Common Share ............................... $ 29.57 $ 27.58
Six Months Ended June 30,
-------------------------------------
Taxable Gain: 1996 1995
-------------- --------------
Net capital gain realized .................... $ 160,787,050 $ 101,915,945
Per Common share ........................... $ 1.80 $ 1.21
Unrealized capital gain, end of period ....... $ 560,024,043 $ 380,755,886
Per Common share ........................... $ 6.27 $ 4.54
Distribution of gain, payable July 1, 1996
Per Common share ........................... $ .572 --
Income:
Total income earned .......................... $ 40,547,535 $ 38,784,662
Expenses ................................... 8,106,957 7,156,415
Preferred Stock dividends .................. 940,925 940,925
-------------- --------------
Income for Common Stock ...................... $ 31,499,653 $ 30,687,322
============== ==============
Dividends per Common Share ................... $ .34 $ .37
With December 1995 gain
distribution taken in shares ............... $ .37 --
</TABLE>
6
<PAGE>
TRI-CONTINENTAL CORPORATION
DIVERSIFICATION OF ASSETS
The diversification of portfolio holdings by industry on June 30, 1996, was as
follows. Individual securities owned are listed on pages 12 to 21.
<TABLE>
<CAPTION>
Percent of
Net Investment
Assets
-------------------
June 30, Dec. 31,
Issues Cost Value 1996 1995
--------- ------------- ------------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Cash and Short-Term
Holdings 2 $ 54,165,830 $ 54,165,830 2.0% 6.9%
Tri-Continental
Financial Division 4 26,099,140 31,818,187 1.2 1.2
--- ------------ ------------ ------ ------
6 $ 80,264,970 $ 85,984,017 3.2% 8.1%
--- ------------ ------------ ------ ------
Common Stocks and
Convertible Issues:
Aerospace 6 $ 69,530,477 $ 92,084,375 3.4% 3.7%
Automotive and related 6 76,198,746 89,197,500 3.4 3.4
Basic materials 4 35,386,360 37,143,750 1.4 1.0
Building and construction 2 21,238,395 27,025,000 1.0 1.3
Chemicals 5 50,035,374 62,639,932 2.3 4.3
Communications 13 142,106,110 161,093,464 6.0 4.2
Computer and business services 10 101,082,600 143,039,459 5.3 3.8
Consumer goods and services 20 248,623,023 344,383,178 12.9 12.7
Diversified 9 95,814,304 118,613,854 4.4 4.0
Drugs and health care 10 101,305,138 151,096,875 5.6 6.6
Electric and gas utilities 11 107,835,503 123,544,980 4.6 2.3
Electronics 7 77,207,796 79,262,500 3.0 2.3
Energy 12 133,698,669 187,765,631 7.0 7.7
Entertainment and leisure 4 24,792,631 31,575,492 1.2 1.3
Environmental management 1 18,502,310 17,400,000 0.7 0.3
Finance and insurance 21 243,029,112 338,293,492 12.6 11.1
Manufacturing and
industrial equipment 11 122,136,564 156,377,858 5.8 5.8
Packaging and paper -- -- -- -- 0.1
Paper and forest products 5 70,103,477 71,448,942 2.7 2.7
Publishing 5 52,821,677 62,356,464 2.3 2.2
Real estate investment trusts 4 31,011,962 39,337,500 1.5 1.5
Retail trade 10 125,195,013 169,963,014 6.4 6.3
Steel 2 30,086,875 25,312,500 1.0 1.0
Transportation 6 58,728,162 61,819,514 2.3 2.3
--- -------------- -------------- ------ ------
184 $2,036,470,278 $2,590,775,274 96.8% 91.9%
--- -------------- -------------- ------ ------
NET INVESTMENT ASSETS 190 $2,116,735,248 $2,676,759,291 100.0% 100.0%
=== ============== ============== ====== ======
</TABLE>
7
<PAGE>
TRI-CONTINENTAL CORPORATION
LARGEST PORTFOLIO CHANGES
April 1 to June 30, 1996
Shares
-----------------
Holdings
Additions Increase 6/30/96
-------- --------
COMMON STOCKS
Central & South West
Corporation 500,000 500,000
Entergy Corporation 500,000 500,000
Fleet Financial Group, Inc. 650,000 650,000
International Flavors &
Fragrances Inc. 400,000 400,000
McDonald's Corporation 350,000 350,000
The Mead Corporation 300,000 300,000
Mellon Bank Corporation 400,000 400,000
Raytheon Company 300,000 300,000
Sysco Corporation 500,000 500,000
Vishay Intertechnology, Inc. 700,000 700,000
Shares
-----------------
Holdings
Reductions Decrease 6/30/96
-------- --------
COMMON STOCKS
Bausch & Lomb,
Incorporated 350,000 --
CoreStates Financial
Corporation 450,000 --
Corporacion Bancaria de
de Espana, S.A. (ADRs) 489,000 --
Edison International 1,000,000 --
Lowe's Companies, Inc. 400,000 --
Morgan (J. P.) & Co., Inc. 300,000 --
Nordstrom, Inc. 250,000 --
Schlumberger, Ltd. 100,000 200,000
Sonat Inc. 200,000 500,000
State Street Boston
Corporation 350,000 --
Largest portfolio changes are based on cost of purchases or proceeds from sales
of securities.
