UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-0266

Tri-Continental Corporation
(Exact name of Registrant as specified in charter)

100 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)

Lawrence P. Vogel
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)

Registrant’s telephone number, including area code:            (212) 850-1864

Date of fiscal year end:         12/31

Date of reporting period:      6/30/06

ITEM 1. REPORTS TO STOCKHOLDERS.


Mid-Year Report 2006

 


Tri-Continental
Corporation

 

 

 

an investment you can live with

Tri-Continental Corporation invests to
produce future growth of both capital
and income, while providing reasonable
current income.


  TABLE OF CONTENTS     
       
  Mid-Year Report     
       
  To the Stockholders    1 
       
  Investment Results    2 
       
  Highlights of the First Half    3 
       
  Diversification of Net Investment Assets    4 
       
  Largest Portfolio Changes    6 
       
  Ten Largest Equity Holdings    6 
       
  Portfolio of Investments    7 
       
  Statement of Assets and Liabilities    13 
       
  Statement of Capital Stock and Surplus    13 
       
  Statement of Operations    14 
       
  Statements of Changes in Net Investment Assets    15 
       
  Notes to Financial Statements    16 
       
  Financial Highlights    21 
       
  Proxy Results    23 
       
  Board of Directors and Executive Officers    24 
       
  Additional Fund Information    25 

 

TY is Tri-Continental Corporation’s symbol for its Common Stock on the New York Stock Exchange.

Tri-Continental Corporation

MID-YEAR REPORT 2006

August 24, 2006

To the Stockholders:

     Your mid-year Stockholder report for Tri-Continental Corporation follows this letter. The report contains the Corporation’s investment results, portfolio of investments, and financial statements. For the six months ended June 30, 2006, Tri-Continental posted a total return of 1.48% based on net asset value, and 5.48% based on market price. During the same period, the S&P 500 Index returned 2.71% and the Lipper Closed-End Growth & Income Funds Average returned 4.10% . Since June 30th, Tri-Continental’s investment performance has continued to improve. We are pleased to report that, as of the date of this letter, total return year-to-date based on net asset value is in line with the S&P 500 Index.

     On June 19, 2006, the independent inspectors of election for the Annual Meeting of Stockholders, held on May 4, 2006, released their final report. Although the Directors seeking re-election were supported by a significant plurality of votes cast, they were not elected because no candidate received at least 50% of the votes entitled to be cast, as required under the Corporation’s Bylaws. The final results of the vote held at the Annual Meeting can be found on page 23 of this report.

     Under Maryland law, the incumbent Directors could legally remain in office until the Corporation’s 2007 Annual Meeting, at which time an election would be held for their successors. Following the 2006 Annual Meeting, however, the Board determined that it would be in the best interests of the Corporation and its Stockholders to have all directors duly elected by Stockholders. The Board has called for a Special Meeting, to be held in September, to provide Stockholders with another opportunity to elect directors without having to wait until the 2007 Annual Meeting. The Board has also approved an amendment to the Corporation’s Charter to reduce the quorum requirement at a meeting of Stockholders from a majority of votes entitled to be cast to one-third of the votes entitled to be cast, unless a higher percentage is specified in the Bylaws of the Corporation. This amendment to the Charter is subject to Stockholder approval at the Special Meeting, the details of which are provided in the Corporation’s proxy materials, which were mailed to Stockholders in July.

     We are continuing to make progress at offsetting the Corporation’s accumulated tax loss carryforward. The loss carryforward per share has decreased from $2.60 on December 31, 2005 to $0.91 on August 24, 2006. Once the loss carryforward is eliminated, the Corporation will again be able to make capital gain payments to Stockholders.

     We thank you for your continued support of Tri-Continental Corporation, and look forward to serving your investment needs for many years to come.

By order of the Board of Directors,


 
William C. Morris    Brian T. Zino 
Chairman    President 

1

Tri-Continental Corporation          
 
 
     Investment Results Per Common Share                  
     TOTAL RETURNS                           
     For Periods Ended June 30, 2006                          
         
Average Annual
  Three   Six   One   Two   Three   Five   Ten
  Months*   Months*   Year   Years   Years   Years   Years
 
 
 
 
 
 
 
     Market Price  (3.51 )%    5.48 %    10.81 %    9.09 %    11.02 %    0.13 %    6.42 % 
     Net Asset Value  (3.11 )    1.48     6.02     6.32     10.80     0.55     5.66  
     Lipper Closed-End                           
          Growth & Income 
                         
          Funds Average** 
(0.63 )    4.10     8.42     10.12     11.51     4.00     7.68  
     S&P 500**  (1.44 )    2.71     8.62     7.46     11.20     2.49     8.31  

 

     PRICE PER SHARE               
 
June 30, 2006 
March 31, 2006
December 31, 2005
   
 
 
   
     Market Price   
$19.46 
    $20.24     $18.58      
     Net Asset Value 
22.33 
    23.13     22.16      

 

DIVIDEND AND CAPITAL GAIN PER SHARE AND YIELD INFORMATION

  For the Six Months Ended June 30, 2006         
          Capital Gain/Loss      
         
     
  Dividends Paid‡      Realized†    Unrealized Gain††    Unrealized Loss††    SEC 30-Day YieldØ
 
   
 
 
 
    $0.14      $1.18    $1.19    $2.01    0.90 % 

Performance data quoted in this report represents past performance and does not guarantee or indicate future investment results. 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. Current performance may be lower or higher than the performance data quoted. Total returns of the Corporation as of the most recent month end will be made available at www.seligman.com1 by the seventh business day following that month end. J. & W. Seligman & Co. Incorporated, the investment manager of the Corporation, made certain payments to the Corporation in 2004. Absent such payments, the net asset value returns that include this period would have been lower. Returns reflect changes in market price or net asset value, as applicable, and assume reinvestment of distributions. Performance data quoted does not reflect the deduction of taxes that investors may pay on distributions or the sale of shares. An investment in Tri-Continental is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation.

*   Returns for periods of less than one year are not annualized.
     
**   The Lipper Closed-End Growth & Income Funds Average (the “Lipper Average”) and the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500”) are unmanaged benchmarks that assume reinvestment of all distributions. The Lipper Average excludes the effect of taxes and any costs associated with the purchase of shares, and the S&P 500 excludes the effect of fees, taxes, and sales charges. The Lipper Average measures the performance of closed-end funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The S&P 500 measures the performance of 500 of the largest US companies based on market capitalizations. Investors cannot invest directly in an index or an average.
     
‡   Preferred Stockholders were paid dividends totaling $1.25 per share.
     
†   Information does not reflect the effect of capital loss carryforwards that are available to offset these and future capital gains. See Note 5 to Financial Statements.
     
††   Represents the per share amount of gross unrealized gain or loss of portfolio securities as of June 30, 2006.
     
Ø   Current yield, representing the annualized yield for the 30-day period ended June 30, 2006, has been computed in accordance with SEC regulations and will vary.
     
1   The website reference is an inactive textual reference and information contained in or otherwise accessible through the website does not form a part of this report or the Corporation’s prospectus or statement of additional information.
     
     

2

Tri-Continental Corporation       
 
Highlights of the First Half       
 
  June 30,   December 31,  
Assets:  2006   2005  
 
 
Total assets  $  2,410,884,811   $  2,443,519,572  
Amount owed    10,208,452   13,578,973  
 
 
Net Investment Assets    2,400,676,359   2,429,940,599  
Preferred Stock, at par value    37,637,000   37,637,000  
 
 
Net Assets for Common Stock  $  2,363,039,359   2,392,303,599  
 
 
Common shares outstanding    105,836,575   107,965,119  
Net Assets Per Common Share    $22.33     $22.16  
 
    Six Months Ended June 30,  
 
Taxable Gains:  2006   2005  
 
 
Net capital gains realized  $  139,425,899   $  107,580,721  
Per Common share    $1.32     $0.97  
Accumulated capital losses, end of period  $  (141,703,756 )  $  (414,328,176 ) 
Per Common share, end of period    $(1.34 )    $(3.74 ) 
Unrealized capital gains, end of period  $  125,759,668   $  226,494,327  
Per Common share, end of period    $1.19     $2.04  
Unrealized capital losses, end of period.  $  (212,605,518 )  $  (134,024,597 ) 
Per Common share, end of period    $(2.01 )    $(1.21 ) 
 
Income:       
Total investment income earned    23,251,826   22,227,121  
Expenses    8,956,611   7,754,499  
Preferred Stock dividends    940,925   940,925  
 
 
Income for Common Stock  $  13,354,290   $  13,531,697  
 
 
Expenses to average net investment assets    0.73 %*  0.65 %* 
Expenses to average net assets for Common Stock.    0.74 %*  0.66 %* 
 
Dividends per Common Share    $0.14     $0.11  
 
 
     
* Annualized       

3

Tri-Continental Corporation

Diversification of Net Investment Assets

The diversification of portfolio holdings by industry on June 30, 2006, was as follows. Individual securities owned are listed on pages 7 to 12.

