N-30B-2 1 c39582_n30b-2.htm

Management Discussion
and
Third Quarter Report 2005

 

 

 

 

Tri-Continental
Corporation

 

 

 

 

an investment you can live with

Tri-Continental Corporation

This Management Discussion is intended only for the information of Stockholders who have received the current prospectus for Tri-Continental Corporation. You should consider the investment risks, charges, and expenses of Tri-Continental before purchasing shares. The prospectus, which contains information about these factors and other information, should be read carefully before purchasing shares. The prospectus may be obtained by calling Stockholder Services at 800-TRI-1092.

The views and opinions expressed are those of the Portfolio Managers, are provided for general information only, and do not constitute specific tax, legal, or investment advice to, or recommendations for, any person. There can be no guarantee as to the accuracy of market forecasts. Opinions, estimates, and forecasts may be changed without notice. Tri-Continental is actively managed, and its holdings are subject to change. For a complete listing of portfolio holdings, please consult Tri-Continental’s third quarter report.

TRI-CONTINENTAL MANAGEMENT DISCUSSION
Interview with Your Portfolio Managers, Jack Cunningham and Michael McGarry

What economic and market conditions impacted Tri-Continental’s portfolio for the three months ended September 30, 2005?

Factors that impacted Tri-Continental’s performance for the period included rising interest rates, higher oil prices, and the effects of Hurricanes Katrina and Rita. The quarter began with the markets emerging from what Federal Reserve Chairman Alan Greenspan referred to as an economic “soft patch.” The US Treasury yield curve continued to flatten (short-term rates moved higher while long-term rates moved lower) throughout most of the quarter, with longer-term rates beginning to move up in September. Consumer stocks suffered as a result of higher gas prices and the prospect of higher heating costs this winter. Despite this activity, the markets held up well. Energy and Utilities were the best performing economic sectors of the S&P 500 Index. The Technology sector also posted a strong quarter, which was a bit unusual given that, historically, Energy and Technology have fairly negative correlations. Consumer spending and corporate profits continued to remain robust.

What can you tell us about Tri-Continental’s investment results and portfolio strategy during the third quarter of 2005?

For the three months ended September 30, 2005, Tri-Continental Corporation posted a total return of 2.02% based on net asset value and 2.86% based on market price. The Corporation’s benchmark, the S&P 500 Index, returned 3.60%, and the Corporation’s peers, as measured by the Lipper Closed-End Growth & Income Funds Average, returned 2.85% for the same period. Tri-Continental’s largest sector weightings as of the close of the period were Information Technology, followed by Financials and Health Care.

We decreased Tri-Continental’s sector weighting in Energy and Utilities during the period. We sold positions within these sectors that we believe had already performed quite well and whose valuations we thought were no longer attractive. These sectors continued to post strong performance, however, and Tri-Continental’s relative

Not part of third quarter report

1

Tri-Continental Corporation

underweighting in each contributed to its underperformance for the three-month period. Entering the third quarter, Tri-Continental’s largest sector weighting was Financials; the portfolio was underweight, relative to the S&P 500, and we continued to scale back the portfolio’s exposure within Financials, amid expectations of a continued flattening in the yield curve and rising interest rates. While this underweight in Financials proved helpful, stock selection within the sector further contributed to Tri-Continental’s relative underperformance. Sectors that made the most positive contributions to performance for the period were Information Technology, Energy, and Consumer Staples.

Tri-Continental’s investment strategy for the three months included a modest repositioning of the portfolio. The Corporation took profits in sectors where securities the portfolio held performed well and where we were concerned about valuations, such as Energy and Utilities. We redeployed the proceeds to Information Technology and Health Care, sectors we believe to possess more attractive growth prospects and valuations. The Corporation’s strategy also included the writing of “covered calls.” By writing a covered call, we agree to sell shares of a particular security that Tri-Continental already holds in its portfolio, which we believe has already performed well, and which we would feel comfortable selling should it reach the higher strike price designated by the call option. This strategy enables Tri-Continental to add incremental returns in the form of call premiums.

What is your outlook?

We expect further appreciation in stocks, but caution that this could be somewhat dependent on oil prices and indications from the Fed that it is close to finishing its series of interest rate increases. We have seen a small retreat in oil prices, which we believe will help boost consumer confidence. An increase in consumer confidence should benefit the markets and economy overall. Consumer cyclical stocks that were hurt in the third quarter look more attractive, and we may seek incremental investment opportunities there as well as in other economic sectors.