10 LARGEST HOLDINGS
June 30, 1996
Value
-----------
General Electric Company $34,600,000
Colgate-Palmolive Company 33,900,000
Eastman Kodak Company 31,100,000
General Re Corporation 30,450,000
Echlin Inc. 30,300,000
General Signal Corporation 30,300,000
American International Group, Inc. 29,587,500
Fleet Financial Group, Inc. 28,275,000
Woolworth Corporation 28,125,000
GTE Corporation 26,850,000
8
<PAGE>
TRI-CONTINENTAL CORPORATION
ASSETS AND LIABILITIES JUNE 30, 1996
<TABLE>
<CAPTION>
Assets:
Investments at value:
<S> <C> <C>
Common stocks (cost--$1,903,467,007) ................... $2,451,515,206
Convertible issues (cost--$133,003,271) ................ 139,260,068
Tri-Continental Financial Division
(cost--$26,099,140) ................................... 31,818,187
Short-term holdings (cost--$109,000,000) ............... 109,000,000 $2,731,593,461
-------------
Cash .................................................... 7,909,661
Receivable for dividends and interest ................... 8,320,052
Receivable for securities sold .......................... 8,124,400
Investment in, and expenses prepaid to, stockholder
service agent .......................................... 335,220
Other ................................................... 288,877
--------------
Total Assets ............................................ $2,756,571,671
--------------
Liabilities:
Distributions payable ................................... $ 66,698,835
Payable for securities purchased ........................ 11,381,473
Unrealized depreciation on foreign currency contract .... 21
Accrued expenses, taxes, and other ...................... 1,732,051
--------------
Total Liabilities ....................................... $ 79,812,380
--------------
Net Investment Assets ................................... $2,676,759,291
Preferred Stock, at $50 par value ..................... 37,637,000
--------------
Net Assets for Common Stock ............................. $2,639,122,291
==============
Net Assets per share of Common Stock
(market value--$24.00) ................................ $29.57
======
Capital Stock and Surplus June 30, 1996
Capital Stock:
$2.50 Cumulative Preferred Stock, $50 par value,
asset coverage per share--$3,556.02
Shares authorized--1,000,000; issued
and outstanding--752,740 .............................. $ 37,637,000
Common Stock, $.50 par value:
Shares authorized--99,000,000; issued
and outstanding--89,252,991 ........................... 44,626,496
Surplus:
Capital surplus ........................................ 1,871,719,044
Undistributed net investment income .................... 2,044,068
Undistributed net realized gain ........................ 160,708,967
Net unrealized appreciation of investments ............. 560,041,131
Net unrealized depreciation on translation of assets
and liabilities denominated in foreign currencies* .... (17,415)
--------------
$2,676,759,291
==============
</TABLE>
- ------------
*Includes unrealized depreciation on translation of investments denominated in
foreign currencies of $17,088.
See notes to financial statements.
9
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
<S> <C> <C>
Investment income:
Dividends .............................................. $ 33,907,556
Interest ............................................... 6,687,064
------------
Total investment income (net of foreign taxes
withheld of $539,157) ................................. $ 40,594,620
Expenses:
Management fee ......................................... $ 5,425,968
Stockholder account and registrar services ............. 1,518,414
Custody and related services ........................... 383,298
Stockholder reports and communications ................. 319,800
Stockholders' meeting .................................. 120,937
Auditing and legal fees ................................ 102,811
Directors' fees and expenses ........................... 92,689
Registration ........................................... 65,758
Miscellaneous .......................................... 77,282
------------
Total expenses .......................................... 8,106,957
........................................................ ------------
Net Investment Income $ 32,487,663*
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions:
Net realized gain on investments ....................... $161,157,860
Net realized loss from foreign
currency transactions ................................. (417,895)
Net change in unrealized appreciation
of investments ........................................ 69,084,729
Net change in unrealized appreciation
on translation of assets and liabilities
denominated in foreign currencies ..................... (3,715,792)
-----------
Net gain on investments and foreign
currency transactions .................................. 226,108,902
------------
Increase in Net Investment Assets
from Operations ........................................ $258,596,565
============
</TABLE>
- ------------
*Net investment income available for Common Stock is $31,499,653, which is net
of Preferred Stock dividends of $940,925, and includes net realized loss from
foreign currency transactions of $47,085.
See notes to financial statements.
10
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
---------------- -----------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 32,487,663 $ 62,231,561
Net realized gain on investments .................... 161,157,860 219,387,584
Net realized gain (loss) from foreign
currency transactions ............................. (417,895) 730,636
Net change in unrealized appreciation
of investments .................................... 69,084,729 301,589,307
Net change in unrealized appreciation on
translation of assets and liabilities
denominated in foreign currencies ................. (3,715,792) 1,694,560
--------------- --------------
Increase in net investment assets from
operations ........................................ $ 258,596,565 $ 585,633,648
--------------- --------------
Distributions to Stockholders:
Net investment income:
Preferred Stock (per share: $1.25 and $2.50) ...... $ (940,925) $ (1,881,850)
Common Stock (per share: $.34 and $.73) (30,336,122) (61,298,938)
--------------- --------------
.................................................... $ (31,277,047) $ (63,180,788)
Net realized gain on investments:
Common Stock (per share: $.572 and $2.01) ......... (51,054,756) (169,106,048)
--------------- --------------
Decrease in net investment assets
from distributions ................................ $ (82,331,803) $ (232,286,836)
--------------- --------------
Capital Share Transactions:
Value of shares of Common Stock issued
at market price in gain distributions
(5,310,869 shares) ................................ $ -- $ 120,158,419
Value of shares of Common Stock issued
for investment plans (828,135 and 1,890,436 share . 19,848,475 42,080,503
Cost of shares purchased for investment plans
(1,099,906 and 1,837,697 shares) .................. (26,160,589) (40,543,318)
Net proceeds from issuance of shares of
Common Stock upon exercise of
Warrants (12,578 and 4,470 shares) ................ 20,885 7,866
--------------- --------------
Increase (decrease) in net investment assets
from capital share transactions ................... $ (6,291,229) $ 121,703,470
--------------- --------------
Increase in net investment assets ................... $ 169,973,533 $ 475,050,282
Net Investment Assets:
Beginning of period ................................. 2,506,785,758 2,031,735,476
--------------- --------------
End of period (including undistributed
net investment income of $2,044,068
and $880,537) ..................................... $ 2,676,759,291 $2,506,785,758
=============== ==============
</TABLE>
- ------------
See notes to financial statements.
