N-Q 1 a11-27803_3nq.htm N-Q

 

 

 

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UNITED STATES

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SECURITIES AND EXCHANGE COMMISSION

 

 

Washington, D.C. 20549

 

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-00266

 

Tri-Continental Corporation

(Exact name of registrant as specified in charter)

 

50606 Ameriprise Financial Center Minneapolis, MN

 

55474

(Address of principal executive offices)

 

(Zip code)

 

Scott R. Plummer

5228 Ameriprise Financial Center

Minneapolis, MN 55474

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

1-612-671-1947

 

 

Date of fiscal year end:

December 31

 

 

Date of reporting period:

September 30, 2011

 

 



 

Item 1. Schedule of Investments.

 



 

Portfolio of Investments

Tri-Continental Corporation

September 30, 2011 (Unaudited)

(Percentages represent value of investments compared to net assets)


Issuer

 

Shares

 

Value

 

 

 

 

 

 

 

Common Stocks 98.7%

 

 

 

 

 

CONSUMER DISCRETIONARY 10.5%

 

 

 

 

 

Automobiles 0.1%

 

 

 

 

 

General Motors Co. (a)

 

23,700

 

$

478,266

 

Diversified Consumer Services 1.2%

 

 

 

 

 

Apollo Group, Inc., Class A (a)

 

273,200

 

10,821,452

 

H&R Block, Inc. (b)

 

66,125

 

880,124

 

Total

 

 

 

11,701,576

 

Household Durables 0.2%

 

 

 

 

 

Tempur-Pedic International, Inc. (a)(b)

 

35,100

 

1,846,611

 

Internet & Catalog Retail 0.5%

 

 

 

 

 

priceline.com, Inc. (a)

 

11,871

 

5,335,539

 

Media 3.2%

 

 

 

 

 

Comcast Corp., Class A

 

542,726

 

11,342,973

 

DIRECTV, Class A (a)(b)

 

444,900

 

18,797,025

 

DISH Network Corp., Class A (a)(b)

 

46,500

 

1,165,290

 

Time Warner Cable, Inc. (b)

 

16,400

 

1,027,788

 

Total

 

 

 

32,333,076

 

Specialty Retail 5.3%

 

 

 

 

 

AutoZone, Inc. (a)

 

56,024

 

17,882,301

 

GameStop Corp., Class A (a)(b)

 

308,200

 

7,119,420

 

Limited Brands, Inc.

 

419,430

 

16,152,249

 

Ross Stores, Inc.

 

159,849

 

12,578,518

 

Total

 

 

 

53,732,488

 

TOTAL CONSUMER DISCRETIONARY

 

 

 

105,427,556

 

CONSUMER STAPLES 11.7%

 

 

 

 

 

Beverages 0.8%

 

 

 

 

 

Coca-Cola Co. (The) (b)

 

23,274

 

1,572,391

 

Coca-Cola Enterprises, Inc.

 

249,801

 

6,215,049

 

Total

 

 

 

7,787,440

 

Food & Staples Retailing 4.9%

 

 

 

 

 

Kroger Co. (The) (b)

 

458,294

 

10,064,136

 

Safeway, Inc. (b)

 

174,400

 

2,900,272

 

Wal-Mart Stores, Inc. (b)

 

515,129

 

26,735,195

 

Walgreen Co.

 

306,382

 

10,076,904

 

Total

 

 

 

49,776,507

 

Food Products 1.4%

 

 

 

 

 

Hershey Co. (The)

 

238,528

 

14,130,399

 

 

Issuer

 

Shares

 

Value

 

 

 

 

 

 

 

Common Stocks (continued)

 

 

 

 

 

 

 

 

 

 

 

CONSUMER STAPLES (CONTINUED)

 

Household Products 0.3%

 

 

 

 

 

Kimberly-Clark Corp.

 

40,100

 

$

2,847,501

 

Tobacco 4.3%

 

 

 

 

 

Lorillard, Inc.

 

174,364

 

19,302,095

 

Philip Morris International, Inc.

 

393,800

 

24,565,244

 

Total

 

 

 

43,867,339

 

TOTAL CONSUMER STAPLES

 

 

 

118,409,186

 

ENERGY 11.7%

 

 

 

 

 

Energy Equipment & Services 1.4%

 

 

 

 

 

National Oilwell Varco, Inc.