                      Percent of Net 
                      Investment Assets 
                      June 30,   December 31, 
    Issues    Cost    Value    2006    2005 
   
 
 
 
 
Common Stocks and Warrants:                               
 Aerospace and Defense    4      $  47,802,884    $  53,674,309    2.2      1.5   
 Air Freight and Logistics    —        —      —    —      0.4   
 Beverages    3        33,977,099      33,202,061    1.4      2.0   
 Biotechnology    2        61,994,103      46,907,947    2.0      1.7   
 Building Products    1        4,090,521      4,060,680    0.2      0.5   
 Capital Markets    5        73,361,639      79,218,094    3.3      2.6   
 Chemicals    3        55,479,387      56,155,928    2.3      2.5   
 Commercial Banks    1        23,881,272      26,129,455    1.1      3.4   
 Commercial Services and Supplies    2        36,456,945      30,779,082    1.3      1.8   
 Communications Equipment    7        137,021,202      139,465,463    5.8      5.7   
 Computers and Peripherals    5        123,238,338      113,598,383    4.7      3.9   
 Containers and Packaging    1        41,191,687      33,442,510    1.4      1.2   
 Diversified Consumer Services    —        —      —    —      0.4   
 Diversified Financial Services    4        161,170,409      178,692,259    7.4      5.3   
 Diversified Telecommunication                               
       Services    4        49,794,549      51,976,125    2.2      2.4   
 Electric Utilities    2        12,450,604      11,406,080    0.5      —   
 Electronic Equipment and                               
       Instruments    1        11,902,678      10,999,326    0.5      —   
 Energy Equipment and Services    2        23,518,333      26,184,937    1.1      —   
 Food and Staples Retailing    2        57,828,704      57,661,887    2.4      3.6   
 Food Products    1        10,928,978      11,250,801    0.5      0.4   
 Health Care Equipment and                               
       Supplies    3        60,283,504      47,873,160    2.0      1.2   
 Health Care Providers and                               
       Services    3        74,818,057      67,913,325    2.8      1.3   
 Hotels, Restaurants and Leisure    1        21,374,215      20,734,560    0.9      1.1   
 Household Products    1        25,468,747      25,147,880    1.0      0.5   
 Industrial Conglomerates    2        103,350,100      90,560,466    3.8      5.0   
 Insurance    5        81,102,836      77,424,799    3.2      3.1   
 Internet Software and Services    3        43,928,571      45,512,841    1.9      1.5   
 Machinery    1        14,873,010      22,228,100    0.9      1.5   
 Media    6        113,990,652      114,368,422    4.8      5.1   
 Metals and Mining    2        35,374,221      35,054,374    1.5      0.5   
 Multi-Utilities    1        14,872,269      14,127,831    0.6      0.3   
 Multiline Retail    1        28,420,977      20,275,194    0.8      1.5   
 Oil, Gas and Consumable Fuels    5        187,544,327      189,782,829    7.9      4.5   
 Personal Products    —        —      —    —      0.5   
 Pharmaceuticals    6        166,694,006      139,880,869    5.8      10.0   
 Semiconductors and                               
       Semiconductor Equipment 
  3        43,333,743      40,162,646    1.7      2.2   
 
 
                     
(continued on page 5) 

4

Tri-Continental Corporation                 
 
 
Diversification of Net Investment Assets (continued)             
                 
Percent of Net 
                  Investment Assets 
                  June 30,   December 31, 
    Issues    Cost    Value    2006    2005 
   
 
 
 
 
Common Stocks and                     
     Warrants: (continued)                           
 Software    5      $ 153,010,197    $ 131,042,042    5.4      6.0   
 Specialty Retail    3      50,854,967    46,235,703    1.9      1.9   
 Thrifts and Mortgage Finance    2      37,730,535    32,007,567    1.3      1.2   
 Tobacco    2      48,129,423    73,211,219    3.0      3.3   
 Wireless Telecommunication                           
       Services    2      48,676,716    55,252,725    2.3      2.5   
   
   
 
 
 
 
 Total Common Stocks and                           
       Warrants    107      2,319,920,405    2,253,601,879    93.8      94.0   
 Options Purchased    23      100,584,967    83,993,725    3.5      1.8   
 US Treasury Notes    —      —    —    —      0.3   
 Tri-Continental Financial                           
       Division    2      5,515,974    1,814,122    0.1      0.1   
 Short-Term Holdings and                           
     Other Assets Less Liabilities    3      61,500,863    61,266,633    2.6      3.8   
   
   
 
 
 
 
 Net Investment Assets    135     
$
2,487,522,209   
$
2,400,676,359    100.0      100.0   
   
   
 
 
   
 

5

Tri-Continental Corporation 
 
 
Largest Portfolio Changes     
April 1 to June 30, 2006     
 
Largest Purchases    Largest Sales 
 
Procter & Gamble Company (The)*    BellSouth Corporation 
QUALCOMM Inc.    Yahoo!, Inc.** 
Hewlett-Packard Company*    UST Inc. 
Freeport-McMoRan Copper & Gold Inc. Class B*    Kohl’s Corporation** 
AT&T Inc.*    Nokia Corp. (ADR) 
Boston Scientific Corporation    International Business Machines Corporation 
Sunoco, Inc.    Halliburton Company 
Chevron Corporation    HCA Inc.** 
Urban Outfitters, Inc.*    Federated Department Stores, Inc.** 
Verizon Communications Inc.*    Johnson & Johnson 

Largest portfolio changes from the previous period to the current period are based on cost of purchases and proceeds from sales of securities, listed in descending order.
*      Position added during the period.
**      Position eliminated during the period.
 
Ten Largest Equity Holdings†      
June 30, 2006       
 
Cost
 
Value
 
 
(000s) 
 
(000s) 
 
 
 
 
General Electric Company  $  91,996   $  78,226  
Exxon Mobil Corporation  64,203     65,749  
Altria Group, Inc.  37,784     61,349  
Citigroup Inc.  54,107     60,166  
Bank of America Corporation  52,386     59,506  
Microsoft Corp.  58,867     49,785  
JPMorgan Chase & Co.  45,402     48,300  
Chevron Corporation  41,210     46,626  
Pfizer Inc.  67,012     43,082  
QUALCOMM Inc.  36,614     35,868  
 
 
 
  $ 549,581   $  548,657  
 
 
 

There can be no assurance that the securities presented have remained or will remain in the Corporation’s portfolio. Information regarding the Corporation’s portfolio holdings should not be construed as a recommendation to buy or sell any security or as an indication that any security is suitable for a particular investor.

    
†      Excludes options purchased.    

