TRI-CONTINENTAL CORPORATION
INVESTS TO PRODUCE
FUTURE GROWTH OF BOTH
CAPITAL AND INCOME,
WHILE PROVIDING REASONABLE
CURRENT INCOME.
THIRD QUARTER REPORT 1999
TRI-CONTINENTAL
CORPORATION
AN INVESTMENT YOU CAN LIVE WITH
Tri-Continental Corporation
MANAGED BY
[LOGO OMITTED]
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.
TRI-CONTINENTAL CORPORATION CETRI3c 9/99
<PAGE>
TRI-CONTINENTAL CORPORATION
To the Stockholders:
The past fiscal quarter was a difficult one for equities and for
Tri-Continental Corporation. During this period, Tri-Continental posted a total
return of -7.85% based on net asset value and -2.73% based on market price.
During the same period, the Lipper Closed-End Growth & Income Funds Average
posted a total return of -7.26% and the Standard and Poor's 500 Composite Stock
Price Index (S&P 500) posted a total return of -6.24%. A discussion with your
Portfolio Managers regarding the Corporation's results begins on page 2.
During the three-month period ended September 30, 1999, the financial markets
were highly volatile due to investor concerns regarding inflation, higher
interest rates, and tighter monetary policy by the Federal Reserve Board. In
May, the Fed began to prepare markets for the possibility of higher rates by
announcing a tightening bias. The Fed followed through by raising the federal
funds rate by 25 basis points in June and by another 25 basis points in August.
These rate hikes are a partial reversal of the easier policy the Fed pursued
last autumn when the global economic crisis threatened to drag the US into
recession. Since this danger has been averted, the Fed has now become concerned
that the robust economic expansion in the US, combined with sharply recovering
economies in the rest of the world, may represent an inflationary threat to the
US economy.
There have been some early and modest signs, such as a slowdown in the
housing market and faltering consumer confidence, that the Fed's tightening is
indeed slowing the economy to a more sustainable rate of growth. We believe this
controlled slowdown is healthy and will pave the way for continued economic
growth and stock market advances over the long term. The fundamentals underlying
the US economy remain sound and should support strong corporate profit growth
over the long term.
J. & W. Seligman & Co. Incorporated, your Corporation's manager, and Seligman
Data Corp., your Corporation's Stockholder service agent, have completed
preparations for potential computer problems related to the Year 2000 (Y2K). All
internal mission-critical systems, software, and interfaces have been
successfully tested for Y2K compliance. We have devoted considerable time and
resources to Y2K during the past several years and we believe that Stockholders
will not be inconvenienced or experience disruptions as a result of the
Corporation's entry into the new millennium. In addition, your portfolio
management team considers the potential ramifications of the Year 2000 (Y2K)
computer issue when making decisions on which securities should be held by the
Corporation.
Thank you for your continued support of Tri-Continental Corporation. We look
forward to serving your investment needs for many years to come.
By order of the Board of Directors,
WILLIAM C. NORRIS
- -----------------
William C. Morris
Chairman
BRIAN T. ZINO
-------------
Brian T. Zino
President
November 5, 1999
1
<PAGE>
Tri-Continental Corporation
INTERVIEW WITH YOUR PORTFOLIO MANAGERS, CHARLES C. SMITH, JR. AND RODNEY COLLINS
[PHOTO OMITTED]
SELIGMAN GROWTH AND INCOME TEAM: (FROM LEFT) AMY FUJII, JOHN ROTH, MELANIE
RAVENELL (ADMINISTRATIVE ASSISTANT), (SEATED) CHARLES SMITH (PORTFOLIO MANAGER),
RODNEY COLLINS (CO-PORTFOLIO MANAGER).
HOW DID TRI-CONTINENTAL CORPORATION PERFORM DURING THE THIRD QUARTER OF 1999?
For the quarter ended September 30, 1999, Tri-Continental Corporation posted a
total return of -7.85% based on net asset value, compared to -7.26% for the
Lipper Closed-End Growth & Income Funds Average and -6.24% for the Standard and
Poor's 500 Composite Stock Price Index (S&P 500).
WHAT ECONOMIC AND MARKET FACTORS AFFECTED TRI-CONTINENTAL'S PERFORMANCE IN THE
THIRD QUARTER?
Tri-Continental's disappointing third-quarter results, like the poor results of
the stock market overall, were primarily due to investor concern and uncertainty
regarding inflation, tighter monetary policy, and rising interest rates. At its
June and August meetings, the Fed increased the federal funds rate by 25 basis
points at each meeting, following its announcement in May of a more restrictive
monetary policy. The almost complete reversal of the looser policy of last year,
in addition to some early and moderate signs of inflationary pressures, produced
uncertainty and anxiety among market participants. These issues negatively
affected the market during the third quarter, despite strong fundamentals such
as a positive corporate earnings outlook. The end result was a high level of
volatility and an extremely narrow market, in which only a small number of
large-capitalization growth stocks experienced higher prices.