 

278,537

 

14,266,665

 

Oil, Gas & Consumable Fuels 10.3%

 

 

 

 

 

Apache Corp.

 

188,100

 

15,093,144

 

Chevron Corp. (b)(c)

 

382,942

 

35,429,794

 

ConocoPhillips

 

302,558

 

19,157,973

 

Devon Energy Corp.

 

6,500

 

360,360

 

Exxon Mobil Corp.

 

185,711

 

13,488,190

 

Marathon Oil Corp. (b)

 

378,718

 

8,172,734

 

Tesoro Corp. (a)(b)

 

389,677

 

7,587,011

 

Valero Energy Corp.

 

230,861

 

4,104,709

 

Total

 

 

 

103,393,915

 

TOTAL ENERGY

 

 

 

117,660,580

 

FINANCIALS 12.8%

 

 

 

 

 

Capital Markets 1.7%

 

 

 

 

 

Franklin Resources, Inc. (b)

 

153,808

 

14,710,197

 

T Rowe Price Group, Inc. (b)

 

46,400

 

2,216,528

 

Total

 

 

 

16,926,725

 

Commercial Banks 0.1%

 

 

 

 

 

KeyCorp (b)

 

245,155

 

1,453,769

 

Consumer Finance 2.6%

 

 

 

 

 

Capital One Financial Corp. (b)

 

419,328

 

16,617,969

 

Discover Financial Services

 

426,796

 

9,790,700

 

Total

 

 

 

26,408,669

 

Diversified Financial Services 3.4%

 

 

 

 

 

Citigroup, Inc.

 

145,049

 

3,716,156

 

JPMorgan Chase & Co.

 

876,602

 

26,403,252

 

Moody’s Corp. (b)

 

140,100

 

4,266,045

 

Total

 

 

 

34,385,453

 

Insurance 3.7%

 

 

 

 

 

Aflac, Inc.

 

457,031

 

15,973,233

 

 


 

Issuer

 

Shares

 

Value

 

 

 

 

 

 

 

Common Stocks (continued)

 

 

 

 

 

FINANCIALS (CONTINUED)

 

 

 

 

 

Insurance (continued)

 

 

 

 

 

Hartford Financial Services Group, Inc.

 

99,887

 

$

1,612,176

 

Lincoln National Corp.

 

365,230

 

5,708,545

 

Prudential Financial, Inc. (b)

 

270,900

 

12,694,374

 

Torchmark Corp. (b)

 

34,700

 

1,209,642

 

Total

 

 

 

37,197,970

 

Real Estate Investment Trusts (REITs) 1.3%

 

 

 

Public Storage

 

25,100

 

2,794,885

 

Simon Property Group, Inc. (b)

 

92,586

 

10,182,608

 

Total

 

 

 

12,977,493

 

TOTAL FINANCIALS

 

 

 

129,350,079

 

HEALTH CARE 12.2%

 

 

 

 

 

Biotechnology 0.8%

 

 

 

 

 

Amgen, Inc.

 

26,900

 

1,478,155

 

Gilead Sciences, Inc. (a)

 

162,600

 

6,308,880

 

Total

 

 

 

7,787,035

 

Health Care Equipment & Supplies 0.3%

 

 

 

 

 

Baxter International, Inc.

 

62,313

 

3,498,252

 

Health Care Providers & Services 2.4%

 

 

 

 

 

UnitedHealth Group, Inc.

 

524,256

 

24,178,687

 

Pharmaceuticals 8.7%

 

 

 

 

 

Abbott Laboratories (b)

 

249,429

 

12,755,799

 

Bristol-Myers Squibb Co.

 

398,014

 

12,489,679

 

Eli Lilly & Co. (b)

 

593,448

 

21,939,773

 

Forest Laboratories, Inc. (a)

 

9,965

 

306,822

 

Johnson & Johnson (b)

 

13,882

 

884,422

 

Merck & Co., Inc.

 

321,533

 

10,517,345

 

Pfizer, Inc.

 

1,637,365

 

28,948,613

 

Total

 

 

 

87,842,453

 

TOTAL HEALTH CARE

 

 

 

123,306,427

 

INDUSTRIALS 10.0%

 

 

 

 

 

Aerospace & Defense 5.2%

 

 

 

 

 

General Dynamics Corp.

