First Quarter Report 1998
Tri-Continental Corporation
invests primarily to produce
long-term growth of both
capital and income,
while providing reasonable
current income.
Tri-Continental
Corporation
Tri-Continental Corporation
Managed by
[LOGO]
J. & W. Seligman & Co.
INCORPORATED
INVESTMENT MANAGERS AND ADVISORS
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
This report is intended only for the information of stockholders or those who
have received the current prospectus covering shares of Common Stock of Tri-
Continental Corporation, which contains information about management fees and
other costs.
CETRI3a 3/98
an investment you can live with
<PAGE>
Tri-Continental Corporation
To the Stockholders:
Tri-Continental posted solid investment results in the first quarter of 1998.
The Corporation's total return based on net asset value was 12.17%, which
slightly lagged its competitive universe, as represented by the Lipper
Closed-End Growth & Income Funds Average. The Corporation's total return based
on market price was 11.27%. For the quarter, the Standard & Poor's 500 Composite
Stock Price Index (S&P 500) had a total return of 13.95%.
Overall, the domestic economy experienced strong growth in the first quarter
of 1998, led by consumer spending. Low inflation, steady wage increases, and
ample liquidity produced a surprisingly buoyant retail spending environment. The
early effects of the Asian crisis were muted. Imports from Asia helped to
contain any inflationary pressures that might usually be associated with strong
economic growth. In the overall global marketplace, moderate European growth
helped to offset the slowdown in Asia. However, the Asian recession is far from
over.
The US equity markets continued to appreciate in the first quarter of 1998.
Business activity was good, and interest rates traded in a narrow range due to a
relatively stable price environment and a lack of policy change by the Federal
Reserve Board. Corporate earnings generally met, and in some cases even
exceeded, reduced expectations. While large-capitalization stocks once again led
the advances, the stock markets began to broaden in March with the performance
of medium and small-cap stocks beginning to more closely track that of the
large-cap stocks.
Although the current domestic environment is encouraging, the Asian financial
crisis is not behind us. We still anticipate a slowdown in the rate of economic
expansion for the balance of 1998. The impact of the reduction in Asian demand
on US economic growth should become more evident later this year.
Corporate profits are beginning to show the effects of the Asian financial
crisis, particularly in the technology sector. Other economic sectors may also
be impacted. We continue to maintain an investment style that emphasizes a
higher dividend yield and more earnings stability than the S&P 500. We believe
that the stocks in Tri-Continental's portfolio should prove rewarding,
particularly if the market receives news of reduced corporate earnings growth
later this year.
We thank you for your continued support of Tri-Continental Corporation, "an
investment you can live with." We look forward to serving your investment needs
in the many years to come. A discussion with your Portfolio Managers and the
Corporation's portfolio of investments follow this letter. Additional
information on Tri-Continental's investment results appears on page 3.
By order of the Board of Directors,
/s/ William Morris
- ------------------------
William C. Morris
Chairman
/s/Brian T. Zino
------------------------
Brian T. Zino
President
May 1, 1998
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Tri-Continental Corporation
INTERVIEW WITH YOUR PORTFOLIO MANAGERS, CHARLES C. SMITH, JR. AND ODETTE GALLI
Seligman Growth and Income Team: (from left) Rodney Collins, Margaret Doyle,
Jonathan Roth, Odette Galli (Co-Portfolio Manager), (seated) Melanie Ravenell
(Administrative Assistant), Charles C. Smith, Jr. (Portfolio Manager), Amy
Fujii.
What were Tri-Continental's investment results in the first quarter?
"Tri-Continental Corporation had a successful first quarter. The Corporation
posted a total return of 12.17% based on net asset value for the three months
ended March 31, 1998. The Standard & Poor's 500 Composite Stock Price Index (S&P
500) posted a total return of 13.95% for the same period. The Corporation's lag
relative to the S&P 500 can be attributed to the portfolio's underweighting in
technology stocks, in keeping with our investment strategy of finding stocks
with yields close to that of the S&P 500. For the quarter, the Corporation's
peers, as measured by the Lipper Closed-End Growth & Income Funds Average, had a
total return of 12.40%, and mutual funds with similar investment objectives, as
measured by the Lipper Growth & Income Funds Average, posted a total return of
11.62%. Tri-Continental Corporation's total return based on market price was
11.27%."
Which economic and market factors influenced Tri-Continental Corporation in the
first quarter?
"The economy continued to grow at a healthy pace in the first quarter of 1998,
contrary to year-end expectations. Despite continued weakness in Asia, the
markets seemed relatively immune to the possibility of earnings disappointments,
and major benchmarks continued to post record highs. Overall, this was a very
positive environment for equity investors and the Corporation."
What is your investment strategy?