We remain optimistic that we will see decent economic growth in the fourth quarter of the year. The hurricanes will certainly slow growth a bit, but GDP growth in the first quarter of next year should increase as reconstruction gets under way. We are keeping an eye on inflation, due to higher energy costs and, in part, to the effects of the hurricanes. We are not overly concerned, however, as we believe a retreat in oil prices overall will prove beneficial to the overall economy.

Not part of third quarter report

2

Tri-Continental Corporation

THIRD QUARTER REPORT 2005

November 21, 2005

To the Stockholders:

     Your third quarter Stockholder report for Tri-Continental Corporation follows this letter. The report contains Tri-Continental’s investment results and portfolio of investments.

     For the three months ended September 30, 2005, the Corporation posted a total return of 2.02% based on net asset value and 2.86% based on market price. For the same period, the S&P 500 Index returned 3.60% and the Lipper Closed-End Growth & Income Funds Average returned 2.85% .

     On November 17, 2005, the Board of Directors voted to renew the Corporation’s stock repurchase program, which allows the Corporation to repurchase up to 5% of its common stock in the open marker from January 1, 2006 through December 31, 2006, as long as its discount to net asset value exceeds 10%. We believe stockholders benefit from the renewal of the stock repurchase program. It increases the liquidity of the Corporation’s common stock. Additionally, it reduces the long-term growth in the number of shares outstanding, and shares repurchased under the program are accretive to net asset value.

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

By order of the Board of Directors,


William C. Morris
Chairman


Brian T. Zino
President


               

1

Tri-Continental Corporation

Investment Results Per Common Share
TOTAL RETURNS
For Periods Ended September 30, 2005
           
           
Average Annual
    Three   Nine   One   Three   Five   Ten
    Months*   Months*   Year   Years   Years   Years
     
     
     
     
     
     
Market Price    2.86 %    0.83 %    11.65 %    12.90 %    (2.36 )%    7.23 % 
Net Asset Value    2.02     0.25     10.57     14.05     (2.64 )    7.00  
Lipper Closed-End                         
     Growth & Income 
                       
     Funds Average** 
  2.85     3.67     13.16     15.49     2.74     8.40  
 
S&P 500 Index**    3.60     2.77     12.25     16.71     (1.49 )    9.49  

PRICE PER SHARE
               
  September 30, 2005    June 30, 2005    March 31, 2005    December 31, 2004 
     
     
     
Market Price  $18.26      $17.81      $17.80      $18.28   
Net Asset Value  21.72    21.36    21.00    21.87 

DIVIDEND, CAPITAL GAIN AND YIELD INFORMATION
For the Nine Months Ended September 30, 2005
      Capital Gain      
     
         
  Dividends Paid‡    Realized†    Unrealized††    SEC 30-Day YieldØ
     
  $0.17    $1.70    $0.46    1.42 % 
Performance data quoted represents past performance and does not guarantee 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 Fund as of the most recent month end will be made available at www.seligman.com1 by the seventh business day following that month end. The Manager made certain payments to the Corporation in May 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 the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
*    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 Index 
    (the “S&P 500”) are unmanaged benchmarks that assume reinvestment of all distributions. The Lipper Average excludes the effect of any 
    costs associated with the purchase of shares, and the S&P 500 excludes the effect of fees and sales charges. 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 $1.875 per share. 
†    Information does not reflect the effect of capital loss carryforwards that are available to offset these and future realized capital gains. 
††    Represents the per share amount of net unrealized appreciation of portfolio securities as of September 30, 2005. 
Ø    Current yield, representing the annualized yield for the 30-day period ended September 30, 2005, has been computed in accordance with 
    SEC regulations and will vary. 
1    The reference to Seligman’s website is an inactive textual reference and information contained in or otherwise accessible through Seligman’s 
    website does not form a part of this report or the Corporation's prospectus. 

2

Tri-Continental Corporation

Largest Portfolio Changes
July 1, 2005 to September 30, 2005
   
Largest Purchases  Largest Sales 
Albertson's Inc.*  Crown Castle International Corp** 
Google Inc.*  MBNA Corporation** 
Advanced Micro Devices, Inc.*  Exxon Mobil Corporation 
ConocoPhillips  Ameren Corporation** 
Bank of America Corporation  Novell, Inc.** 
Johnson & Johnson  Nortel Networks Corporation** 
Chevron Corporation  PPL Corporation** 
Valeant Pharmaceuticals International*  BP p.l.c. (ADR)** 
Corning Incorporated*  Marriott International, Inc. Class A** 
Wachovia Corporation  Duke Energy Corporation** 

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
September 30, 2005

   
Cost
 
Value
   
(000s)
 
(000s)
          