 

161,807

 

9,205,200

 

Lockheed Martin Corp. (b)

 

134,723

 

9,786,279

 

Northrop Grumman Corp. (b)

 

84,636

 

4,414,614

 

Raytheon Co.

 

374,184

 

15,292,900

 

United Technologies Corp.

 

195,563

 

13,759,812

 

Total

 

 

 

52,458,805

 

 

 

Issuer

 

Shares

 

Value

 

 

 

 

 

 

 

Common Stocks (continued)

 

 

 

 

 

INDUSTRIALS (CONTINUED)

 

 

 

 

 

Air Freight & Logistics 0.6%

 

 

 

 

 

United Parcel Service, Inc., Class B (b)

 

96,441

 

$

6,090,249

 

Commercial Services & Supplies 0.9%

 

 

 

 

 

Pitney Bowes, Inc. (b)

 

109,104

 

2,051,155

 

RR Donnelley & Sons Co. (b)

 

483,797

 

6,831,214

 

Total

 

 

 

8,882,369

 

Industrial Conglomerates 2.8%

 

 

 

 

 

General Electric Co. (b)

 

880,998

 

13,426,410

 

Tyco International Ltd. (d)

 

360,323

 

14,683,162

 

Total

 

 

 

28,109,572

 

Professional Services 0.5%

 

 

 

 

 

Dun & Bradstreet Corp. (The)

 

92,800

 

5,684,928

 

TOTAL INDUSTRIALS

 

 

 

101,225,923

 

INFORMATION TECHNOLOGY 19.3%

 

 

 

 

 

Computers & Peripherals 7.1%

 

 

 

 

 

Apple, Inc. (a)

 

143,000

 

54,508,740

 

Dell, Inc. (a)(b)

 

771,187

 

10,912,296

 

Lexmark International, Inc., Class A (a)

 

129,300

 

3,494,979

 

Western Digital Corp. (a)(b)

 

99,182

 

2,550,961

 

Total

 

 

 

71,466,976

 

IT Services 3.7%

 

 

 

 

 

International Business Machines Corp. (b)

 

211,708

 

37,055,251

 

Semiconductors & Semiconductor Equipment 4.7%

 

 

 

Atmel Corp. (a)

 

157,200

 

1,268,604

 

Intel Corp. (b)

 

994,939

 

21,222,049

 

LSI Corp. (a)

 

189,500

 

981,610

 

Micron Technology, Inc. (a)(b)

 

1,520,100

 

7,661,304

 

Novellus Systems, Inc. (a)(b)

 

23,600

 

643,336

 

Teradyne, Inc. (a)(b)

 

292,400

 

3,219,324

 

Texas Instruments, Inc. (b)

 

481,100

 

12,821,315

 

Total

 

 

 

47,817,542

 

Software 3.8%

 

 

 

 

 

Microsoft Corp.

 

1,518,777

 

37,802,360

 

TOTAL INFORMATION TECHNOLOGY

 

 

 

194,142,129

 

 


 

Issuer

 

Shares

 

Value

 

 

 

 

 

 

 

Common Stocks (continued)

 

 

 

 

 

MATERIALS 2.9%

 

 

 

 

 

Chemicals 1.3%

 

 

 

 

 

CF Industries Holdings, Inc.

 

6,332

 

$

781,305

 

Eastman Chemical Co.

 

179,024

 

12,268,515

 

Total

 

 

 

13,049,820

 

Metals & Mining 1.6%

 

 

 

 

 

Freeport-McMoRan Copper & Gold, Inc. (b)

 

528,889

 

16,104,670

 

TOTAL MATERIALS

 

 

 

29,154,490

 

TELECOMMUNICATION SERVICES 3.5%

 

 

 

 

 

Diversified Telecommunication Services 3.5%

 

 

 

AT&T, Inc.

 

711,894

 

20,303,217

 

Verizon Communications, Inc. (b)

 

422,398

 

15,544,246

 

Total

 

 

 

35,847,463

 

TOTAL TELECOMMUNICATION SERVICES

 

 

 

35,847,463

 

UTILITIES 4.1%

 

 

 

 

 

Electric Utilities 1.9%

 

 

 

 

 

Exelon Corp. (b)

 

454,413

 

19,362,538

 

Independent Power Producers & Energy Traders 0.9%

 

 

 

AES Corp. (The) (a)

 

902,739

 

8,810,733

 

Multi-Utilities 1.3%

 

 

 

 

 

Public Service Enterprise Group, Inc.