WHAT SECTORS OF THE PORTFOLIO MOST IMPACTED THE CORPORATION'S RESULTS?
During a quarter in which few stocks were able to deliver positive results, the
Corporation had a significant weighting in technology, which was the only market
sector to deliver strong results. Nearly all other sectors posted negative
results. The financial sector -- another large sector in the portfolio -- was
the biggest detractor from overall performance. Financial stocks are highly
sensitive to changes in interest rates, and the rising-rate environment of the
past three months put pressure on the prices of many of these stocks.
WHAT WAS YOUR INVESTMENT STRATEGY?
We believe that the recent high levels of market volatility make a consistent
strategy more important than ever. We have therefore remained dedicated to
finding attractive long-term opportunities for the Corporation, despite
short-term market swings. While investors are currently shying away from value
stocks and are driving the prices for a few large-capitalization growth stocks
ever higher, we continue to pursue stocks that sell at reasonable prices and
that have attractive dividend yields within their industry groups. If a market
pullback does offer an opportunity to acquire high-quality stocks at more
reasonable prices, we plan to take advantage of that event.
(continued on page 4)
2
<PAGE>
TRI-CONTINENTAL CORPORATION
INVESTMENT RESULTS PER COMMON SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
Average Annual
------------------------
Three Nine One Five 10
Months* Months* Year Years Years
-------- -------- ----- ----- -----
MARKET PRICE** (2.73)% 6.22% 29.85% 21.45% 15.35%
NET ASSET VALUE** (7.85) 1.31 21.42 20.56 14.56
LIPPER CLOSED-END
GROWTH & INCOME
FUNDS AVERAGE*** (7.26) 1.78 19.13 17.73 13.66
S&P 500*** (6.24) 5.36 27.80 25.03 16.82
Price per share
<TABLE>
<CAPTION>
September 30, 1999 June 30, 1999 March 31, 1999 December 31, 1998
------------------- --------------- ---------------- -------------------
<S> <C> <C> <C> <C>
MARKET PRICE $29.25 $30.1875 $29.00 $28.50
NET ASSET VALUE 33.41 36.40 34.80 34.13
</TABLE>
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
CAPITAL GAIN
----------------------------------------------
Dividend Paid+ Paid Realized Unrealized
--------------- ----------- ----------- -------------
$0.36 $0.67++ $3.03 $7.72+++
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 $1.875 per share.
++ Represents realized capital gains from 1998, which were paid on June 24,
1999.
+++ Represents the per share amount of net unrealized appreciation of
portfolio securities as of September 30, 1999.
3
<PAGE>
TRI-CONTINENTAL CORPORATION
INTERVIEW WITH YOUR PORTFOLIO MANAGERS (continued)
WHAT IS YOUR OUTLOOK?
There are early signs, such as a slowdown in the housing industry and faltering
consumer confidence, that the Fed's tightening policy will be successful at
slowing the economy to a more sustainable rate of growth. Over the long term, we
believe that this is healthy for the US economy and for the stock market.
However, over the short term, concerns over rising interest rates, inflation,
and Fed policy will probably produce continued investor uncertainty and high
market volatility. In our view, these factors are not a threat to the long-term
positive fundamentals underlying the economy and the market. In fact, these
factors are likely to be positive for the Corporation's long-term success by
presenting buying opportunities over the next few months. In particular, we will
be looking to gain exposure to some high-quality stocks if they begin selling at
more reasonable prices during a market pullback.
4
<PAGE>
TRI-CONTINENTAL CORPORATION
Largest Portfolio Changes
July 1 to September 30, 1999
Shares
------------------------
Holdings
ADDITIONS Increase 9/30/99
---------- ----------
COMMON STOCKS
Allstate Corporation (The) 1,100,000 2,200,000
Cisco Systems, Inc. 320,000 1,220,000
Clorox Company (The) 600,000(1) 1,200,000
Dell Computer Corporation 335,000 905,000
Johnson & Johnson 125,000 725,000
Merrill Lynch & Co., Incorporated 575,000 575,000
Microsoft Corporation 175,000 1,940,000
Procter & Gamble Company (The) 225,000 630,000
Raytheon Company Class B 630,300 1,230,300
Schering-Plough Corporation 200,000 845,000
Shares or Prin. Amt.