6

Tri-Continental Corporation           
 
 
Portfolio of Investments (unaudited) 
June 30, 2006 
 
 
Shares or 
     
 
Warrants 
    Value 
 
 
COMMON STOCKS AND WARRANTS 93.8%           
 
AEROSPACE AND DEFENSE 2.2%           
Boeing Company (The)  147,800  shs.   
$ 
12,106,298 
General Dynamics Corporation  191,800        12,555,228 
Honeywell International Inc.  712,500        28,713,750 
Raytheon Company* (exercise price of $37.50,           
expiring 6/16/2011)  23,639  wts.      299,033 
          53,674,309 
 
BEVERAGES 1.4%           
Coca-Cola Company (The)  275,200  shs.      11,839,104 
Coca-Cola Enterprises Inc.  636,100        12,957,357 
PepsiCo, Inc.  140,000        8,405,600 
          33,202,061 
 
BIOTECHNOLOGY 2.0%           
Amgen Inc.*  400,500        26,120,610 
Pharmion Corporation*  1,222,425        20,787,337 
          46,907,947 
 
BUILDING PRODUCTS 0.2%           
Masco Corporation  137,000        4,060,680 
 
 
CAPITAL MARKETS 3.3%           
Bank of New York Company, Inc. (The)  633,500        20,398,700 
Goldman Sachs Group, Inc. (The)  82,300        12,380,389 
Legg Mason, Inc.  61,300        6,100,576 
Merrill Lynch & Co. Inc.  360,300        25,062,468 
Morgan Stanley  241,670        15,275,961 
          79,218,094 
 
CHEMICALS 2.3%           
Dow Chemical Co. (The)  591,000        20,045,808 
E. I. du Pont de Nemours and Company  599,400        23,241,920 
Praxair, Inc.  238,300        12,868,200 
          56,155,928 
 
COMMERCIAL BANKS 3.6%           
Bank of America Corporation  1,237,140        59,506,434 
Wachovia Corporation  483,163        26,129,455 
          85,635,889 
 
COMMERCIAL SERVICES AND SUPPLIES 1.3%           
Cendant Corporation  1,132,200        18,443,538 
Waste Management Inc.  343,800        12,335,544 
          30,779,082 
           

See footnotes on page 12.

7

Tri-Continental Corporation   
 
 
Portfolio of Investments (unaudited) 
June 30, 2006 
 
 
Shares or 
 
Warrants 
Value 
 
 
 
COMMUNICATIONS EQUIPMENT 5.8%           
Cisco Systems, Inc.* 
1,486,280 
shs. 
 
$ 
29,019,617 
Corning Incorporated* 
1,218,300 
      29,470,677 
Lucent Technologies, Inc.* 
11,626,025 
      3,080,897 
Lucent Technologies, Inc.* (exercise price of $2.75, expiring 12/10/2007) 
5,067,200 
wts. 
    12,262,624 
Motorola, Inc. 
592,800 
shs. 
    11,944,920 
Nokia Corp. (ADR) 
879,500 
      17,818,670 
QUALCOMM Inc. 
894,800 
      35,868,058 
          139,465,463 
 
COMPUTERS AND PERIPHERALS 4.7%           
Apple Computer, Inc.*  270,500        15,480,715 
EMC Corporation*  2,793,800        30,647,986 
Hewlett-Packard Company  671,200        21,263,616 
International Business Machines Corporation  383,720        29,477,370 
Seagate Technology*  738,900        16,728,696 
          113,598,383 
 
CONTAINERS AND PACKAGING 1.4%           
Smurfit-Stone Container Company*  3,058,300        33,442,510 
 
DIVERSIFIED FINANCIAL SERVICES 4.9%           
CIT Group Inc.  205,000        10,719,450 
Citigroup Inc.  1,247,230        60,166,375 
JPMorgan Chase & Co.  1,150,000        48,300,000 
          119,185,825 
 
DIVERSIFIED TELECOMMUNICATION SERVICES 2.2%           
AT&T Inc.  600,000        16,734,000 
BellSouth Corporation  198,700        7,192,940 
Citizens Communications Company  1,119,000        14,602,950 
Verizon Communications Inc.  401,500        13,446,235 
          51,976,125 
 
ELECTRONIC EQUIPMENT AND INSTRUMENTS 0.5%           
Symbol Technologies, Inc.  1,019,400        10,999,326 
 
ELECTRIC UTILITIES 0.5%           
American Electric Power Company, Inc.  167,300        5,730,025 
Southern Company  177,100        5,676,055 
          11,406,080 
 
ENERGY EQUIPMENT AND SERVICES 1.1%           
Halliburton Company  187,700        13,929,217 
Tidewater Inc.  249,100        12,255,720 
          26,184,937 
 
FOOD AND STAPLES RETAILING 2.4%           
CVS Corporation  1,051,000        32,265,700 
Wal-Mart Stores, Inc.  527,220        25,396,187 
          57,661,887 

See footnotes on page 12.

8

Tri-Continental Corporation           
 
 
Portfolio of Investments (unaudited) 
June 30, 2006 
 
 
 
Shares 
 
Value 
 
 
 
FOOD PRODUCTS 0.5%           
Hershey Company (The)  204,300     
$ 
11,250,801 
 
HEALTH CARE EQUIPMENT AND SUPPLIES 2.0%           
Bausch & Lomb Inc.  123,400        6,051,536 
Boston Scientific Corporation*  1,360,900        22,917,556 
Medtronic, Inc.  402,900        18,904,068 
          47,873,160 
 
HEALTH CARE PROVIDERS AND SERVICES 2.8%           
Aetna Inc.  444,000        17,728,920 
UnitedHealth Group Incorporated  380,800        17,052,224 
WellPoint Inc.*  455,300        33,132,181 
          67,913,325 
 
HOTELS, RESTAURANTS AND LEISURE 0.9%           
McDonald’s Corporation  617,100        20,734,560 
 
HOUSEHOLD PRODUCTS 1.0%           
Procter & Gamble Company (The)  452,300        25,147,880 
 
INDUSTRIAL CONGLOMERATES 3.8%           
General Electric Company  2,373,350        78,225,616 
Tyco International Ltd.  448,540        12,334,850 
          90,560,466 
 
INSURANCE 3.2%           
Allstate Corporation (The)  247,900        13,567,567 
American International Group, Inc.  527,800        31,166,590 
MetLife, Inc.  173,300        8,874,693 
UnumProvident Corporation  489,300        8,871,009 
XL Capital Ltd. Class A  243,800        14,944,940 
          77,424,799 
 
INTERNET SOFTWARE AND SERVICES 1.9%           
Google Inc. Class A*  61,900        25,956,218 
McAfee Inc.*  560,400        13,600,908 
Symantec Corporation*  383,374        5,955,715 
          45,512,841 
 
MACHINERY 0.9%           
Illinois Tool Works Inc.  467,960        22,228,100 
 
MEDIA 4.8%           
Clear Channel Communications, Inc.  552,900        17,112,255 
Comcast Corporation Class A*  546,500        17,938,863 
News Corp. Class A  1,030,000        19,755,400 
Time Warner Inc.  1,880,300        32,529,190 
Univision Communications Inc. Class A*  535,900        17,952,650 
Viacom Inc. Class B*  253,350        9,080,064 
          114,368,422 
See footnotes on page 12.

 

9

Tri-Continental Corporation           
 
 
Portfolio of Investments (unaudited) 
June 30, 2006 
 
 
Shares 
Value 
 
 
 
METALS AND MINING 1.5%           
Alcoa Inc.  656,900     
$ 
21,257,284 
Freeport-McMoRan Copper & Gold Inc. Class B  249,000        13,797,090 
          35,054,374 
 
MULTI-UTILITIES 0.6%           
Dominion Resources, Inc.  188,900        14,127,831 
 
MULTILINE RETAIL 0.8%           
Dollar General Corporation  1,450,300        20,275,194 
 
OIL, GAS AND CONSUMABLE FUELS 7.9%           
Chevron Corporation  751,300        46,625,678 
ConocoPhillips  512,200        33,564,466 
Exxon Mobil Corporation  1,071,700        65,748,795 
Murphy Oil Corporation  268,625        15,005,392 
Sunoco, Inc.  416,200        28,838,498 
          189,782,829 
 
PHARMACEUTICALS 5.8%           
Forest Laboratories, Inc.*  456,900        17,677,461 
Johnson & Johnson  288,907        17,311,307 
Lilly, Eli & Company  225,700        12,474,439 
Pfizer Inc.  1,835,638        43,082,424 
Valeant Pharmaceuticals International  1,310,000        22,165,200 
Wyeth  611,800        27,170,038 
          139,880,869 
 