11
<PAGE>
TRI-CONTINENTAL CORPORATION
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS JUNE 30, 1996
Shares Value
------------ ------------
COMMON STOCKS - 91.6%
<S> <C> <C>
AEROSPACE - 3.4%
Boeing Company 175,000 $ 15,246,875
Aircraft manufacturer
General Dynamics Corporation 200,000 12,400,000
Diversified defense contractor
General Motors Corporation Class "H" 200,000 12,025,000
Diversified aerospace manufacturer--missiles, satellites,
and communications systems
Lockheed Martin Corporation 200,000 16,800,000
Manufacturer of missiles and space systems, aeronautical systems,
and technology services
Raytheon Company 300,000 15,487,500
Defense and commercial electronics
United Technologies Corporation 175,000 20,125,000
Manufacturer of elevators, jet engines, flight systems, and
automotive parts
------------
$ 92,084,375
-------------
AUTOMOTIVE AND RELATED - 2.7%
Autoliv (ADRs)+* 170,000 $ 5,100,000
Swedish supplier of safety restraint systems
Echlin Inc. 800,000 30,300,000
Manufacturer of brakes and auto replacement parts
Genuine Parts Company 330,000 15,097,500
Supplier of auto parts
Harley-Davidson Inc. 500,000 20,562,500
Motorcycle manufacturer ------------
$ 71,060,000
------------
BASIC MATERIALS - 1.4%
Aluminum Company of America 200,000 $ 11,475,000
US aluminum producer
Nucor Corporation 200,000 10,125,000
Mini-mill steel production
Pohang Iron & Steel (ADSs) 210,000 5,118,750
Korean steel manufacturer
Reynolds Metals Company 200,000 10,425,000
Manufacturer of finished aluminum products
------------
$ 37,143,750
------------
BUILDING AND CONSTRUCTION - 1.0%
Fluor Corporation 200,000 $ 13,075,000
Engineering and related services
Sherwin-Williams Corporation 300,000 13,950,000
Paints and related products
------------
$ 27,025,000
------------
CHEMICALS - 2.3%
Bayer AG 400,000 $ 14,053,735
Producer of specialty chemicals, pharmaceuticals, and plastics
Dow Chemical Company 250,000 19,000,000
Diversified chemicals
EUROPEAN VINYLS CORPORATION 162,000 5,023,697
Market leaders in PVC industry
- ----------------
See footnotes on page 21.
</TABLE>
12
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
CHEMICALS (continued)
Morton International, Inc. 300,000 $ 11,175,000
Adhesives, coatings, salt, and specialty products
Olin Corporation 150,000 13,387,500
Chemicals; defense products and ammunition; metals
------------
$ 62,639,932
------------
COMMUNICATIONS - 6.0%
Alcatel Alsthom Compagnie Generale d'Electricite 65,000 $ 5,662,977
French developer of equipment and systems for
public telecommunications
ALLTEL Corporation 500,000 15,375,000
Telephone utility
American Telephone & Telegraph Company 350,000 21,700,000
International and domestic telecommunications services
Frontier Corporation 400,000 12,250,000
Telephone utility
GTE Corporation 600,000 26,850,000
Telephone systems and equipment
Indosat (ADRs) 84,200 2,820,700
International Telecommunications to the Indonesian market
NYNEX Corporation 250,000 11,875,000
Telephone utility and publishing
SBC Communications Inc. 400,000 19,700,000
Telephone services, primarily in the Midwest
Tele Danmark (ADSs) 415,000 10,530,625
Domestic and international telephone services
in Denmark
Telecom Italia-Di Risp 2,526,000 4,353,867
Provider of the whole spectrum of
telecommunications services throughout Italy
Telecom Italia Mobile-Di Risp 2,526,000 3,440,295
Provider of the whole spectrum of mobile
telecommunications services throughout Italy
Teleport Communications Group Inc. Class "A"* 390,000 7,410,000
Provider of telecommunications services
U.S. West, Inc. 600,000 19,125,000
Telephone utility
------------
$161,093,464
------------
COMPUTER AND BUSINESS SERVICES - 4.9%
Compaq Computer Corporation* 250,000 $ 12,312,500
Leading global PCmanufacturer
Dell Computer Corporation* 200,000 10,162,500
MANUFACTURER OF IBM-COMPATIBLE PCS
Electronic Data Systems Corporation 350,000 18,812,500
Computer systems and services
First Data Corporation 250,000 19,906,250
Information processing services
Hewlett-Packard Company 150,000 14,943,750
Computers and peripherals
Intel Corporation 300,000 22,031,250
Semiconductors/memory circuits
Microsoft Corporation* 150,000 18,009,375
Computer software
</TABLE>
- -----------------
See footnotes on page 21.
13
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
COMPUTER AND BUSINESS SERVICES (continued)
Olivetti & C Spa 8,000,000 $ 4,311,334
PCs, minicomputers, workstations, and peripherals
Sun Microsystems, Inc.* 200,000 11,775,000
Networked workstations
------------
$132,264,459
------------
CONSUMER GOODS AND SERVICES - 12.9%
Adidas AG 165,960 $ 13,801,417
SPORTING EQUIPMENT, FOOTWARE
Allied-Domecq plc 870,000 6,101,119
International food, drink, and hospitality group
B.A.T. Industries plc 1,440,000 11,193,142
UK financial services and tobacco company
The Clorox Company 200,000 17,725,000
Household products and specialty tools
Coca-Cola Company 300,000 14,662,500
Soft drinks, consumer products
Colgate-Palmolive Company 400,000 33,900,000
Household and personal care products
CPC International Inc. 250,000 18,000,000
International food company
Eastman Kodak Company 400,000 31,100,000
Film, chemicals, and health care products
General Mills, Inc. 200,000 10,900,000
Consumer foods and restaurants
Gillette Company 200,000 12,475,000
Personal care products
International Flavors & Fragrances Inc. 400,000 19,050,000
Developer and manufacturer of flavor and fragrance products
Liz Claiborne, Inc. 400,000 13,850,000
Designer and distributor of women's apparel
McDonald's Corporation 350,000 16,362,500
Fast-food restaurants
PepsiCo, Inc. 500,000 17,687,500
Soft drinks and consumer products
Philip Morris Companies, Inc. 150,000 15,600,000
Tobacco, food, and beverage manufacturer
Procter & Gamble Company 200,000 18,125,000
Household and personal care products
RJR Nabisco Holdings Corporation 500,000 15,500,000
Processed foods, consumer products
Rubbermaid Incorporated 800,000 21,800,000
Manufacturer of plastic and rubber household products
Sara Lee Corporation 600,000 19,425,000
Processed foods; consumer products
Sysco Corporation 500,000 17,125,000
Food distributor
------------
$344,383,178
------------
</TABLE>
- ---------------
See footnotes on page 21.