"We maintained our investment strategy of seeking stocks
with higher yields, less volatility, and more earnings stability than the S&P
500. We therefore focused on domestic issues with steady earnings growth and
strong fundamentals, many of which have large, yet diversified, international
exposure. The most significant change to the Corporation's portfolio in the
quarter was the elimination of virtually all foreign holdings, which will reduce
currency risk in the portfolio."
Which industry groups improved the Corporation's investment results?
"Communications stocks posted strong results in the first quarter, supported by
continued consolidation and stable earnings growth in the industry. We had
overweighted the group in the fourth quarter of 1997 when their valuations were
attractive. Additionally, industry groups that supply basic materials, such as
chemicals and paper and forest products, as well as capital goods companies,
benefited from the unexpected strength of the lasting economic expansion and saw
positive first-quarter results.
(CONTINUED ON PAGE 4)
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Tri-Continental Corporation
================================================================================
INVESTMENT RESULTS PER COMMON SHARE
TOTAL RETURNS
FOR PERIODS ENDED MARCH 31, 1998
Average Annual
----------------------
Three One Five 10
Months* Year Years Years
-------- ----- ----- -----
MARKET PRICE** 11.27% 39.32% 16.49% 15.95%
NET ASSET VALUE** 12.17 39.51 18.63 16.89
LIPPER CLOSED-END
GROWTH & INCOME
FUNDS AVERAGE*** 12.40 40.90 18.64 16.20
S&P 500*** 13.95 48.00 22.40 18.94
PRICE PER SHARE
March 31, 1998 December 31, 1997
---------------- -------------------
Market Price $29.5625 $26.6875
Net Asset Value 35.80 32.06
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Capital Gain
---------------------
Dividends Paid+ Realized Unrealized
--------------- --------- ----------
$0.13 $1.81++ $10.05+++
----------------------------------------------------------------------------
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original cost.
Past performance is not indicative of future investment results.
* Returns for periods of less than one year are not annualized.
** These rates of return reflect changes in market price or net asset
value, as applicable, and assume that all distributions within the period
are taken in additional shares.
*** The Lipper Closed-End Growth & Income Funds Average and the S&P 500
are unmanaged benchmarks that assume investment of dividends. The Lipper
Closed-End Growth & Income Funds Average excludes the effect of any costs
associated with the purchase of shares, and the S&P 500 excludes the effect
of fees and sales charges. Investors cannot invest directly in an index or
an average.
+ Preferred Stockholders were paid dividends totaling $0.625 per share.
++ Excludes $1.85 of undistributed realized capital gains from 1997.
+++ Represents the per share amount of net unrealized appreciation of portfolio
securities as of March 31, 1998.
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TRI-CONTINENTAL CORPORATION
INTERVIEW WITH YOUR PORTFOLIO MANAGERS (Continued)
Which industries impaired the Corporation's results?
"The weakest stocks in the portfolio were tobacco companies, due to regulatory
concerns and ongoing discussions with governmental authorities. Additionally,
the portfolio has been, and will remain, underweighted in technology stocks as
few of these companies have attractive dividend yields. The Corporation's
holdings are concentrated in the largest, most-established corporations that
have stable earnings growth. The Corporation's underweighting in the technology
sector slightly diminished investment results as these stocks surged in the
first quarter."
What is the outlook?
"We expect that problems relating to the widespread recession in Asia will
endure for some time. However, continued above-average economic growth with
price stability in the US provides a positive environment for the equity
markets. In addition, US financial markets continue to be supported by massive
foreign inflows, and, thus far, seem immune to the reduced trade and sales
consequences of the slowdown in Asian consumption. As long as demand for US
securities holds up, the economy continues to grow, and inflation remains low,
the equity markets should remain buoyant. However, we are maintaining our
disciplined investment strategy amid all this positive market sentiment. We will
continue to focus on companies with strong fundamentals that should be less
vulnerable if there are market fluctuations later in 1998."
4
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Tri-Continental Corporation
Largest Portfolio Changes
January 1 to March 31, 1998
Shares
-------------------
HOLDINGS
ADDITIONS INCREASE 3/31/98
-------- --------
COMMON STOCKS
American General Corporation 600,000 1,000,000
American Home
Products Corporation 350,000 650,000
Baxter International Inc. 650,000 650,000
Chevron Corporation 480,000 480,000
Edison International 1,500,000 1,500,000
General Mills, Inc. 520,000 520,000
International Business
Machines Corporation 279,000 605,000
Marsh & McLennan
Companies, Inc. 520,000 520,000
Mobil Corporation 550,000 950,000
US WEST
Communications Group 740,000 740,000
Shares or Prin. Amt.