SEMICONDUCTORS AND           
     SEMICONDUCTOR EQUIPMENT 1.7% 
         
Broadcom Corporation Class A*  359,600        10,807,778 
Maxim Integrated Products, Inc.  534,400        17,178,288 
Texas Instruments Incorporated  402,000        12,176,580 
          40,162,646 
 
SOFTWARE 5.4%           
Activision, Inc.*  745,500        8,487,518 
Business Objects S.A. (ADR)*  686,000        18,655,770 
Cogent Inc.  2,019,600        30,344,490 
Mercury Interactive Corporation*  680,470        23,768,817 
Microsoft Corp.  2,136,256        49,785,446 
          131,042,041 
 
SPECIALTY RETAIL 1.9%           
Abercrombie & Fitch Co. Class A  373,100        20,680,934 
Home Depot, Inc. (The)  415,800        14,881,482 
Urban Outfitters, Inc.*  610,600        10,673,288 
          46,235,704 
 
THRIFTS AND MORTGAGE FINANCE 1.3%           
Fannie Mae  400,300        19,254,430 
Freddie Mac  223,700        12,753,137 
 
          32,007,567 
See footnotes on page 12.

10

Tri-Continental Corporation         
 
 
Portfolio of Investments (unaudited) 
June 30, 2006 
 
Shares or 
 
Shares subject to Call 
Value 
 
 
 
TOBACCO 3.0%         
Altria Group, Inc.  835,480     
$
61,349,296 
UST Inc.  262,490      11,861,923 
        73,211,219 
 
WIRELESS TELECOMMUNICATION SERVICES 2.3%         
American Tower Corporation Class A*  769,100      23,934,392 
Sprint Nextel Corporation  1,566,700      31,318,333 
        55,252,725 
 
TOTAL COMMON STOCKS         
AND WARRANTS (Cost $2,319,920,405)        2,253,601,879 
 
OPTIONS PURCHASED* 3.5%         
 
BEVERAGES 0.3%         
Coca-Cola Enterprise Inc., Call expiring January 2008 at $15  9,925      6,600,125 
 
COMMUNICATIONS EQUIPMENT 0.4%         
Comverse Technology Inc., Call expiring January 2008 at $20  9,672      4,207,320 
Corning Incorporated, Call expiring January 2007 at $22.50  7,706      3,197,990 
Motorola, Inc., Call expiring January 2008 at $17.50  6,282      3,266,640 
        10,671,950 
 
COMPUTERS AND PERIPHERALS 0.4%         
Dell Inc., Call expiring January 2008 at $25  9,812      4,022,920 
Seagate Technology, Call expiring January 2007 at $17.50  7,522      4,663,640 
        8,686,560 
 
HEALTH CARE EQUIPMENT AND SUPPLIES 0.3%         
Bausch & Lomb Inc., Call expiring January 2008 at $50  3,365      3,163,100 
St. Jude Medical Inc., Call expiring January 2008 at $35  7,466      3,546,350 
        6,709,450 
 
HOTELS, RESTAURANTS AND LEISURE 0.2%         
McDonald’s Corporation, Call expiring January 2008 at $30  8,055      5,396,850 
 
HOUSEHOLD PRODUCTS 0.1%         
Procter & Gamble Company (The), Call expiring January 2008 at $55  3,266      2,442,968 
 
MEDIA 0.1%         
Univision Communications Inc., Call expiring September 2006 at $30  6,337      2,534,800 
 
MULTILINE RETAIL 0.1%         
Dollar General Corp., Call expiring January 2008 at $15  13,324      2,531,560 
 
PHARMACEUTICALS 0.1%         
Forest Laboratories, Inc., Call expiring January 2007 at $40  4,973      2,635,690 

See footnotes on page 12.

11

Tri-Continental Corporation           
 
 
Portfolio of Investments (unaudited) 
June 30, 2006 
    Shares subject to Call,       
    Partnership Interest or       
    Principal Amount   
Value 
SEMICONDUCTORS AND 
 
 
SEMICONDUCTOR EQUIPMENT 0.2% 
         
Intel Corp., Call expiring January 2008 at $20  21,057 
shs. 
   $  5,495,877 
 
SOFTWARE 0.6%           
Activision, Inc., Call expiring January 2008 at $15  15,446        2,703,050 
Cogent, Inc., Call expiring December 2006 at $15  13,974        3,423,630 
Mercury Interactive Corporation, Call expiring January 2008 at $20  4,628        7,867,600 
            13,994,280 
 
THRIFTS AND MORTGAGE FINANCE 0.1%           
Fannie Mae, Call expiring September 2006 at $70  15,114        75,570 
Freddie Mac, Call expiring January 2008 at $55  2,073        1,751,685 
            1,827,255 
 
TOBACCO 0.6%           
Altria Group Inc., Call expiring January 2008 at $70  3,941        4,059,230 
Altria Group Inc., Call expiring January 2008 at $75  3,148        2,518,400 
Altria Group Inc., Call expiring January 2008 at $80  6,841        3,625,730 
Altria Group Inc., Call expiring January 2008 at $85  12,180        4,263,000 
            14,466,360 
TOTAL OPTIONS PURCHASED (Cost $100,584,967)          83,993,725 
 
TRI-CONTINENTAL FINANCIAL DIVISION† 0.1%       
WCAS Capital Partners II, L.P.  $ 4,301,124        1,794,644 
Whitney Subordinated Debt Fund, L.P.  1,214,850        19,478 
TOTAL TRI-CONTINENTAL           
 
FINANCIAL DIVISION (Cost $5,515,974) 
        1,814,122 
 
SHORT-TERM HOLDINGS 2.5%           
CORPORATE NOTES 0.5%           
Goldman Sachs Group (The), Aggregate Mandatory Exchangeable           
  Notes 13%, 12/20/06 ø††  12,130,000        11,895,770 
 
TIME DEPOSIT 1.4%           
Citibank N.A., Nassau 4.94%, 7/3/06  34,575,000        34,575,000 
US TREASURY NOTES 0.6%           
US Treasury Notes 7%, 7/15/06  13,550,000        13,560,704 
TOTAL SHORT-TERM HOLDINGS (Cost $60,265,704)          60,031,474 
TOTAL INVESTMENTS (Cost $2,486,287,050) 99.9%          2,399,441,200 
OTHER ASSETS LESS LIABILITIES 0.1%          1,235,159 
NET INVESTMENT ASSETS 100.0%        $  2,400,676,359 
*  Non-income producing security. 
   
†  Restricted security. 
   
ø The notes are exchangeable at maturity for value of the common stock of five companies in the home building industry. The maturity value of each stock is limited to 115% of the stock’s price at the date of purchase of the notes.
   
†† The security may be offered and sold only to a “qualified institutional buyer” under Rule 144A of the Securities Act of 1933.
   
ADR — American Depositary Receipts.
   
See Notes to Financial Statements.

 

12

Tri-Continental Corporation     
 
 
Statement of Assets and Liabilities (unaudited) 
June 30, 2006
 
 
Assets:     
Investments, at value:     
   Common stocks and warrants (cost $2,319,920,405)  $  2,253,601,879  
   Options purchased (cost $100,584,967)    83,993,725  
   Tri-Continental Financial Division (cost $5,515,974)    1,814,122  
   Short-term holdings (cost $60,265,704)    60,031,474  
 
Total investments (cost $2,486,287,050)    2,399,441,200  
Restricted cash    206,670  
Receivable for securities sold    8,406,015  
Receivable for dividends and interest    2,364,185  
Investment in, and expenses prepaid to, stockholder service agent    266,360  
Other    200,381  
 
Total Assets    2,410,884,811  
 
Liabilities:     
Payable for securities purchased    7,023,226  
Management fee payable    817,637  
Payable for Common Stock repurchased    528,207  
Preferred dividends payable    470,463  
Bank overdraft    398,263  
Accrued expenses and other   970,656  
 
Total Liabilities    10,208,452  
 
Net Investment Assets    2,400,676,359  
Preferred Stock    37,637,000  
 
Net Assets for Common Stock  $  2,363,039,359  
 
Net Assets per share of Common Stock     
   (Market value—$19.46)    $22.33  
 
 
 
 
Statement of Capital Stock and Surplus (unaudited) 
June 30, 2006
 
 
Capital Stock:     
$2.50 Cumulative Preferred Stock, $50 par value,     
   assets coverage per share $3,189     
   Shares authorized—1,000,000; issued and     
   outstanding—752,740  $  37,637,000  
Common Stock, $0.50 par value:     
   Shares authorized—159,000,000; issued and     
   outstanding—105,836,575    52,918,288  
Surplus:     
Capital surplus    2,539,114,388  
Dividends in excess of net investment income    (443,711 ) 
Accumulated net realized loss    (141,703,756 ) 
Net unrealized depreciation of investments    (86,845,850 ) 
 
Net Investment Assets  $  2,400,676,359  
 

See Notes to Financial Statements.