14
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
DIVERSIFIED - 3.3%
Allied-Signal, Inc. 300,000 $ 17,137,500
Aerospace and automotive materials
Cooper Industries, Inc. 300,000 12,450,000
Manufacturer of electric equipment
Corning, Inc. 350,000 13,431,250
Specialty glass products
Minnesota Mining & Manufacturing Company 300,000 20,700,000
Consumer and industrial goods and services
PT Astra International 2,000,000 2,901,354
Distributor of automobiles and motorcycles in Indonesia
Tenneco, Inc. 400,000 20,450,000
Shipbuilding; auto parts; chemicals; plastic packaging
------------
$ 87,070,104
------------
DRUGS AND HEALTH CARE - 5.6%
Abbott Laboratories 300,000 $ 13,050,000
Diversified health care products
American Home Products Corporation 300,000 18,037,500
Pharmaceuticals, food, and housewares
Baxter International Inc. 250,000 11,812,500
Manufacturer and distributor of hospital and laboratory products
Bristol-Myers Squibb Company 250,000 22,500,000
Health and personal care products
Guidant Corporation 250,000 12,312,500
Cardiac rhythm management and coronary artery disease intervention
Medtronic, Inc. 200,000 11,200,000
Manufacturer of pacemakers and related cardiovascular products
Merck & Co., Inc. 300,000 19,387,500
Pharmaceutical company
Pharmacia & Upjohn, Inc. 250,000 10,921,875
Pharmaceutical manufacturer
United Healthcare Corporation 250,000 12,625,000
National managed health care company
Warner-Lambert Company 350,000 19,250,000
Drug, toiletries, and food manufacturer
------------
$151,096,875
------------
ELECTRIC AND GAS UTILITIES - 4.6%
Baltimore Gas & Electric Company 750,000 $ 21,281,250
Electric and gas service
British Gas plc (ADRs) 115,000 3,162,500
Major gas supplier in UK
Central & South West Corporation 500,000 14,500,000
Integrated electric utility holding company
Empresa Nacional de Electricidad (ADRs) 132,000 8,266,500
Major electric utility in Spain
Entergy Corporation 500,000 14,187,500
Electric utility
Hong Kong & China Gas Company Ltd.* 4,800,000 7,658,222
Producer, distributor, and marketer of natural gas to industrial and
residential customers
Hong Kong & China Gas Company Ltd. (Warrants)* 400,000 104,642
Producer, distributor, and marketer of natural gas to industrial and
residential customers
Huaneng Power International (ADRs)* 270,000 4,826,250
Flagship power company of China
</TABLE>
- --------------
See footnotes on page 21.
15
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
ELECTRIC AND GAS UTILITIES (continued)
Sonat Inc. 500,000 $ 22,500,000
Oil and gas, production and pipelines
VEBA AG 230,000 12,208,116
Provider of electric energy inGermany
The Williams Companies, Inc. 300,000 14,850,000
Oil and gas, production and pipelines
------------
$123,544,980
------------
ELECTRONICS - 3.0%
AMP Inc. 400,000 $ 16,050,000
Manufacturer of electronic connectors and systems
Atmel Corporation* 200,000 6,037,500
Manufacturer of memory circuits
Motorola Inc. 275,000 17,290,625
Producer of semiconductors and communications equipment
Synopsys, Inc.* 250,000 9,968,750
Integrated circuit design software
Teradyne, Inc.* 500,000 8,625,000
Semiconductor test equipment
Vishay Intertechnology, Inc.* 700,000 16,537,500
Electronic resistive systems
Xilinx, Inc.* 150,000 4,753,125
Field programmable gate arrays
------------
$ 79,262,500
------------
ENERGY - 7.0%
Amoco Corporation 275,000 $ 19,903,125
Oil and gas producer
Anadarko Petroleum Company 200,000 11,600,000
Oil and gas exploration, development, and production
Atlantic Richfield Company 125,000 14,812,500
Oil producer and West Coast marketer
Baker Hughes Incorporated 500,000 16,437,500
Oil service company
Enron Corporation 500,000 20,437,500
Pipeline exploration and production
Exxon Corporation 300,000 26,062,500
Integrated oil and gas company
PanEnergy Corporation 600,000 19,725,000
Oil and gas, production and pipelines
Schlumberger Ltd. 200,000 16,850,000
Worldwide energy services
Texaco Inc. 250,000 20,968,750
International oil company
Total S.A. Class "B" 75,000 5,556,256
International oil enterprise
Union Pacific Resources Group Inc. 200,000 5,350,000
Producer of natural gas
USX-Marathon Group, Inc. 500,000 10,062,500
Worldwide oil and gas producer and refiner
------------
$187,765,631
------------
</TABLE>
- -----------------
See footnotes on page 21.
16
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
ENTERTAINMENT AND LEISURE - 1.2%
Disney (Walt) Company 250,000 $ 15,718,750
Film entertainment, amusement parks, and
other forms of leisure related activities
News Corp. Ltd. (ADRs) 260,000 6,110,000
Worldwide media and television provider
News Corp. Ltd. (ADRs--Voting Preference Shares) 130,000 2,616,250
Worldwide media and television provider
Television Broadcast* 1,900,000 7,130,492
TV broadcasting; program production; rental of films; and advertising
------------
$ 31,575,492
------------
ENVIRONMENTAL MANAGEMENT - 0.7%
Browning-Ferris Industries, Inc. 600,000 $ 17,400,000
Solid and liquid waste management services ------------
FINANCE AND INSURANCE - 11.8%
ABN-AMRO Holdings N.V. 127,717 $ 6,845,051
Worldwide banking operations based in the Netherlands
American International Group, Inc. 300,000 29,587,500
International insurance holding company
AXA S.A. 166,533 9,099,511
Provider of financial services and insurance
BankAmerica Corporation 300,000 22,725,000
Largest commercial bank in California and Western states
Bank of New York Company, Inc. 500,000 25,625,000
Commercial bank
Citicorp 249,999 20,656,167
New York commercial bank
Federal National Mortgage Association 600,000 20,100,000
Mortgage financing
Fleet Financial Group, Inc. 650,000 28,275,000
Commercial banking in the Northeast
General Re Corporation 200,000 30,450,000
Largest property casualty re-insurer in the US
Grupo Financiero Banamex Accival, S.A. Class "B" 2,176,000 4,532,736
One of the largest financial companies in Mexico
involved in banking and stockbroking
Household International, Inc. 300,000 22,800,000
Consumer loans, credit cards, equity loans, and life insurance
HSBC Holdings plc 550,000 8,313,202
Provider of banking and financial services
ING Groep N.V. 424,562 12,644,202
Largest banking and insurance services group in the Netherlands
Irish Life plc 1,200,000 4,747,590
Provider of insurance and related products
Krung Thai Bank Public Company Limited 1,100,000 5,154,964
One of the largest providers of banking services in Taiwan
Mellon Bank Corporation 400,000 22,800,000
Commercial banking
St. Paul Companies 400,000 21,400,000
Property and casualty insurance
</TABLE>
- -----------------
See footnotes on page 21.