 

381,092

 

12,717,040

 

TOTAL UTILITIES

 

 

 

40,890,311

 

Total Common Stocks
(Cost: $974,448,349)

 

 

 

$

995,414,144

 

 

 

 

 

 

 

Limited Partnerships 0.2%

 

 

 

 

 

FINANCIALS 0.2%

 

 

 

 

 

Capital Markets 0.2%

 

 

 

 

 

WCAS Capital Partners II LP (a)(e)(f)(g)

 

4,212,137

 

1,995,100

 

TOTAL FINANCIALS

 

 

 

1,995,100

 

Total Limited Partnerships
(Cost: $4,212,137)

 

 

 

$

1,995,100

 

 

 

 

 

Shares

 

Value

 

 

 

 

 

 

 

Money Market Fund 0.4%

 

 

 

 

 

 

 

 

 

 

 

 

Columbia Short-Term Cash Fund, 0.125% (h)(i)

 

3,960,522

 

$

3,960,522

 

Total Money Market Fund
(Cost: $3,960,522)

 

 

 

$

3,960,522

 

 

Issuer

 

Effective
Yield

 

Par/
Principal/
Shares

 

Value

 

 

 

 

 

 

 

 

 

Investments of Cash Collateral Received for Securities on Loan 9.2%

 

Asset-Backed Commercial Paper 0.4%

 

 

 

 

 

Scaldis Capital LLC

 

 

 

 

 

 

 

10/04/11

 

0.550%

 

3,999,756

 

$

3,999,756

 

Total

 

 

 

 

 

3,999,756

 

 

 

 

 

 

 

 

 

Certificates of Deposit 1.8%

 

 

 

 

 

 

 

Bank of Montreal

 

 

 

 

 

 

 

11/14/11

 

0.250%

 

2,000,000

 

2,000,000

 

Banque et Caisse d’Epargne de l’Etat

 

 

 

 

 

12/06/11

 

0.380%

 

1,498,561

 

1,498,561

 

Branch Banking & Trust Corporation

 

 

 

 

 

10/11/11

 

0.200%

 

3,000,000

 

3,000,000

 

Clydesdale Bank PLC

 

 

 

 

 

 

 

12/30/11

 

0.550%

 

2,995,835

 

2,995,835

 

Credit Suisse

 

 

 

 

 

 

 

11/17/11

 

0.300%

 

2,000,000

 

2,000,000

 

DnB NOR ASA

 

 

 

 

 

 

 

11/23/11

 

0.300%

 

2,000,000

 

2,000,000

 

Landeskreditbank Baden-Wuerttemberg - Foerderbank

 

 

 

10/11/11

 

0.340%

 

2,000,000

 

2,000,000

 

Swedbank AB

 

 

 

 

 

 

 

10/24/11

 

0.260%

 

2,000,000

 

2,000,000

 

Total

 

 

 

 

 

17,494,396

 

 

 

 

 

 

 

 

 

Other Short-Term Obligations 0.2%

 

 

 

 

 

Natixis Financial Products LLC

 

 

 

 

 

 

 

10/03/11

 

0.430%

 

2,000,000

 

2,000,000

 

 

 

 

 

 

 

 

 

Repurchase Agreements 6.8%

 

 

 

 

 

 

 

Cantor Fitzgerald & Co.
dated 09/30/11, matures 10/03/11,
repurchase price $10,000,117 (j)

 

 

 

 

 

 

 

0.140%

 

10,000,000

 

10,000,000

 

MF Global Holdings Ltd.
dated 09/30/11, matures 10/03/11,
repurchase price $5,000,092 (j)

 

 

 

 

 

 

 

0.220%

 

5,000,000

 

5,000,000

 


 


 

Issuer

 

Effective
Yield

 

Par/
Principal/
Shares

 

Value

 

 

 

 

 

 

 

 

 

Investments of Cash Collateral Received for Securities on Loan (continued)

 

Repurchase Agreements (continued)

 

Mizuho Securities USA, Inc.
dated 09/30/11, matures 10/03/11,
repurchase price $20,000,267 (j)

 

 

 

 

 

 

 

0.160%

 

$

20,000,000

 

$

20,000,000

 

Natixis Financial Products, Inc.
dated 09/30/11, matures 10/03/11,
repurchase price $20,000,150 (j)

 

 

 

 

 

 

 

0.090%

 