 

13

Tri-Continental Corporation   
 
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2006
 
 
Investment Income:   
 Dividends (net of foreign taxes withheld of $128,993) 
$
21,494,543  
 Interest  1,754,789  
 Other income  2,494  
 
Total Investment Income  23,251,826  
 
 
Expenses:   
 Management fee  5,091,402  
 Stockholder account and registrar services  1,855,712  
 Stockholders’ meeting  1,093,551  
 Custody and related services  272,913  
 Stockholder reports and communications  190,183  
 Directors’ fees and expenses  173,373  
 Auditing and legal fees  74,883  
 Registration  23,474  
 Miscellaneous  181,120  
 
Total Expenses  8,956,611  
 
Net Investment Income  14,295,215 * 
 
Net Realized and Unrealized Gain (Loss)   
 on Investments and Options Written:   
 Net realized gain on investments  133,639,680  
 Net realized gain on options written  5,786,219  
 Net change in unrealized appreciation   
   of investments and options written  (124,503,730 ) 
 
Net Gain on Investments and Options Written  14,922,169  
 
Increase in Net Assets from Operations 
$
29,217,384  
 
       

*      Net investment income for Common Stock is $13,354,290, which is net of Preferred Stock dividends of $940,925.
 

See Notes to Financial Statements.

 

14

 

Tri-Continental Corporation         
 
 
Statements of Changes in Net Investment Assets (unaudited)        
 
 
Six Months Ended
Year Ended
 
 
June 30, 2006
December 31, 2005
 
 
   
 
Operations:         
Net investment income 
$
14,295,215     $  28,586,031  
Net realized gain on investments  133,639,680       232,990,389  
Net realized gain on options written  5,786,219       7,783,566  
Net change in unrealized appreciation of investments         
   and options written  (124,503,730 )      (228,289,164 ) 
 
   
 
Increase in Net Investment Assets from Operations  29,217,384       41,070,822  
 
   
 
 
Distributions to Stockholders:         
Net investment income:         
   Preferred Stock (per share: $1.25 and $2.50)  (940,925 )      (1,881,850 ) 
   Common Stock (per share: $0.14 and $0.24)  (14,910,444 )      (26,442,677 ) 
 
   
 
Decrease in Net Investment Assets         
     from Distributions  (15,851,369 )      (28,324,527 ) 
 
   
 
 
Capital Share Transactions:         
Value of shares of Common Stock issued         
   for investment plans (325,529 and 623,631 shares) 
6,438,765       11,321,060  
Cost of shares of Common Stock purchased         
   from investment plan participants         
   (1,616,991 and 3,126,041 shares)  (32,173,335 )      (56,684,947 ) 
Cost of shares of Common Stock purchased in the         
   open market (843,832 and 2,527,047 shares)  (16,902,435 )      (45,869,616 ) 
Net proceeds from issuance of shares of         
   Common Stock upon exercise of         
   warrants (6,750 and 9,900 shares)  6,750       9,900  
 
   
 
Decrease in Net Investment Assets         
     from Capital Share Transactions  (42,630,255 )      (91,223,603 ) 
 
   
 
Decrease in Net Investment Assets  (29,264,240 )      (78,477,308 ) 
 
Net Investment Assets:         
Beginning of period  2,429,940,599       2,508,417,907  
 
   
 
End of Period (including undistributed (dividends in         
   excess of) net investment income of $(443,711) and 
       
   $1,112,443, respectively) 
$
2,400,676,359     $  2,429,940,599  
 
   
 
               

See Notes to Financial Statements.

15

Tri-Continental Corporation

Notes to Financial Statements (unaudited)

1. Significant Accounting Policies — The financial statements of Tri-Continental Corporation (the “Corporation”) have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results may differ from these estimates. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The following summarizes the significant accounting policies of the Corporation:

      a. Security Valuation — Securities traded on an exchange are valued at the last sales price on the primary exchange or market on which they are traded. Securities not listed on an exchange or security market, or securities for which there is no last sales price, are valued at the mean of the most recent bid and asked prices or are valued by J. & W. Seligman & Co. Incorporated (the “Manager”) based on quotations provided by primary market makers in such securities. Securities for which market quotations are not readily available (or are otherwise no longer valid or reliable) are valued at fair value determined in accordance with procedures approved by the Board of Directors. This can occur in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts, and extreme market volatility. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other investment companies to determine net asset value or the price that may be realized upon the actual sale of the security. Short-term holdings that mature in more than 60 days are valued at current market quotations. Short-term holdings maturing in 60 days or less are valued at amortized cost.
 
  b. Federal Taxes — There is no provision for federal income tax. The Corporation has elected to be taxed as a regulated investment company and intends to distribute substantially all taxable net income and net realized gain.
 
  c.  Security Transactions and Related Investment Income — Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial statements and federal income tax purposes. Dividends receivable are recorded on ex-dividend dates, except that certain dividends from foreign securities where the ex-dividend dates may have passed are recorded as soon as the Corporation is informed of the dividend. Interest income is recorded on an accrual basis.
 
  d. Distributions to Stockholders — Dividends and other distributions to stockholders are recorded on ex-dividend date.
 
  e. Options — The Corporation is authorized to write and purchase put and call options. When the Corporation writes an option, an amount equal to the premium received by the Corporation is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Corporation enters into a closing transaction), the Corporation realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). The Corporation, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option.
   
 
  f. Repurchase Agreements — The Corporation may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Corporation’s custodian and, pursuant to the terms of the repurchase agreements, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. On a daily basis, the market value of repurchase agreements’ underlying securities are monitored to ensure the existence of the proper level of collateral.
 
  g. Restricted Cash — Restricted cash represents deposits that are being held by banks as collateral for letters of credit issued in connection with the Corporation’s insurance policies.
 

16

Tri-Continental Corporation

Notes to Financial Statements (unaudited)

      h. Aggregate Mandatory Exchangeable Notes — The Corporation may purchase notes created by a counterparty, typically an investment bank. The notes bear interest at a fixed or floating rate. At maturity, the notes must be exchanged for an amount based on the value of one or more equity securities (“Index Stocks”) of third party issuers. The exchange value may be limited to an amount less than the actual value of the Index Stocks at the maturity date. Any difference between the exchange amount and the original cost of the notes will be a gain or loss.
 

2. Capital Stock Transactions — Under the Corporation’s Charter, dividends on 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, 2006, 1,616,991 shares were purchased from Plan participants at a cost of $32,173,335, which represented a weighted average discount of 13.10% from the net asset value of those acquired shares. A total of 325,529 shares were issued to Plan participants during the year for proceeds of $6,438,765, an average discount of 13.11% from the net asset value of those shares.

     For the six months ended June 30, 2006, the Corporation purchased 843,832 shares of its Common Stock in the open market at an aggregate cost of $16,902,435, which represented a weighted average discount of 12.53% from the net asset value of those acquired shares.

     Shares of Common Stock repurchased to satisfy Plan requirements or in the open market are retired and no longer outstanding.

     At June 30, 2006, 271,845 shares of Common Stock were reserved for issuance upon exercise of 12,082 Warrants, each of which entitled the holder to purchase 22.50 shares of Common Stock at $1.00 per share.