17
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
FINANCE AND INSURANCE (continued)
Societe Generale 36,849 $ 4,046,944
Provider of full banking and financial services
Travelers Incorporated 375,000 17,109,375
Broad-based financial services company
------------
$316,912,242
------------
MANUFACTURING AND
INDUSTRIAL EQUIPMENT - 5.3%
ABB AG (ADRs) 97,000 $ 11,996,737
Manufacturer of heavy equipment for electric power generation and
distribution
BTR plc 1,300,000 5,112,968
UK global manufacturer of industrial goods
Emerson Electric Co. 250,000 22,593,750
Electric motors, hand-held tools, and miscellaneous electrical equipment
General Electric Company 400,000 34,600,000
Supplier of electrical equipment and other industrial and
consumer products
General Signal Corporation 800,000 30,300,000
Capital goods producer
Illinois Tool Works, Inc. 200,000 13,525,000
Manufacturer of fasteners, tools, and plastic items
Ingersoll-Rand Company 300,000 13,125,000
Manufacturer of machinery, equipment, bearings, and tools
Mannesmann 22,500 7,735,459
Plant and machinery construction; automotive technology
Pacific Dunlop Ltd. 1,500,000 3,376,444
Australian manufacturer of a wide range of products
------------
$142,365,358
------------
PAPER AND FOREST PRODUCTS - 2.7%
International Paper Company 600,000 $ 22,125,000
Paper and paper products, specialty products, wood, and timber
Kimberly-Clark Corporation 200,000 15,450,000
Consumer paper products; newsprint
Louisiana-Pacific Corporation 500,000 11,062,500
Lumber, plywood, and pulp
The Mead Corporation 300,000 15,562,500
Manufacturer of paper, lumber, and wood products
Stora Kopparbergs Class "B" 550,000 7,248,942
Manufacturer of forestry products
------------
$ 71,448,942
------------
PUBLISHING - 2.3%
Donnelley (R.R.) & Sons Company 300,000 $ 10,462,500
Printing and computer services
Elsevier 650,000 9,850,214
Global printer and publisher of professional trade journals and magazines
Gannet Co., Inc. 200,000 14,150,000
Newspapers, radio and TV broadcasting
Reader's Digest Association Inc. Class "A" 400,000 17,000,000
Publisher of periodicals, books, videos, and records
Tribune Co. 150,000 10,893,750
Book publishing, newsprint operations
------------
$ 62,356,464
------------
</TABLE>
- --------------
See footnotes on page 21.
18
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS - 1.5%
Avalon Properties, Inc. 500,000 $ 10,875,000
REIT focusing on apartment properties in the Eastern US
Kimco Realty Corporation 450,000 12,712,500
High-quality REIT operator of shopping centers
Security Capital Industrial Trust 400,000 7,050,000
REIT operator of shopping centers
Security Capital Pacific Trust 400,000 8,700,000
Real estate investment trust involved in multi-family residential
properties
--------------
$ 39,337,500
--------------
RETAIL TRADE - 5.9%
American Stores Company 500,000 $ 20,625,000
Food retailer
Dillard Department Stores Inc. Class "A" 300,000 10,950,000
Major department store chain
May Department Stores Company 400,000 17,500,000
Large department store chain
The Pep Boys - Manny, Moe and Jack 500,000 17,000,000
Auto parts store
Sears, Roebuck & Company 300,000 14,587,500
Major department store
Tandy Corporation 350,000 16,581,250
Retailer of consumer electronics
Tesco plc 1,478,000 6,741,764
Supermarket chain
WAL-MART STORES, INC. 1,000,000 25,375,000
Largest discount retail chain
Woolworth Corporation* 1,250,000 28,125,000
Discount and variety retailer
--------------
$ 157,485,514
--------------
TRANSPORTATION - 2.1%
Burlington Northern Santa Fe 145,300 $ 11,751,137
Freight railroad system
Caliber System, Inc. 355,000 12,070,000
Motor carrier
Conrail Inc. 200,000 13,275,000
Freight railroad system
Jurong Shipyard Ltd. 425,000 2,153,309
Leading ship repair company in Singapore
Norfolk Southern Corporation 200,000 16,950,000
Railroad holding company, motor carrier
--------------
$ 56,199,446
--------------
TOTAL COMMON STOCKS
(COST: $1,903,467,007) $2,451,515,206
--------------
</TABLE>
- ----------------
See footnotes on page 21.