--------------------
HOLDINGS
REDUCTIONS DECREASE 3/31/98
-------- --------
COMMON STOCKS
Applied Materials, Inc. 965,000shs. --
Arrow Electronics, Inc. 800,000 --
Compaq Computer
Corporation 1,250,000(1) --
Disney (Walt) Company 250,000 --
First Union Corporation 700,000 --
ING Groep N.V. 437,624 --
KLA-Tencor Corporation 630,000 --
US Government Securities
US Treasury Notes, 53/4%,
11/30/2002 $35,000,000 --
US Treasury Notes, 57/8%,
2/15/2004 40,000,000 --
US Treasury Notes, 61/4%,
2/15/2007 50,000,000 --
Largest portfolio changes from the previous quarter to the current quarter are
based on cost of purchases and proceeds from sales of securities.
(1) Includes 625,000 shares received as a result of 2-for-1 stock split.
10 Largest Holdings
March 31, 1998
================================================================================
Value
------------
General Electric Company $137,900,000
Exxon Corporation 103,804,375
Mobil Corporation 72,793,750
Microsoft Corporation 70,680,313
American International Group 69,895,313
United Technologies Corporation 67,849,687
The Bank of New York Company, Inc. 67,837,500
Bristol-Myers Squibb Company 66,238,438
Merck & Co., Inc. 66,113,125
American General Corporation 64,687,500
================================================================================
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TRI-CONTINENTAL CORPORATION
PORTFOLIO OF INVESTMENTS (unaudited)
Shares Value
------- ---------
COMMON STOCKS - 96.6%
AEROSPACE - 2.6%
General Dynamics Corporation 375,000 $ 32,296,875
United Technologies Corporation 735,000 67,849,687
--------------
$ 100,146,562
--------------
AUTOMOTIVE AND
RELATED - 4.0%
Chrysler Corporation 1,385,000 $ 57,564,063
Dana Corporation 575,000 33,457,812
Eaton Corporation 235,000 22,369,063
Harley-Davidson Inc. 1,200,000 39,600,000
--------------
$ 152,990,938
--------------
BASIC MATERIALS - 0.9%
Aluminum Company of America 490,000 $ 33,718,125
--------------
BUILDING AND
CONSTRUCTION - 0.6%
Sherwin-Williams Corporation 600,000 $ 21,300,000
--------------
ChemicalS - 2.1%
duPont (E.I.) de Nemours
and Company 595,000 $ 40,460,000
The B. F. Goodrich Company 810,000 41,360,625
--------------
$ 81,820,625
--------------
COMMUNICATIONS - 7.9%
Ameritech Corporation 955,000 $ 47,212,812
Bell Atlantic Corporation 425,000 43,562,500
GTE Corporation 770,000 46,103,750
SBC Communications, Inc. 1,070,000 46,678,750
Sprint Corporation 385,000 26,059,688
US WEST Communications
Group 740,000 40,515,000
WorldCom, Inc.* 1,220,000 52,498,125
--------------
$ 302,630,625
--------------
COMPUTER AND
BUSINESS SERVICES - 6.2%
Intel Corporation 640,000 $ 49,940,000
International Business
Machines Corporation 605,000 62,844,375
Microsoft Corporation* 790,000 70,680,313
Xerox Corporation 490,000 52,154,375
--------------
$ 235,619,063
--------------
CONSUMER GOODS
AND SERVICES - 12.5%
Anheuser-Busch Companies, Inc. 1,180,000 $ 54,648,750
Coca-Cola Company 770,000 59,626,875
ConAgra, Inc. 1,795,000 57,664,375
General Mills, Inc. 520,000 39,520,000
PepsiCo, Inc. 1,190,000 50,798,125
Philip Morris Companies, Inc. 1,530,000 63,781,875
Procter & Gamble Company 600,000 50,625,000
RJR Nabisco Holdings
Corporation 1,375,000 43,054,688
Sara Lee Corporation 975,000 60,084,375
--------------
$ 479,804,063
--------------
DIVERSIFIED - 1.3%
AlliedSignal Inc. 1,180,000 $ 49,560,000
--------------
DRUGS AND
HEALTH CARE - 10.4%
Abbott Laboratories 540,000 $ 40,668,750
American Home Products
Corporation 650,000 61,993,750
Baxter International Inc. 650,000 35,831,250
Bristol-Myers Squibb Company 635,000 66,238,438
Johnson & Johnson 650,000 47,653,125
Merck & Co., Inc. 515,000 66,113,125
Pfizer Inc. 320,000 31,900,000
Schering-Plough Corporation 570,000 46,561,875
--------------
$ 396,960,313
--------------
ELECTRIC AND
GAS UTILITIES - 3.5%
Edison International 1,500,000 $ 44,062,500
Unicom Corporation 1,155,000 40,425,000
The Williams Companies, Inc. 1,515,000 48,480,000
--------------
$ 132,967,500
--------------