20,000,000

 

20,000,000

 

 

 

Issuer

 

Effective
Yield

 

Par/
Principal/
Shares

 

Value

 

 

 

 

 

 

 

 

 

Investments of Cash Collateral Received for Securities on Loan (continued)

 

Repurchase Agreements (continued)

 

Pershing LLC
dated 09/30/11, matures 10/03/11, repurchase price $4,000,060 (j)

 

 

 

 

 

 

 

 

 

0.180%

 

$

4,000,000

 

$

4,000,000

 

RBS Securities, Inc.
dated 09/30/11, matures 10/03/11, repurchase price $9,751,527 (j)

 

 

 

 

 

 

 

 

 

0.150%

 

9,751,405

 

9,751,405

 

Total

 

 

 

 

 

68,751,405

 

 

 

 

 

 

 

 

 

Total Investments of Cash Collateral Received for Securities on Loan
(Cost: $92,245,557)

 

$

92,245,557

 

 

 

 

 

 

 

 

 

Total Investments
(Cost: $1,074,866,565) (k)

 

 

 

 

 

$

1,093,615,323(l)

 

Other Assets & Liabilities, Net

 

 

 

 

 

(85,546,016)

 

 

 

 

 

 

 

 

 

Net Assets

 

 

 

 

 

$

1,008,069,307

 


 

Investments in Derivatives

 

 

Futures Contracts Outstanding at September 30, 2011

 

 

 

Number of

 

 

 

 

 

 

 

 

 

 

 

Contracts

 

Notional

 

Expiration

 

Unrealized

 

Unrealized

 

Contract Description

 

Long (Short)

 

Market Value

 

Date

 

Appreciation

 

Depreciation

 

S&P 500 Index

 

12

 

$

3,378,000

 

Dec. 2011

 

$

 

$

(148,362

)

 

Notes to Portfolio of Investments

 

 

(a)

Non-income producing.

(b)

At September 30, 2011, security was partially or fully on loan.

(c)

At September 30, 2011, investments in securities included securities valued at $605,076 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts.

(d)

Represents a foreign security. At September 30, 2011, the value of foreign securities, excluding short-term securities, amounted to $14,683,162 or 1.46% of net assets.

(e)

At September 30, 2011, there was no capital committed to the LLC or LP for future investment.

(f)

Identifies issues considered to be illiquid as to their marketability. The aggregate value of such securities at September 30, 2011 was $1,995,100, representing 0.20% of net assets. Information concerning such security holdings at September 30, 2011 was as follows:

 

Security

 

Acquisition Dates

 

Cost

 

WCAS Capital Partners II LP

 

12-11-90 – 03-24-98

 

$

4,212,137

 

 


 

(g)

At September 30, 2011, the Fund owned one limited partnership investment that was purchased through a private offering and cannot be sold without prior registration under the Securities Act of 1933 or pursuant to an exemption therefrom. The investment is valued at fair value as determined in accordance with procedures approved by the Board of Trustees of the Fund. The acquisition dates of investment in the limited partnership, along with the cost and value at September 30, 2011, were as follows:

 

Security

 

Acquisition Date

 

Cost

 

Value (a)

 

WCAS Capital Partners II LP

 

12-11-90 – 03-24-98

 

$

4,212,137

 

$

1,995,100

 

 

(h)

The rate shown is the seven-day current annualized yield at September 30, 2011.

(i)

Investments in affiliates during the period ended September 30, 2011:

 

Issuer

 

Beginning Cost

 

Purchase Cost

 

Sales Cost/
Proceeds from
Sales

 

Realized
Gain/

Loss

 

Ending Cost

 

Dividends
or Interest
Income

 

Value

 

Columbia Short-Term Cash Fund

 

$

3,118,708

 

$

35,874,722

 

$

(35,032,908

)

$

 

$

3,960,522

 

$

1,512

 

$

3,960,522

 

 


 

(j)                                      The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund’s custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The value of securities and/or cash held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.