     Assuming the exercise of all Warrants outstanding at June 30, 2006, net investment assets would have increased by $271,845 and the net asset value of the Common Stock would have been $22.27 per share. The number of Warrants exercised during the six months ended June 30, 2006 and the year ended December 31, 2005 was 300 and 440, respectively.

3. Management Fee, Administrative Services, and Other Transactions — The Manager manages the affairs of the Corporation and provides for the necessary personnel and facilities. Compensation of all officers of the Corporation, all directors of the Corporation who are employees 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, 2006 was equivalent to an average annual rate of 0.41% of the average daily net assets of the Corporation.

     For the six months ended June 30, 2006, Seligman Data Corp., which is owned by the Corporation and certain associated investment companies, charged the Corporation at cost $1,855,712 for stockholder account services in accordance with a methodology approved by the Corporation’s directors. Costs of Seligman Data Corp. directly attributable to the Corporation were charged to the Corporation. The remaining charges were allocated to the Corporation by Seligman Data Corp. pursuant to a formula based on the Corporation’s net assets, stockholder transaction volume and number of stockholder accounts. The Corporation’s investment in Seligman Data Corp. is recorded at a cost of $43,681.

     The Corporation and certain other associated investment companies (together, the “Guarantors”) have severally but not jointly guaranteed the performance and observance of all the terms and conditions of two leases entered into by Seligman Data Corp., including the payment of rent by Seligman Data Corp. (the “Guaranties”). The leases and the Guaranties expire in September 2008 and January 2009. The obligation of the Corporation to pay any amount due under either Guaranty is limited to a specified percentage of

17

Tri-Continental Corporation

Notes to Financial Statements (unaudited)

the full amount, which generally is based on the Corporation’s percentage of the expenses billed by Seligman Data Corp. to all Guarantors in the most recent calendar quarter. As of June 30, 2006, the Corporation’s potential obligation under the Guaranties is $356,200. As of June 30, 2006, no event has occurred which would result in the Corporation becoming liable to make any payment under a Guaranty. A portion of rent paid by Seligman Data Corp. is charged to the Corporation as part of Seligman Data Corp.’s stockholder account services cost.

     Certain officers and directors of the Corporation are officers or directors of the Manager and/or Seligman Data Corp.

     The Corporation has a compensation arrangement under which directors who receive fees may elect to defer receiving such fees. Directors may elect to have their deferred fees accrue interest or earn a return based on the performance of the Corporation or other funds in the Seligman Group of Investment Companies. Deferred fees and related accrued earnings are not deductible by the Corporation for federal income tax purposes until such amounts are paid. The accumulated balance at December 31, 2005 of $247,499 was paid to the participating director in January 2006. As of June 30, 2006, no directors were participating in the deferred compensation arrangement.

4. Purchases and Sales of Securities — Purchases and sales of portfolio securities, excluding US Government obligations and short-term investments, for the six months ended June 30, 2006, amounted to $1,135,597,399 and $1,144,519,921, respectively; purchases and sales of US Government obligations for this period were $0 and $6,814,289, respectively.

5. Federal Tax Information — Certain components of income, expense and realized capital gain and loss are recognized at different times or have a different character for federal income tax purposes and for financial reporting purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Corporation. As a result of the differences described above, the treatment for financial reporting 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. Further, the cost of investments also can differ for federal income tax purposes.

     The tax basis information presented is based on operating results for the six months ended June 30, 2006, and will vary from the final tax information as of the Corporation’s year end.

     At June 30, 2006, the cost of investments for federal income tax purposes was $2,481,563,552. The tax basis cost was lower than the cost for financial reporting purposes primarily due to tax losses passed through to the Corporation from its limited partnership investments of $6,463,469 offset, in part, by the tax deferral of losses on wash sales and certain option transactions in the amount of $1,739,971.

At June 30, 2006, the tax basis components of accumulated earnings/losses were as follows:

Gross unrealized appreciation of portfolio securities 
$
132,223,137  
Gross unrealized depreciation of portfolio securities  (214,345,489 ) 
 
Net unrealized depreciation of portfolio securities  (82,122,352 ) 
Capital loss carryforward  (285,514,996 ) 
Current period net realized gain  139,046,543  
Undistributed ordinary income  —  
 
Total accumulated loss 
$
(228,590,805 ) 
 
       

18

Tri-Continental Corporation

Notes to Financial Statements (unaudited)

     At December 31, 2005, the Corporation had a net capital loss carryforward for federal income tax purposes of $285,514,996 which is available for offset against future taxable net capital gains, with $248,552,472 expiring in 2010 and $36,962,524 expiring in 2011. Accordingly, no capital gain distributions are expected to be paid to stockholders until net capital gains have been realized in excess of the available capital loss carryforward.

     For the six months ended June 30, 2006 and for the year ended December 31, 2005, the tax characterization of distributions to stockholders was the same as for financial reporting purposes.

6. Restricted Securities — At June 30, 2006, the Tri-Continental Financial Division of the Corporation comprised two investments that were purchased through private offerings and cannot be sold without prior registration under the Securities Act of 1933 or pursuant to an exemption therefrom. These investments are valued at fair value as determined in accordance with procedures approved by the Board of Directors of the Corporation. The acquisition dates of investments in the limited partnerships, along with their cost and values at June 30, 2006, were as follows:

Investments   
Acquisition Date(s) 
 
Cost 
Value 
 
 
 
WCAS Capital Partners II, L.P.   
12/11/90 to 3/24/98 
 
$
4,301,124 
 
$
1,794,644 
Whitney Subordinated Debt Fund, L.P.   
7/12/89 to 11/10/98 
 
1,214,850 
  19,478 
 
Total       
$
5,515,974 
 
$
1,814,122 
 

7. Options Written — Transactions in options written during the six months ended June 30, 2006 were as follows:

 
Shares
 
 
Subject
 
 
to Call/Put
Premium
 
 
 
Options outstanding at December 31, 2005  1,243,100    
$ 
4,161,063  
Options written  9,007,400    
11,807,682  
Options expired  (4,672,300 )   
(5,062,196 ) 
Options exercised  (5,163,500 )   
(8,259,452 ) 
Options terminated in closing purchase transactions  (414,700 )   
(2,647,098 ) 
   
 
Options outstanding at June 30, 2006  —    
$ 
—  
   
 

8. Other Matters — In late 2003, the Manager conducted an extensive internal review in response to public announcements concerning frequent trading in shares of open-end mutual funds. The Manager’s review of frequent trading appropriately did not include Tri-Continental Corporation because it is a listed, closed-end investment company. As of September 2003, the Manager had one arrangement that permitted frequent trading in the Seligman mutual funds. This arrangement was in the process of being closed down by the Manager before the first proceedings relating to trading practices within the mutual fund industry were publicly announced. Based on a review of the Manager’s records for 2001 through 2003, the Manager identified three other arrangements that had permitted frequent trading in the Seligman mutual funds. All three had already been terminated prior to the end of September 2002. None of these arrangements involved Tri-Continental Corporation.

     The results of the Manager’s internal review were presented to the Independent Directors of all Seligman registered investment companies (the “Seligman Funds”). In order to resolve matters with the Independent Directors relating to the four arrangements that permitted frequent trading, the Manager, in May 2004, made payments to three mutual funds and agreed to waive a portion of its management fee with respect to another mutual fund.

19

Tri-Continental Corporation

Notes to Financial Statements (unaudited)

     Since February 2004, the Manager has been in discussions with the New York staff of the Securities and Exchange Commission (“SEC”) and the Office of the New York Attorney General (“Attorney General”) in connection with their review of frequent trading in certain of the Seligman Funds. No late trading is involved. This review was apparently stimulated by the Manager’s voluntary public disclosure of the foregoing arrangements in January 2004. In March 2005, negotiations to settle the matter were initiated by the New York staff of the SEC. After several months of negotiations, tentative agreement was reached, both with the New York staff of the SEC and the Attorney General, on the financial terms of a settlement. However, settlement discussions with the Attorney General ended when the Attorney General sought to impose operating conditions on the Manager that were unacceptable to the Manager, would have applied in perpetuity and were not requested or required by the SEC. Subsequently, the New York staff of the SEC indicated that, in lieu of moving forward under the terms of the tentative financial settlement, the staff was considering recommending to the Commissioners of the SEC the instituting of a formal action against the Manager and Seligman Advisors, Inc. (together, “Seligman”).