ELECTRONICS - 3.4%
AMP Inc. 665,000 $ 29,135,312
Raytheon Company 1,055,000 61,585,625
Thomas & Betts Corporation 600,000 38,400,000
--------------
$ 129,120,937
--------------
ENERGY - 9.9%
Amoco Corporation 400,000 $ 34,550,000
Baker Hughes Incorporated 300,000 12,075,000
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March 31, 1998
TRI-CONTINENTAL CORPORATION
Shares Value
------- ---------
ENERGY (continued)
Chevron Corporation 480,000 $ 38,550,000
Exxon Corporation 1,535,000 103,804,375
Mobil Corporation 950,000 72,793,750
Royal Dutch Petroleum Company 1,030,000 58,516,875
Schlumberger Ltd. 200,000 15,150,000
Texaco Inc. 720,000 43,380,000
--------------
$ 378,820,000
--------------
FINANCE AND
INSURANCE - 16.4%
ACE Limited 900,000 $ 33,918,750
Ahmanson (H. F.) & Company 800,000 62,000,000
American General Corporation 1,000,000 64,687,500
American International Group, Inc. 555,000 69,895,313
BankAmerica Corporation 555,000 45,856,875
The Bank of New York
Company, Inc. 1,080,000 67,837,500
Citicorp 200,000 28,400,000
Federal National Mortgage
Association 720,000 45,540,000
General Re Corporation 75,000 16,546,875
Marsh & McLennan
Companies, Inc. 520,000 45,402,500
Mellon Bank Corporation 750,000 47,625,000
St. Paul Companies, Inc. 555,000 49,464,375
Travelers Incorporated 810,000 48,600,000
--------------
$ 625,774,688
--------------
MANUFACTURING AND
INDUSTRIAL EQUIPMENT - 5.7%
Deere & Company, Inc. 505,000 $ 31,278,437
GATX Corporation 380,000 29,640,000
General Electric Company 1,600,000 137,900,000
Illinois Tool Works, Inc. 300,000 19,425,000
--------------
$ 218,243,437
--------------
PAPER AND
FOREST PRODUCTS - 2.8%
Fort James Corporation 865,000 $ 39,627,812
The Mead Corporation 1,080,000 38,677,500
Union Camp Corporation 500,000 29,875,000
--------------
$ 108,180,312
--------------
PUBLISHING- 0.8%
Gannet Company, Inc. 400,000 $ 28,750,000
--------------
REAL ESTATE
INVESTMENT TRUST- 0.3%
Security Capital US Realty Trust 1,000,000 $ 13,200,000
--------------
RETAIL TRADE-3.7%
May Department Stores Company 795,000 $ 50,482,500
J. C. Penney Company, Inc. 735,000 55,630,313
Wal-Mart Stores, Inc. 705,000 35,822,812
--------------
$ 141,935,625
--------------
STEEL - 0.6%
Allegheny Teledyne Inc. 874,000 $ 24,330,375
--------------
TRANSPORTATION - 1.0%
Norfolk Southern Corporation 1,055,000 $ 39,430,625
--------------
TOTAL COMMON STOCKS
(Cost: $2,632,831,937) $3,695,303,813
--------------
TRI-CONTINENTAL FINANCIAL
DIVISION+ - 0.5%
(COST: $16,941,337) $ 17,556,810
--------------
SHORT-TERM HOLDINGS - 1.4%
(COST: $ 52,000,000) $ 52,000,000
--------------
TOTAL INVESTMENTS - 98.5%
(COST: $2,701,773,274) $3,764,860,623
--------------
OTHER ASSETS
LESS LIABILITIES - 1.5% 58,203,726
--------------
NET INVESTMENT ASSETS - 100.0% $3,823,064,349
==============
* Non-income producing security.
+ Restricted securities.
Note: Investments in stocks, limited partnership interests, and short-term
holdings maturing in more than 60 days are valued at current market values or,
in their absence, at fair values 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, at the mean of bid and asked prices. Short-term
holdings maturing in 60 days or less are valued at amortized cost.
7
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TRI-CONTINENTAL CORPORATION
For information about your Corporation, call or write Corporate Communications,
J. & W. Seligman & Co. Incorporated, 100 Park Avenue, New York, NY 10017. If
you want information about your investment account, call or write Stockholder
Services, Seligman Data Corp., at the same address.
IMPORTANT TELEPHONE NUMBERS
================================================================================
STOCKHOLDER RETIREMENT PLAN 24-HOUR AUTOMATED
SERVICES SERVICES TELEPHONE ACCESS SERVICE
(800) TRI-1092 (800) 445-1777 (800) 622-4597
(8:30 a.m. to 6:00 p.m. EST) (8:30 a.m. to 6:00 p.m. EST)
================================================================================
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