19
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
Shares
or Prin. Amt. Value
------------ ------------
<S> <C> <C>
CONVERTIBLE ISSUES - 5.2%
Convertible Debentures - 2.6%
AUTOMOTIVE AND RELATED - 0.7%
Exide Corporation, 2.90%, 12/15/2005+ $14,000,000 $ 7,787,500
Magna International Inc., 5%, 10/15/2002 10,000,000 10,350,000
------------
$ 18,137,500
------------
COMPUTER AND BUSINESS SERVICES - 0.4%
EMC Corporation, 4 1/4%, 1/1/2001 10,000,000 $ 10,775,000
------------
DIVERSIFIED - 0.6%
Cooper Industries, Inc., 7.05%, 1/1/2015 5,000,000 $ 5,337,500
MascoTech Inc., 4 1/2%, 12/15/2003 15,000,000 11,925,000
------------
$ 17,262,500
------------
FINANCE AND INSURANCE - 0.2%
LibLife International, 6 1/2%, 9/30/2004 3,500,000 $ 4,821,250
------------
MANUFACTURING AND
INDUSTRIAL EQUIPMENT - 0.5%
Teco Electrical and Machinery, 2 3/4%, 4/15/2004 3,000,000 $ 2,587,500
TriMas Corporation, 5%, 8/1/2003 10,000,000 11,425,000
------------
$ 14,012,500
------------
TRANSPORTATION - 0.2%
Nippon Yusen, 2%, 9/29/2000 505,000,000 ** $ 5,620,068
------------
Total Convertible Debentures
(Cost: $68,382,109) $ 70,628,818
------------
CONVERTIBLE PREFERRED STOCKS - 2.6%
DIVERSIFIED - 0.5%
Corning Inc. (Delaware), 6% 250,000 shs. $ 14,281,250
------------
FINANCE AND INSURANCE - 0.6%
Travelers Incorporated, 5 1/2% 180,000 $ 16,560,000
------------
RETAIL TRADE - 0.5%
Kmart Financing, 7 3/4% 230,000 $ 12,477,500
------------
STEEL - 1.0%
AK Steel Holdings Corporation, 7% 350,000 $ 12,862,500
Bethlehem Steel Corporation, $3.50+ 300,000 12,450,000
------------
$ 25,312,500
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost: $64,621,162) $ 68,631,250
------------
TOTAL CONVERTIBLE ISSUES
(Cost: $133,003,271) $139,260,068
------------
</TABLE>
- ---------------
See footnotes on page 21.
20
<PAGE>
TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (continued) June 30, 1996
<TABLE>
<CAPTION>
. Value
------------
<S> <C>
TRI-CONTINENTAL FINANCIAL DIVISION++ - 1.2%
(Cost: $26,099,140) $ 31,818,187
--------------
SHORT-TERM HOLDINGS - 4.0%
(Cost: $109,000,000) $ 109,000,000
--------------
Total Investments - 102.0%
(Cost: $2,171,569,418) $2,731,593,461
Other Assets Less Liabilities - (2.0)% (54,834,170)
--------------
Net Investment Assets - 100.0% $2,676,759,291
==============
</TABLE>
- -----------------
*Non-income producing security.
**Principal amount reported in Japanese Yen.
+Rule 144A security.
++Restricted securities.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. Investments in stocks, bonds, limited partnership interests, and
short-term holdings ma*turing in more than 60 days are valued at current
market values or, in their absence, fair value determined in accordance
with procedures approved by the Board of Directors. Securities traded on
national exchanges are valued at last sales prices or, in their absence
and in the case of over-the-counter securities, a mean of bid and asked
prices. Short-term holdings maturing in 60 days or less are valued at
amortized cost.
b. The books and records of the Corporation are maintained in US dollars. The
market value of investment securities and other assets and liabilities
denominated in foreign currencies are translated into US dollars at the
closing daily rate of exchange as reported by a pricing service. Purchases
and sales of investment securities, income, and expenses are translated
into US dollars at the rate of exchange prevailing on the respective dates
of such transactions.
The Corporation separates that portion of the results of operations
resulting from changes in the foreign exchange rates from the fluctuations
arising from changes in the market prices of securities held in the
portfolio. Similarly, the Corporation separates the effect of changes in
foreign exchange rates from the fluctuations arising from changes in the
market prices of portfolio securities sold during the period.
c. The Corporation may enter into forward currency contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings, or other amounts receivable or payable in
foreign currency. A forward contract is a commitment to purchase or sell a
foreign currency at a future date at a negotiated forward rate. Certain
risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts. The
contracts are valued daily at current exchange rates and any unrealized
gain or loss is included in net unrealized appreciation or depreciation on
translation of assets and liabilities denominated in foreign currencies
and forward currency contracts. The gain or loss, if any, arising from the
difference between the settlement value of the forward contract and the
closing of such contract is included in net realized gain or loss from
foreign currency transactions.
d. There is no provision for federal income or excise tax. The Corporation
has elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
e. Investment transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statements and federal income
tax purposes. Dividends receivable and payable are recorded on ex-dividend
dates. Interest income is recorded on the accrual basis.
f. The treatment for financial statement purposes of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate treatment for federal income tax purposes.
These differences primarily are caused by differences in the timing of the
recognition of certain components of income, expense or capital gain, and
the recharacterization of foreign exchange gains or losses to either
ordinary income or realized capital gain for federal income tax purposes.
Where such differences are permanent in nature, they are reclassified in
the components of net investment assets based on their ultimate
characterization for federal income tax purposes. Any such
reclassification will have no effect on net assets, results of operations,
or net asset value per share of the Corporation.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
2. Under the Corporation's Charter, dividends on the Common Stock cannot be
declared unless net assets, after such dividends and dividends on Preferred
Stock, equal at least $100 per share of Preferred Stock outstanding. The
Preferred Stock is subject to redemption at the Corporation's option at any time
on 30 days' notice at $55 per share (or a total of $41,400,700 for the shares
outstanding) plus accrued dividends, and entitled in liquidation to $50 per
share plus accrued dividends.
The Corporation, in connection with its Automatic Dividend Investment and
Cash Purchase Plan and other Stockholder plans, acquires and issues shares of
its own Common Stock, as needed, to satisfy Plan requirements. For the six
months ended June 30, 1996, 1,099,906 shares were purchased from Plan
participants at a cost of $26,160,589, which represented a weighted average
discount of 17.3% from the net asset value of those acquired shares. A total of
828,135 shares were issued to Plan participants during the six months for
proceeds of $19,848,475, a discount of 17.8% from the net asset value of those
shares.