     Seligman believes that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds.

     Immediately after settlement discussions with the Attorney General ended, the Attorney General issued subpoenas to certain of the Seligman Funds and their directors. The subpoenas seek various Board materials and information relating to the deliberations of the Independent Directors as to the advisory fees paid by the Seligman Funds to the Manager. The Manager has objected to the Attorney General’s seeking of such information and, on September 6, 2005, filed suit in federal district court seeking to enjoin the Attorney General from pursuing a fee inquiry. Seligman believes that the Attorney General’s inquiry is improper because Congress has vested exclusive regulatory oversight of investment company advisory fees in the SEC.

     At the end of September 2005, the Attorney General indicated that it intends to file an action at some time in the future alleging, in substance, that the Manager permitted other persons to engage in frequent trading other than the arrangements described above and, as a result, the prospectus disclosure of the Seligman Funds is and has been misleading. Seligman believes any such action would be without merit.

     Any resolution of these matters with regulatory authorities may include, but not be limited to, sanctions, penalties, injunctions regarding Seligman, restitution to mutual fund shareholders or changes in procedures. Any penalties or restitution will be paid by Seligman and not by the Seligman Funds.

     Seligman does not believe that the foregoing possible actions or any threatened legal actions should have a material adverse impact on the Manager, Seligman Advisors, Inc. or the Seligman Funds; however, there can be no assurance of this, or that these matters and any related publicity will not result in reduced demand for shares of the Seligman Funds or other adverse consequences.

9. Recently Issued Accounting Pronouncement — In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” FIN 48 provides guidance for how uncertain tax positions, if any, should be recognized, measured, presented and disclosed in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Corporation is currently evaluating the impact, if any, of applying the various provisions of FIN 48.

20

Tri-Continental Corporation

Financial Highlights (unaudited)

     The Corporation’s financial highlights are presented below. Per share operating performance data is designed to allow investors to trace the operating performance, on a per Common share basis, from the beginning net asset value to the ending net asset value, so that investors can understand what effect the individual items have on their investment, assuming it was held throughout the period. Generally, the per share amounts are derived by converting the actual dollar amounts incurred for each item, as disclosed in the financial statements, to their equivalent per Common share amounts, using average shares outstanding.

     Total investment return measures the Corporation’s performance assuming that investors purchased shares of the Corporation at the market value or net asset value as of the beginning of the period, invested dividends and capital gains paid, as provided for in the Corporation’s Prospectus and Automatic Dividend Investment and Cash Purchase Plan, and then sold their shares at the closing market value or net asset value per share on the last day of the period. The computations do not reflect taxes or any sales commissions investors may incur in purchasing or selling shares of the Corporation. Total investment returns are not annualized for periods of less than one year.

     The ratios of expenses and net investment income to average net investment assets and to average net assets for Common Stock for the periods presented do not reflect the effect of dividends paid to Preferred Stockholders.

                       
 
Six Months
   
Year Ended December 31,
 
Ended
 
June 30, 2006
   
2005
2004
2003
2002
2001
 
   
   
   
   
   
 
Per Share Operating                       
 Performance:                       
Net Asset Value,                       
 Beginning of Period 
$
22.16    
$
21.87    
$
19.55    
$
15.72    
$
21.69    
$
25.87  
   
   
   
   
   
 
Net investment income  0.14     0.26     0.26     0.18     0.25     0.32  
Net realized and unrealized                       
 investment gain (loss)  0.18     0.29     2.31     3.84     (5.95 )    (3.02 ) 
   
   
   
   
   
 
Increase (Decrease) from                       
 Investment Operations 0.32     0.55     2.57     4.02     (5.70 )    (2.70 ) 
Dividends paid on                       
 Preferred Stock  (0.01 )    (0.02 )    (0.02 )    (0.02 )    (0.01 )    (0.01 ) 
Dividends paid on                       
 Common Stock  (0.14 )    (0.24 )    (0.23 )    (0.17 )    (0.26 )    (0.28 ) 
Distributions from net                       
 gain realized  —     —     —     —     —     (1.11 ) 
Issuance of Common Stock                       
 in gain distributions  —     —     —     —     —     (0.08 ) 
   
   
   
   
   
 
Net Increase (Decrease)                       
 in Net Asset Value  0.17     0.29     2.32     3.83     (5.97 )    (4.18 ) 
   
   
   
   
   
 
Net Asset Value,                       
 End of Period 
$
22.33    
$
22.16    
$
21.87    
$
19.55    
$
15.72    
$
21.69  
   
   
   
   
   
 
Adjusted Net Asset Value, 
   
   
   
   
   
 
 End of Period* 
$
22.27    
$
22.10    
$
21.82    
$
19.51    
$
15.69    
$
21.65  
Market Value, 
   
   
   
   
   
 
 End of Period 
$
19.46    
$
18.58    
$
18.28    
$
16.40    
$
13.25    
$
18.75  

See footnotes on page 22.

21

Tri-Continental Corporation    
 
 
Financial Highlights (unaudited) (continued)          
 
 
                     
 
Six Months
 
Year Ended December 31,
Ended
 
June 30, 2006
   
2005
 
2004
 
2003
 
2002
 
2001
 
 
 
Total Investment Return:                   
Based upon market value    5.48 %      2.98 %  12.95 %  25.24 %  (28.18 )%  (5.22 )% 
Based upon net asset value   1.48 %      2.66 %  13.36 %#  25.84 %  (26.35 )%  (10.20 )% 
 
Ratios/Supplemental Data:                   
Expenses to average net                   
 investment assets.    0.73 %†      0.64 %  0.65 %  0.68 %  0.67 %  0.59 % 
Expenses to average net                   
 assets for Common Stock   0.74 %†      0.65 %  0.66 %  0.70 %  0.68 %  0.60 % 
Net investment income to                   
 average net investment                   
 assets    1.18 %†      1.18 %  1.26 %  1.03 %  1.29 %  1.36 % 
Net investment income to                   
 average net assets for                   
 Common Stock    1.20 %†      1.20 %  1.28 %  1.05 %  1.31 %  1.37 % 
Portfolio turnover rate    47.91 %      70.77 %  47.36 %  138.65 %  152.79 %  124.34 % 
Net Investment Assets,                   
 End of Period                   
 (000s omitted):                   
For Common Stock  $ 2,363,039     $ 2,392,304    
$
2,470,781     $ 2,310,999    
$
1,958,295    
$
2,873,655  
For Preferred Stock    37,637       37,637    
37,637   37,637    
37,637    
37,637  
 
   
   
   
   
   
 
Total Net Investment                                               
 Assets  $ 2,400,676     $ 2,429,941    
$
2,508,418    
$
2,348,636    
$
1,995,932    
$
2,911,292  
 
   
   
   
   
   
 

*

Assumes the exercise of outstanding warrants.

#

Excluding the effect of the payments received from the Manager in 2004, the total investment return would have been 13.33% .

†

Annualized.

See Notes to Financial Statements.