------------------------
Holdings
REDUCTIONS Decrease 9/30/99
---------- ----------
COMMON STOCKS
AlliedSignal Inc. 540,000shs. 640,000shs.
Bristol-Myers Squibb Company 180,000 1,040,000
Citigroup Inc. 492,500 1,630,000
Exxon Corporation 230,000 770,000
Fort James Corporation 408,100 641,900
GTE Corporation 225,000 965,000
Sonat Inc. 1,222,500 377,500
US GOVERNMENT SECURITIES
US Treasury Bonds,
7.875%, 2/15/2021 $25,000,000 --
US Treasury Notes:
5.625%, 11/30/2000 60,000,000 --
6.50%, 10/15/2006 25,000,000 $50,000,000
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
(1) Includes 600,000 shares received as a result of a 2-for-1 stock split.
10 LARGEST HOLDINGS
September 30, 1999
Value
-------------
Microsoft Corporation $175,751,875
General Electric Company 149,365,038
United Technologies Corporation 110,914,375
International Business Machines Corporation 104,989,375
Intel Corporation 96,646,875
Wal-Mart Stores, Inc. 84,661,250
Cisco Systems, Inc. 83,608,125
AT&T Corp. 79,822,500
GTE Corporation 74,184,375
Bank of New York Company, Inc. 72,225,000
5
<PAGE>
Tri-Continental Corporation
Portfolio of Investments (unaudited)
Shares Value
------- ---------
COMMON STOCKS - 94.4%
Aerospace - 0.6%
General Dynamics Corporation 400,000 $ 24,975,000
--------------
AUTOMOTIVE AND RELATED - 2.2%
DaimlerChrysler Corporation 580,000 $ 40,273,750
Ford Motor Company 915,000 45,921,563
--------------
$ 86,195,313
--------------
CHEMICALS - 1.0%
duPont (E.I.) de Nemours
and Company 640,000 $ 38,960,000
--------------
COMMUNICATIONS - 7.8%
AT&T Corp. 1,835,000 $ 79,822,500
Ameritech Corporation 830,000 55,765,625
GTE Corporation 965,000 74,184,375
MCI WorldCom, Inc.* 805,000 57,834,219
SBC Communications, Inc. 800,000 40,850,000
--------------
$ 308,456,719
--------------
COMMUNICATIONS - EQUIPMENT - 1.7%
Lucent Technologies, Inc.* 1,050,000 $ 68,118,750
--------------
COMPUTER AND BUSINESS SERVICES - 18.1%
America Online, Inc. 250,000 $ 26,000,000
Applied Materials Inc. 690,000 53,582,812
Cisco Systems, Inc.* 1,220,000 83,608,125
Dell Computer Corporation* 905,000 37,840,312
Electronic Data Systems
Corporation1, 275,000 67,495,312
Hewlett-Packard Company 360,000 33,120,000
Intel Corporation 1,300,000 96,646,875
International Business Machines
Corporation 865,000 104,989,375
Microsoft Corporation* 1,940,000 175,751,875
Xerox Corporation 700,000 29,356,250
--------------
$ 708,390,936
--------------
CONSUMER GOODS
AND SERVICES - 11.4%
Anheuser-Busch Companies, Inc. 600,000 $ 42,037,500
Bestfoods 980,000 47,530,000
Clorox Company (The) 1,200,000 45,900,000
Coca-Cola Company (The) 635,000 30,519,688
ConAgra, Inc. 2,500,000 56,406,250
Fort James Corporation 641,900 17,130,706
Fortune Brands, Inc. 239,500 7,723,875
PepsiCo, Inc. 1,550,000 46,887,500
Philip Morris Companies, Inc. 1,430,000 48,888,125
Procter & Gamble Company (The) 630,000 59,062,500
Sara Lee Corporation 1,950,000 45,703,125
--------------
$ 447,789,269
--------------
DIVERSIFIED - 1.0%
AlliedSignal Inc. 640,000 $ 38,360,000
--------------
DRUGS AND
HEALTH CARE - 11.1%
Abbott Laboratories 1,080,000 $ 39,690,000
American Home Products
Corporation1, 300,000 53,950,000
Baxter International Inc. 667,400 40,210,850
Bristol-Myers Squibb Company 1,040,000 70,200,000
Johnson & Johnson 725,000 66,609,375
Merck & Co., Inc. 910,000 58,979,375
Pfizer Inc. 895,000 32,164,062
Pharmacia & Upjohn, Inc. 760,000 37,715,000
Schering-Plough Corporation 845,000 36,863,125
--------------
$ 436,381,787
--------------
ELECTRIC AND
GAS UTILITIES - 3.8%
DQE Inc. 1,000,000 $ 39,125,000
Sonat Inc. 377,500 14,982,031
Unicom Corporation 1,155,000 42,662,812
Williams Companies, Inc. (The) 1,400,000 52,412,500
--------------
$ 149,182,343
--------------
ELECTRONICS - 1.5%
Raytheon Company Class B 1,230,300 $ 61,053,638
--------------
See footnotes on page 7.