At June 30, 1996, 196,912 shares of Common Stock were reserved for issuance
upon exercise of 14,543 Warrants, each of which entitled the holder to purchase
13.54 shares of Common Stock at $1.66 per share. Assuming the exercise of all
Warrants outstanding at June 30, 1996, net investment assets would have
increased by $326,874 and the net asset value of the Common Stock would have
been $29.51 per share. The number of Warrants exercised during the six months
ended June 30, 1996, and the year ended December 31, 1995, was 929 and 350,
respectively.
3. Purchases and sales of portfolio securities, excluding USGovernment
obligations and short-term investments, amounted to $949,007,739 and
$886,900,385, respectively. At June 30, 1996, the cost of investments for
federal income tax purposes was substantially the same as the cost for financial
reporting purposes, and the tax basis gross unrealized appreciation and
depreciation of portfolio securities, including the effects of foreign currency
translations, amounted to $612,066,441 and $52,042,398, respectively.
4. At June 30, 1996, the Corporation owned short-term investments which matured
in less than 7 days.
5. J. & W. Seligman & Co. Incorporated (the "Manager") manages the affairs of
the Corporation and provides necessary personnel and facilities. Compensation of
all officers of the Corporation, all directors of the Corporation who are
employees or consultants of the Manager, and all personnel of the Corporation
and the Manager is paid by the Manager. The Manager receives a fee, calculated
daily and payable monthly, equal to a percentage of the Corporation's daily net
assets at the close of business on the previous business day. The management fee
rate is calculated on a sliding scale of 0.45% to 0.375%, based on average daily
net assets of all the investment companies managed by the Manager. The
management fee for the six months ended June 30, 1996, was equivalent to an
annual rate of 0.41% of the average daily net assets of the Corporation.
Seligman Henderson Co. (the "Subadviser"), a 50%-owned affiliate of the Manager,
is entitled to a portion of the Manager's fee for acting as Subadviser for
certain of the international investments of the Corporation.
Seligman Data Corp., owned by the Corporation and certain associated
investment companies, charged the Corporation at cost $1,503,595 for stockholder
account services. The Corporation's investment in Seligman Data Corp. is
recorded at a cost of $43,681.
Certain officers and directors of the Corporation are officers or directors
of the Manager, the Subadviser, and/or Seligman Data Corp.
Fees of $55,000 were incurred by the Corporation for legal services of
Sullivan & Cromwell, a member of which firm is a director of the Corporation.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
The Corporation has a compensation arrangement under which directors who
receive fees may elect to defer receiving such fees. Interest is accrued on the
deferred balances. The cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at June 30, 1996, of
$415,780 is included in other liabilities. Deferred fees and the related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
6. At June 30, 1996, the Tri-Continental Financial Division of the Corporation
was comprised of four investments that were purchased through private offerings
and cannot be sold without prior registration under the Securities Act of 1933
or pursuant to an exemption therefrom. These investments are valued at fair
value as determined in accordance with procedures approved by the Board of
Directors of the Corporation. The acquisition dates of investments in the
limited partnerships and stock, along with their cost and values at June 30,
1996, are as follows:
<TABLE>
<CAPTION>
Investments Acquisition Date(s) Cost Value
- ---------------------------------- ------------------ ---------- ----------
<S> <C> <C> <C>
Tempest Reinsurance Company Ltd. 9/13/93 $10,000,000 $13,384,000
Water Street Corporate Recovery
Fund I, L.P. 10/9/90 to 12/22/95 1,193,271 1,085,541
WCAS Capital Partners II, L.P. 12/11/90 to 10/10/95 7,549,235 8,593,295
Whitney Subordinated Debt Fund, L.P. 7/12/89 to 6/27/96 7,356,634 8,755,351
----------- -----------
Total $26,099,140 $31,818,187
=========== ===========
</TABLE>
7. At June 30, 1996, the Corporation had an outstanding foreign currency
contract to buy foreign currency as follows:
<TABLE>
<CAPTION>
Foreign In Exchange Settlement Unrealized
Contract Currency for US $ Date US $ Value Depreciation
-------- --------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Purchase:
French Francs .............. 85,691 16,649 7/2/96 16,628 $21
</TABLE>
24
<PAGE>
FINANCIAL HIGHLIGHTS
The Corporation's financial highlights are presented below. The per share
operating performance data is designed to allow investors to trace the operating
performance, on a per Common share basis, from the Corporation's beginning net
asset value to the ending net asset value so that they can understand what
effect the individual items have on their investment, assuming it was held
throughout the year. 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.
The total investment return based on market value measures the Corporation's
performance assuming investors purchased shares of the Corporation at the market
value as of the beginning of the period, invested dividends and capital gains
paid as provided for in the Corporation's Prospectus and Automatic Dividend
Investment and Cash Purchase Plan, and then sold their shares at the closing
market value per share on the last day of the period. The total investment
return based on net asset value is similarly computed except that the
Corporation's net asset value is substituted for the corresponding market value.
The total investment return computations do not reflect any sales commissions
investors may incur in purchasing or selling shares of the Corporation. The
total investment returns for periods of less than one year are not annualized
Average commission rate paid represents the average commission paid by the
Corporation to purchase or sell portfolio securities. It is determined by
dividing the total commission dollars paid by the number of shares purchased and
sold during the period for which commissions were paid. This rate is provided
for the period beginning January 1, 1996.