 

Cantor Fitzgerald & Co. (0.140%)

 

 

 

Security Description

 

Value

 

Fannie Mae Interest Strip

 

$          69,588

 

Fannie Mae Pool

 

6,119,221

 

Fannie Mae REMICS

 

431,949

 

Federal Home Loan Banks

 

97,371

 

Freddie Mac Non Gold Pool

 

2,090,376

 

Freddie Mac REMICS

 

514,607

 

Freddie Mac Strips

 

194,260

 

Ginnie Mae I Pool

 

109,937

 

Ginnie Mae II Pool

 

105,079

 

Government National Mortgage Association

 

145,666

 

United States Treasury Note/Bond

 

321,946

 

Total Market Value of Collateral Securities

 

$   10,200,000

 

MF Global Holdings Ltd. (0.220%)

 

 

 

Security Description

 

Value

 

Fannie Mae REMICS

 

$        286,842

 

Federal Farm Credit Bank

 

5,251

 

Federal Home Loan Banks

 

120,846

 

Federal Home Loan Mortgage Corp

 

158,802

 

Federal National Mortgage Association

 

248,803

 

Freddie Mac Gold Pool

 

5,781

 

Freddie Mac REMICS

 

434,122

 

Ginnie Mae I Pool

 

643,276

 

Ginnie Mae II Pool

 

384,328

 

Government National Mortgage Association

 

1,265,918

 

United States Treasury Note/Bond

 

1,546,082

 

Total Market Value of Collateral Securities

 

$     5,100,051

 

Mizuho Securities USA, Inc. (0.160%)

 

 

 

Security Description

 

Value

 

Fannie Mae Grantor Trust

 

$        196,727

 

Fannie Mae Pool

 

6,493,425

 

Fannie Mae REMICS

 

4,226,477

 

Fannie Mae Whole Loan

 

34,895

 

Federal Home Loan Bank of Chicago

 

41,504

 

Federal Home Loan Mortgage Corp. Structured Pass Through Securities

 

218,611

 

Freddie Mac Gold Pool

 

3,588,223

 

Freddie Mac REMICS

 

5,515,405

 

Ginnie Mae II Pool

 

84,733

 

Total Market Value of Collateral Securities

 

$   20,400,000

 

Natixis Financial Products, Inc. (0.090%)

 

 

 

Security Description

 

Value

 

Fannie Mae Interest Strip

 

$     5,357,399

 

Fannie Mae Pool

 

10,646,100

 

Fannie Mae REMICS

 

8,749

 

Freddie Mac Gold Pool

 

3,116,126

 

Freddie Mac Non Gold Pool

 

142,729

 

Freddie Mac REMICS

 

81,328

 

Freddie Mac Strips

 

659,409

 

Government National Mortgage Association

 

388,313

 

Total Market Value of Collateral Securities

 

$   20,400,153

 

 


 

Pershing LLC (0.180%)

 

 

 

Security Description

 

Value

 

Fannie Mae Pool

 

$    1,112,533

 

Fannie Mae REMICS

 

705,982

 

Fannie Mae Whole Loan

 

7,951

 

Fannie Mae-Aces

 

15,471

 

Freddie Mac REMICS

 

1,316,199

 

Ginnie Mae I Pool

 

635,778

 

Government National Mortgage Association

 

286,086

 

Total Market Value of Collateral Securities

 

$    4,080,000

 

RBS Securities, Inc. (0.150%)

 

 

 

Security Description

 

Value

 

Freddie Mac Gold Pool

 

$    9,946,477

 

Total Market Value of Collateral Securities

 

$    9,946,477

 

 

(k)                                   At September 30, 2011, the cost of securities for federal income tax purposes was approximately $1,074,867,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was:

 

Unrealized Appreciation

 

$

106,534,000 

 

Unrealized Depreciation

 

(87,786,000)

 

Net Unrealized Appreciation

 

$

18,748,000 

 

 

(l)                                      Securities are valued using policies described in the notes to financial statements in the most recent shareholder report.

 

Fair Value Measurements

 

Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category.

 

The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.  Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.

 

Fair value inputs are summarized in the three broad levels listed below:

 

·                            Level 1 - Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date (including NAV for open-end mutual funds).  Valuation adjustments are not applied to Level 1 investments.

 

·                            Level 2 – Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.).

 

·                            Level 3 – Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments).

 

Inputs that are used in determining fair value of an investment may include price information, credit data, volatility

 


 

statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.

 

Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments.  However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices.  Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager.  Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.