 

 

22

Tri-Continental Corporation

Proxy Results

     Tri-Continental Corporation Stockholders voted on the following proposals at the Annual Meeting of Stockholders on May 4, 2006, in Baltimore, MD. Each proposal and number of shares voted are as follows:

Election of Directors:             
  For    Withheld       
 
Tri-Continental’s Slate 
           
   John R. Galvin  47,863,843    4,777,433       
   William C. Morris  49,000,824    3,640,452       
   Robert L. Shafer  49,046,166    3,595,110       
 
Dissident’s Slate             
   Arthur D. Lipson  26,976,342    979,048       
   Paul DeRosa  27,032,586    922,804       
   Marlene A. Plumlee  26,988,125    967,265       
 
 
 
For    Against    Abstain   
Ratification of Deloitte & 
 
 
 
   Touche LLP as auditors:  78,925,851    1,797,056    1,337,019   
 
To provide for cumulative 
For    Against    Abstain   
   voting in the election of 
 
 
 
   directors:  36,916,603    42,075,778    3,067,523   
             

23

Tri-Continental Corporation

Board of Directors

John R. Galvin (1,3)    Robert L. Shafer (2,3) 
Dean Emeritus, Fletcher School of Law and    Ambassador and Permanent Observer of the 
   Diplomacy at Tufts University   
Sovereign Military Order of Malta to the 
Chairman Emeritus, American Council on       United Nations 
   Germany     
    James N. Whitson (1,3) 
Frank A. McPherson (2,3)    Retired Executive Vice President and Chief Operating 
Retired Chairman of the Board and Chief Executive       Officer, Sammons Enterprises, Inc. 
   Officer, Kerr-McGee Corporation    Director, CommScope, Inc. 
Director, DCP Midstream GP, LLP, Integris     
Health, Oklahoma Chapter of the Nature 
  Brian T. Zino 
Conservancy, Oklahoma Medical Research 
  Director and President, J. & W. Seligman & Co. 
   Foundation, Boys and Girls Clubs of       Incorporated 
Oklahoma, Oklahoma City Public Schools 
  Chairman, Seligman Data Corp. 
Foundation and Oklahoma Foundation for 
  Director, ICI Mutual Insurance Company, 
   Excellence in Education       Seligman Advisors, Inc. and Seligman 
       Services, Inc. 
Betsy S. Michel (1,3)    Member of the Board of Governors, Investment 
Trustee, The Geraldine R. Dodge Foundation       Company Institute 
     
William C. Morris     
Chairman, J. & W. Seligman & Co. Incorporated,    __________
     Carbo Ceramics Inc., Seligman Advisors, Inc. 
   

     and Seligman Services, Inc.

  
Member: (1) 
Audit Committee
Director, Seligman Data Corp. 
 
(2) 
Director Nominating Committee
President and Chief Executive Officer, 
 
(3) 
Board Operations Committee
   The Metropolitan Opera Association     
     
Leroy C. Richie (1,3) 
It is with deep sorrow that we mourn the recent death of Alice Stone Ilchman, a respected member since 1990 of the Board of Directors of Tri-Continental Corporation.
Counsel, Lewis & Munday, P.C. 
Chairman and Chief Executive Officer, Q Standards 
   Worldwide, Inc. 
Director, Kerr-McGee Corporation, Infinity, Inc.     
and Vibration Control Technologies, LLC 
   
Lead Outside Director, Digital Ally Inc.     
Director and Chairman, Highland Park Michigan     
   Economic Development Corp.     
Chairman, Detroit Public Schools Foundation     

 


Executive Officers   
 
William C. Morris  Eleanor T.M. Hoagland  Thomas G. Rose 
Chairman  Vice President and Chief  Vice President 
Brian T. Zino  Compliance Officer  Lawrence P. Vogel 
President and Chief Executive  Charles W. Kadlec  Vice President and Treasurer 
Officer  Vice President  Marco F. Acosta 
John B. Cunningham  Michael F. McGarry  Assistant Vice President 
Vice President  Vice President  Frank J. Nasta 
    Secretary 

24

Tri-Continental Corporation   
 
Additional Information   
 
Manager  Important Telephone Numbers 
J. & W. Seligman & Co. Incorporated 
(800)
TRI-1092  Stockholder Services 
100 Park Avenue 
New York, NY 10017 
(800)
445-1777  Retirement Plan Services 
Stockholder Service Agent 
(212)
682-7600  Outside the United States 
Seligman Data Corp. 
(800)
622-4597  24-Hour Automated 
100 Park Avenue      Telephone Access Service 
New York, NY 10017   

Quarterly Schedule of Investments

A complete schedule of portfolio holdings owned by the Corporation will be filed with the SEC as of the end of the first and third quarters of each fiscal year on Form N-Q, and will be available to stockholders (i) without charge, upon request, by calling toll-free (800) 874-1092 in the US or collect (212) 682-7600 outside the US or (ii) on the SEC’s website at www.sec.gov.1 In addition, the Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Certain of the information contained in the Corporation’s Form N-Q is also made available to stockholders on Seligman’s website at www.seligman.com.1

Proxy Voting

A description of the policies and procedures used by the Corporation to determine how to vote proxies relating to portfolio securities as well as information regarding how the Corporation voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available (i) without charge, upon request, by calling toll-free (800) 874-1092 in the US or collect (212) 682-7600 outside the US and (ii) on the SEC’s website at www.sec.gov.1 Information for each new 12-month period ending June 30 will be available no later than August 31 of that year.
1 These website references are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this report or the Corporation’s prospectus or statement of additional information.

25



 

     
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Tri-Continental Corporation

Managed by


J. & W. SELIGMAN & CO.

INCORPORATED

Investment Managers and Advisors

ESTABLISHED 1864

 

This report is intended only for the information of Stockholders who have received the current prospectus covering shares of Common Stock of Tri-Continental Corporation, which contains information about investment objectives, risks, management fees and other costs. The prospectus should be read carefully before investing and may be obtained by calling Stockholder Services at 800-TRI-1092.  
 

CETR13b 6/06

ITEM 2. CODE OF ETHICS.
    Not applicable.
     
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
    Not applicable.
     
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
    Not applicable.
     
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
    Not applicable.
     
ITEM 6. SCHEDULE OF INVESTMENTS.
    Included in Item 1 above.
     
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
    Not applicable.
     
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
    Not applicable.
     
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

    Total    Total Number of Shares  Maximum Number (or 
    Number of  Average  (or Units) Purchased as  Approximate Dollar Value) of 
    Shares (or  Price Paid  Part of Publicly  Shares (or Units) that May Yet 
    Units)  per Share  Announced Plans or  Be Purchased Under the Plans 
  Period            Purchased  (or Unit)  Programs (1)  or Programs (1) 
 
  1-01-06 to       
Shares
  1-31-06  376,016  $ 19.57   376,016 
5,022,240
 
  2-01-06 to         
  2-28-06  307,531  19.68  307,531  4,714,709
 
  3-01-06 to         
  3-31-06  435,135  20.19  435,135  4,279,574
 
  4-01-06 to         
  4-30-06  413,045  20.53  413,045  3,866,529
 
  5-01-06 to         
  5-31-06  580,616  20.15  580,616  3,285,913
 
  6-01-06 to         
  6-30-06  348,480  19.23  348,480  2,937,433
 

(1)  The stock repurchase program, renewed on November 17, 2005, authorizes the Registrant to repurchase up to 5.0% of its common stock in the open market or elsewhere from January 1, 2006 through December 31, 2006 as long as the discount of the net asset value of the common stock to its market price exceeds 10%.

 

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
    Not applicable.
     
ITEM 11. CONTROLS AND PROCEDURES.
     
(a) The registrant's principal executive officer and principal financial officer have concluded, based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures provide reasonable assurance that material information required to be disclosed by the registrant in the report it files or submits on Form N-CSR is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and that such material information is accumulated and communicated to the registrant's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions regarding required disclosure.
     
(b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
     
ITEM 12. EXHIBITS.
     
(a)(1) Not applicable.
   
(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
   
(a)(3) Not applicable. 
   
(b) Certifications of chief executive officer and chief financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TRI-CONTINENTAL CORPORATION

 

By:  /S/ BRIAN T. ZINO 
  Brian T. Zino 
  President and Chief Executive Officer 
 
 
Date:  August 30, 2006 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  /S/ BRIAN T. ZINO 
  Brian T. Zino 
  President and Chief Executive Officer 
 
Date:  August 30, 2006 


By:  /S/ LAWRENCE P. VOGEL 
  Lawrence P. Vogel 
  Vice President, Treasurer and Chief Financial Officer 
 
Date:  August 30, 2006 

TRI-CONTINENTAL CORPORATION

EXHIBIT INDEX

  (a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
     
  (b)    Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940.