The ratios of expenses to average net assets and net investment income to
average net assets for the years presented do not reflect the effect of
dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended -----------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value,
beginning of period $ 27.58 $ 23.70 $ 27.49 $ 28.03 $ 28.57 $ 24.60
------- ------- ------- ------- ------- -------
Net investment income .36 .74 .83 .83 .81 .81
Net realized and unrealized
investment gain (loss) 2.60 6.14 (1.69) 1.46 1.19 5.79
Net realized and unrealized gain (loss)
on foreign currency transactions (.05) .03 .02 -- -- --
------- ------- ------- ------- ------- -------
Increase (decrease) from
investment operations 2.91 6.91 (.84) 2.29 2.00 6.60
Dividends paid on Preferred Stock (.01) (.02) (.03) (.03) (.03) (.03)
Dividends paid on Common Stock (.34) (.73) (.79) (.80) (.78) (.78)
Distribution from net gain realized (.57) (2.01) (1.90) (1.80) (.70) (1.80)
Issuance of Common Stock
in gain distributions -- (.27) (.23) (.19) (.05) (.02)
Issuance of Common Stock
upon Warrant exercise -- -- -- (.01) -- --
Issuance of Common Stock
from exercise of Rights -- -- -- -- (.97) --
Rights offering costs -- -- -- -- (.01) --
------- ------- ------- ------- ------- -------
Net increase (decrease)
in net asset value 1.99 3.88 (3.79) (.54) (.54) 3.97
------- ------- ------- ------- ------- -------
Net asset value,
end of period $ 29.57 $ 27.58 $ 23.70 $ 27.49 $ 28.03 $ 28.57
======= ======= ======= ======= ======= =======
Adjusted net asset value,
end of period* $ 29.51 $ 27.52 $ 23.65 $ 27.42 $ 27.95 $ 28.48
Market value, end of period $ 24.00 $ 22.625 $ 19.875 $ 23.75 $ 25.50 $ 27.75
</TABLE>
25
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended ----------------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total Investment Return:
Based upon market value............ 10.11% 27.95% (5.07)% 3.47% .61%+ 42.98%
Based upon net asset value......... 11.29% 30.80% (2.20)% 8.95% 7.42%+ 27.91%
Ratios/Supplemental Data:
Expenses to average
net assets....................... .62%++ .63% .64% .66% .67% .67%
Net investment income to
average net assets............... 2.47%++ 2.71% 3.08% 2.88% 2.86% 2.90%
Portfolio turnover rate............ 35.93% 62.28% 70.38% 69.24% 44.35% 49.02%
Average commission rate paid....... $ .0491
Net investment assets,
end of period (000's omitted):
For Common Stock................. $2,639,122 $2,469,149 $1,994,098 $2,166,212 $2,088,102 $1,833,664
For Preferred Stock.............. 37,637 37,637 37,637 37,637 37,637 37,637
---------- ---------- ---------- ---------- ---------- ----------
Total net investment assets........ $2,676,759 $2,506,786 $2,031,735 $2,203,849 $2,125,739 $1,871,301
========== ========== ========== ========== ========== ==========
</TABLE>
- ------------------
* Assumes the exercise of outstanding warrants.
+ The total investment returns for 1992 have been adjusted for the effect of the
exercise of Rights (equivalent to approximately $0.97 per share), assuming
full subscription by Common Stockholders.
++Annualized.
See notes to financial statements.
26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Security Holders,
Tri-Continental Corporation:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, and the statement of capital stock and
surplus of Tri-Continental Corporation as of June 30, 1996, the related
statements of operations for the six months then ended and of changes in net
investment assets for the six months then ended and the year ended December 31,
1995, and the financial highlights for the six months ended June 30, 1996 and
for each of the years in the five-year period ended December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the Corporation's custodians and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Tri-Continental
Corporation as of June 30, 1996, the results of its operations, the changes in
its net investment assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
July 31, 1996
- --------------------------------------------------------------------------------
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
Subadviser
Seligman Henderson Co.
100 Park Avenue
New York, NY 10017
Stockholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) TRI-1092 Stockholder
Services
(800) 445-1777 Retirement Plan
Services
(800) 622-4597 24-Hour Automated
Telephone Access Service
27
<PAGE>
TRI-CONTINENTAL CORPORATION
PROXY RESULTS
Tri-Continental Corporation Stockholders voted on the following proposals at
the Annual Meeting of Stockholders on May 16, 1996, in San Francisco, CA. The
description of each proposal and the voting results are stated below. Each
Director was elected and the selection of Deloitte & Touche LLP as auditors was
ratified. Each of the Stockholder proposals did not pass.
For Withheld
----- ---------
Election of Directors:
John E. Merow 68,555,227 2,642,922
Betsy S. Michel 68,624,961 2,591,741
James C. Pitney 68,555,227 2,642,753
James N. Whitson 68,606,425 2,644,426
Brian T. Zino 68,555,392 2,573,209
<TABLE>
<CAPTION>
For Against Abstain Non-Vote
----- -------- -------- ---------
<S> <C> <C> <C> <C>
Ratification of Deloitte &
Touche LLP as auditors 69,280,383 1,012,172 905,102 n/a
Stockholder proposals:
Cumulative Voting for Directors 6,814,142 47,250,113 2,185,956 14,947,938
Additional Qualifications
for Potential Directors 11,226,847 41,958,193 2,621,084 15,392,025
Conversion to Mutual Fund 8,784,445 45,361,262 2,159,539 14,892,903
</TABLE>
28
<PAGE>
TRI-CONTINENTAL CORPORATION
BOARD OF DIRECTORS
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co.
Incorporated
John R. Galvin (2,4)
Dean, Fletcher School of Law and
Diplomacy at Tufts University
Director, USLIFE Corporation
Alice S. Ilchman (3,4)
President, Sarah Lawrence College
Trustee, Committee for Economic
Development
Director, NYNEX
Chairman, The Rockefeller Foundation
Frank A. McPherson (2,4)
Chairman and CEO, Kerr-McGee
Corporation
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow
Partner, Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum
Corporation
Betsy S. Michel (2,4)
Director or Trustee,
Various Organizations
William C. Morris (1)
Chairman
Chairman of the Board and President,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney (3,4)
Partner, Pitney, Hardin, Kipp & Szuch,
Law Firm
Director, Public Service Enterprise Group
James Q. Riordan (3,4)
Director, The Brooklyn Union Gas
Company
Trustee, Committee for Economic
Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Ronald T. Schroeder (1)
Managing Director, J. & W. Seligman & Co.
Incorporated
Robert L. Shafer (3,4)
Director or Trustee,
Various Organizations
James N. Whitson (2,4)
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, Red Man Pipe and Supply
Company
Brian T. Zino (1)
President
Managing Director, J. & W. Seligman & Co.
Incorporated
- --------------------
Member:
(1) Executive Committee
(2) Audit Committee
(3) Director Nominating Committee
(4) Board Operations Committee
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
William C. Morris
Chairman
Brian T. Zino
President
Charles W. Kadlec
Vice President
Charles C. Smith, Jr.
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
<PAGE>