6
<PAGE>
TRI-CONTINENTAL CORPORATION
SEPTEMBER 30, 1999
Shares Value
------- ---------
ENERGY - 6.8%
BP Amoco plc (ADRs)
(United Kingdom) 500,000 $ 55,406,250
Exxon Corporation 770,000 58,471,875
Mobil Corporation 400,000 40,300,000
Royal Dutch Petroleum
Company (Netherlands) 1,100,000 64,968,750
Schlumberger Ltd. 800,000 49,850,000
--------------
$ 268,996,875
--------------
FINANCE AND
INSURANCE - 15.3%
Allstate Corporation (The) 2,200,000 $ 54,862,500
American General Corporation 1,000,000 63,187,500
American International
Group, Inc. 600,000 52,162,500
Bank of America Corporation 915,000 50,954,063
Bank of New York Company, Inc. 2,160,000 72,225,000
Chubb Corporation (The) 625,000 31,132,812
Citigroup Inc. 1,630,000 71,720,000
Fannie Mae 720,000 45,135,000
Mellon Bank Corporation 1,500,000 50,625,000
Merrill Lynch & Co., Incorporated 575,000 38,632,813
Morgan (J.P.) & Co. Incorporated 300,000 34,275,000
Washington Mutual, Inc. 1,344,000 39,312,000
--------------
$ 604,224,188
--------------
MACHINERY AND
INDUSTRIAL
EQUIPMENT - 6.6%
General Electric Company 1,259,800 $ 149,365,038
United Technologies Corporation 1,870,000 110,914,375
--------------
$ 260,279,413
--------------
PAPER AND
FOREST PRODUCTS - 0.9%
Mead Corporation (The) 1,080,000 $ 37,125,000
--------------
PUBLISHING - 0.7%
Gannett Co., Inc. 400,000 $ 27,675,000
--------------
RETAIL TRADE - 3.3%
May Department Stores
Company 1,192,500 $ 43,451,719
Wal-Mart Stores, Inc. 1,780,000 84,661,250
--------------
$ 128,112,969
--------------
Shares or
Prin. Amt. Value
-------- ---------
TRANSPORTATION - 0.6%
GATX Corporation 760,000shs. $23,607,500
--------------
TOTAL COMMON STOCKS
(Cost: $2,817,577,701) $3,717,884,700
--------------
US GOVERNMENT
SECURITIES - 3.0%
US Treasury Notes:
7.25%, 8/15/2004 $65,000,000 $ 68,676,595
6.50%, 10/15/2006 50,000,000 51,125,000
--------------
TOTAL US GOVERNMENT
SECURITIES
(Cost: $119,320,738) $ 119,801,595
--------------
TRI-CONTINENTAL FINANCIAL
DIVISION+ - 0.4%
(Cost: $13,949,168) $ 14,825,388
--------------
SHORT-TERM HOLDINGS - 1.7%
(Cost: $67,000,000) $ 67,000,000
--------------
TOTAL INVESTMENTS - 99.5%
(Cost: $3,017,847,607) $3,919,511,683
OTHER ASSETS
LESS LIABILITIES - 0.5% 17,591,150
--------------
NET INVESTMENT ASSETS - 100.0% $3,937,102,833
--------------
--------------
- ------------------
* Non-income producing security.
+ Restricted security.
Note: Investments in common stocks, bonds, 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 an exchange
are valued at last sales prices or, in their absence and in the case of
over-the-counter securities, at the mean of bid and asked prices. Short-term
holdings maturing in 60 days or less are valued at amortized cost.
7
<PAGE>
TRI-CONTINENTAL CORPORATION
STOCKHOLDER SERVICES
Tri-Continental provides a number of services to make maintaining an
investment in its Common Stock more convenient.
AUTOMATIC DIVIDEND INVESTMENT AND CASH PURCHASE PLAN. Stockholders may
automatically purchase additional shares with dividends and capital gains. There
is no charge for this service. Stockholders may alsopurchase additional shares
directly from the Corporation. There is a service fee of a maximum of $2.00 for
each cash purchase transaction.
AUTOMATIC CASH WITHDRAWAL PLAN. Stockholders who hold common shares with a
market value of $5,000 or more may elect to receive a fixed amount from their
investment at regular intervals.
TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNT (IRA). Stockholders who have earned
income and are under age 701/2 may contribute up to $2,000 per year to a
Traditional IRA. A working or non-working spouse may also contribute up to
$2,000 to a separate Traditional IRA. Contributions to a Traditional IRA may be
deductible or non-deductible. If you are NOT covered by an employer's retirement
plan, your contribution will always be deductible. For individuals who are
covered by a plan, contributions will be deductible if your modified adjusted
gross income (MAGI) in 1999 is less than $31,000. For spouses who are both
covered by a plan, contributions will be fully deductible if your MAGI is less
than $51,000. If one spouse does not work or is not covered by a retirement
plan, that spouse's contribution will be fully deductible provided your
household MAGI does not exceed $150,000. If your contribution is not deductible,
you may still take advantage of the tax-deferred accumulation of earnings in
your Traditional IRA.
ROLLOVER IRA. You may be eligible to roll over a distribution of assets received
from another IRA, a qualified employee benefit plan, or tax-deferred annuity
into a Rollover IRA with Tri-Continental. To avoid a tax penalty, the transfer
to a Rollover IRA must occur within 60 days of receipt of the qualifying
distribution. If you do not make a direct transfer of a distribution from a
qualified employee benefit plan or a tax-deferred annuity to a Rollover IRA, the
payor of the distribution must withhold 20% of the distribution.
ROTH IRA. You (and a working or non-working spouse) may each make an after-tax
contribution of up to $2,000 per year to a Roth IRA provided you have earned
income and meet the eligibility requirements. Your MAGI must be less than
$95,000 (individuals) or $150,000 (married couples) to be eligible to make a
full contribution to a Roth IRA. Total contributions to a Roth IRA and a
Traditional IRA cannot exceed $2,000 in any year. Earnings grow tax-free and
will be distributed to you tax-free and penalty-free provided that you hold your
account for at least five years and you take the distribution either after age
591/2, for disability, upon death, or to make a first-time home purchase (up to
$10,000). Unlike a Traditional IRA, you may contribute to a Roth IRA even if you
are over age 701/2 (if you have earned income), and you are not required to take
minimum distributions at age 701/2. You may convert an existing Traditional
IRA to a Roth IRAto take advantage of tax-free distributions. You must pay
taxes on any earnings and deductible contributions in your Traditional IRA when
converting it to a Roth IRA. Talk to your financial advisor for more details on
converting your Traditional IRA.
8
<PAGE>
TRI-CONTINENTAL CORPORATION
STOCKHOLDER SERVICES (continued)
RETIREMENT PLANNING -- QUALIFIED PLANS. Unincorporated businesses and the
self-employed may take advantage of the same benefits in their retirement plans
that are available to corporations. Contribution levels can go as high as 25% of
earned income (reduced by plan contributions), to a maximum of $30,000 per
participant. For retirement plan purposes, no more than $160,000 may be taken
into account as earned income under the plan in 1999 and future years (subject
to adjustments to reflect cost of living increases). Social Security integration
and employee vesting schedules are also available as options in the
Tri-Continental prototype retirement plans. Although you already may be
participating in an employer's retirement plan, you may be eligible to establish
another plan based upon income from other sources, such as director's fees.
RETIREMENT PLAN SERVICES provides information about our prototype retirement
plans. The toll-free telephone number is (800) 445-1777 in the US and (212)
682-7600 outside the US.
GIFTS FREE OF FEDERAL TAX are often made using Tri-Continental Common Stock. You
may give as much as $10,000 a year to as many individuals as desired free of
federal gift tax, and a married couple may give up to $20,000 a year.
STOCK REPURCHASE PROGRAM. In November 1998, the Board of Directors authorized a
stock repurchase program through which Tri-Continental may repurchase up to 7.5%
of its then-outstanding common stock as long as its discount to net asset value
remains wider than 10%. The repurchase program seeks, among other things, to
moderate the growth in the number of shares outstanding, increase the net asset
value of the Corporation'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 Corporation's common stock in the marketplace.
As of September 30, 1999, 4.3 million shares had been repurchased. This is
approximately 3.9% of the shares outstanding as of November 19, 1998, when the
buy-back program was announced.
9
<PAGE>
TRI-CONTINENTAL CORPORATION
For information about your Corporation, write to Corporate Communications, J.&
W. Seligman & Co. Incorporated, 100 Park Avenue, New York, NY 10017. If you want
information about your investment account, write to Stockholder Services,
Seligman Data Corp., at the same address. You may also call Stockholder Services
at the telephone number listed below.
- --------------------------------------------------------------------------------
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)
10