 

The following table is a summary of the inputs used to value the Fund’s investments as of September 30, 2011:

 

 

 

Fair value at September 30, 2011

 

 

 

Level 1

 

Level 2

 

Level 3

 

 

 

Description(a)

 

quoted prices

 

other

 

significant

 

Total

 

 

 

in active

 

significant

 

unobservable

 

 

 

 

 

markets for

 

observable

 

inputs

 

 

 

 

 

identical assets(b)

 

inputs

 

 

 

 

 

Equity Securities

 

 

 

 

 

 

 

 

 

Common Stocks

 

 

 

 

 

 

 

 

 

Consumer Discretionary

 

$    105,427,556

 

$                     —

 

$                  —

 

$    105,427,556

 

Consumer Staples

 

118,409,186

 

 

 

118,409,186

 

Energy

 

117,660,580

 

 

 

117,660,580

 

Financials

 

129,350,079

 

 

 

129,350,079

 

Health Care

 

123,306,427

 

 

 

123,306,427

 

Industrials

 

101,225,923

 

 

 

101,225,923

 

Information Technology

 

194,142,129

 

 

 

194,142,129

 

Materials

 

29,154,490

 

 

 

29,154,490

 

Telecommunication Services

 

35,847,463

 

 

 

35,847,463

 

Utilities

 

40,890,311

 

 

 

40,890,311

 

Total Equity Securities

 

995,414,144

 

 

 

995,414,144

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Limited Partnerships

 

 

 

 

 

 

 

 

 

Financials

 

 

 

1,995,100

 

1,995,100

 

Affiliated Money Market Fund(c)

 

3,960,522

 

 

 

3,960,522

 

Investments of Cash Collateral Received for Securities on Loan

 

 

92,245,557

 

 

92,245,557

 

Total Other

 

3,960,522

 

92,245,557

 

1,995,100

 

98,201,179

 

 

 

 

 

 

 

 

 

 

 

Investments in Securities

 

999,374,666

 

92,245,557

 

1,995,100

 

1,093,615,323

 

Derivatives(d)

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Futures Contracts

 

(148,362)

 

 

 

(148,362

)

Total

 

$    999,226,304

 

$      92,245,557

 

$     1,995,100

 

$ 1,093,466,961

 

 

The Fund’s assets assigned to the Level 2 input category are generally valued using the market approach, in which a security’s value is determined

through reference to prices and information from market transactions for similar or identical assets.

 

The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed most appropriate in the circumstances. Certain Limited Partnerships classified as Level 3 securities are valued using the market approach. To determine fair value for these securities, management considered various factors which may have included, but were not limited to, estimated cash flows of the securities and observed yields on securities management deemed comparable.

 

(a) See the Portfolio of Investments for all investment classifications not indicated in the table.

 

(b) There were no significant transfers between Levels 1 and 2 during the period.

 

(c) Money market fund that is a sweep investment for cash balances in the Fund at September 30, 2011.

 

(d) Derivative instruments are valued at unrealized appreciation (depreciation).

 

The following table is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.

 

 

 

 

 

 

 

 

 

 

 

Limited

 

 

 

Partnerships

 

Balance as of December 31, 2010

 

$     2,019,088

 

Accrued discounts/premiums

 

 

Realized gain (loss)

 

 

Change in unrealized appreciation (depreciation)*

 

(23,988

)

Sales

 

 

Purchases

 

 

Transfers into Level 3

 

 

Transfers out of Level 3

 

 

Balance as of September 30, 2011

 

$    1,995,100

 

 

 

*Change in unrealized appreciation (depreciation) relating to securities held at September 30, 2011 was $(23,988).

 

Transfers in and/or out of Level 3 are determined based on the fair value at the beginning of the period for security positions held throughout the period.


 

Item  2. Controls and Procedures.

 

(a)

The registrant’s principal executive officer and principal financial officers, based on their evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-Q is accumulated and communicated to the registrant’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

 

(b)

There was no change in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

 

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.

 



 

SIGNATURES

 

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

 

(Registrant)

Tri-Continental Corporation

 

 

By

 

 

 

/s/ J. Kevin Connaughton

 

 

J. Kevin Connaughton

 

 

President and Principal Executive Officer

 

 

 

 

Date

November 22, 2011

 

 

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/ J. Kevin Connaughton

 

 

J. Kevin Connaughton

 

 

President and Principal Executive Officer

 

 

 

 

Date

November 22, 2011

 

 

 

By

 

 

 

/s/ Michael G. Clarke

 

 

Michael G. Clarke

 

 

Treasurer and Principal Financial Officer

 

 

 

 

Date

November 22, 2011