General Electric Company    $  97,093   $  87,055
Citigroup Inc.      75,738     81,860
Microsoft Corporation      80,040     75,453
Altria Group, Inc.      37,784     61,583
Exxon Mobil Corporation      36,062     60,384
Pfizer Inc.      77,064     54,585
Bank of America Corporation      52,386     52,084
Johnson & Johnson      45,282     47,470
Wal-Mart Stores, Inc.      58,033     44,864
American International Group      43,109     44,549
    $  602,591   $  609,887

3

Tri-Continental Corporation

Portfolio of Investments (unaudited)
  
September 30, 2005 

   
Shares
    Value 
           
COMMON STOCKS        
   AND WARRANTS 98.4%      
AEROSPACE AND         
   DEFENSE 1.6%         
General Dynamics Corporation    105,900    
$
12,660,345 
Honeywell International Inc.    688,900     25,833,750 
        38,494,095 
AIR FREIGHT AND         
   LOGISTICS 0.5%         
FedEx Corp.    149,610     13,035,519 
BEVERAGES 1.9%         
Coca-Cola Company (The)    633,900     27,378,141 
PepsiCo, Inc.    316,200     17,931,702 
        45,309,843 
BIOTECHNOLOGY 1.9%         
Amgen Inc.*    289,100 (1)    23,026,815 
Pharmion Corporation*    998,600     21,754,501 
        44,781,316 
BUILDING PRODUCTS 0.5%         
Masco Corporation    377,300     11,575,564 
CAPITAL MARKETS 3.0%         
Bank of New York         
     Company, Inc. (The) 
  633,500     18,631,235 
Goldman Sachs         
     Group, Inc. (The)    130,600     15,878,348 
Merrill Lynch & Co. Inc.    313,400     19,227,090 
Morgan Stanley    340,970     18,391,922 
        72,128,595 
CHEMICALS 2.4%         
Dow Chemical Co. (The)    396,900     16,538,823 
E.I. Du Pont de Nemours         
     and Company    599,400     23,478,498 
Praxair, Inc.    385,500     18,477,015 
        58,494,336 
COMMERCIAL BANKS 3.1%         
Bank of America Corporation    1,237,140     52,083,594 
Wachovia Corporation    483,163     22,993,727 
        75,077,321 
COMMERCIAL SERVICES         
     AND SUPPLIES 2.3% 
       
Cendant Corporation    1,400,100     28,898,064 
Waste Management Inc.    888,100     25,408,541 
        54,306,605 
             
   
Shares or 
       
   
Warrants 
      Value 
COMMUNICATIONS             
     EQUIPMENT 5.9%             
Cisco Systems, Inc.*   
1,994,180 
shs.   $ 35,745,677 
Corning Incorporated*    835,500        16,150,215 
Lucent Technologies, Inc.*    6,389,900        20,767,175 
Lucent Technologies Inc.             
     (exercise price of $2.75, 
           
     expiring 12/10/2007)    6,919,689  wts.     6,608,303 
Nokia Corp. (ADR)    2,357,700  shs.     39,868,707 
QUALCOMM Inc.    512,100        22,883,188 
            142,023,265 
 
COMPUTERS AND             
     PERIPHERALS 3.3% 
           
Apple Computer, Inc.*    115,200        6,176,448 
Dell Inc.*    241,860        8,270,403 
EMC Corporation*    1,655,600        21,423,464 
International Business             
     Machines Corporation 
  537,820        43,143,920 
            79,014,235 
 
CONSUMER FINANCE 0.6%             
American Express Company    263,530        15,137,163 
CONTAINERS AND             
     PACKAGING 0.9%             
Smurfit-Stone             
     Container Company* 
  2,167,600        22,434,660 
DIVERSIFIED CONSUMER             
     SERVICES 0.6%             
ServiceMaster Company (The)    986,000        13,350,440 
DIVERSIFIED FINANCIAL             
     SERVICES 5.3%             
CIT Group Inc.    132,800        5,999,904 
Citigroup Inc.    1,798,330        81,859,982 
J.P. Morgan Chase & Co.    1,150,000        39,019,500 
            126,879,386 
 
DIVERSIFIED             
     TELECOMMUNICATION 
           
     SERVICES 2.4%             
Citizens Communications             
     Company    1,573,500        21,320,925 
SBC Communications Inc.    371,500        8,904,855 
Verizon Communications Inc.    847,600        27,708,044 
            57,933,824 
 

See footnotes on page 8.

4

Tri-Continental Corporation

Portfolio of Investments (unaudited) 
 
September 30, 2005 

   
Shares
      Value 
           
ENERGY EQUIPMENT           
   AND SERVICES 1.1%           
National Oilwell Varco Inc.*    93,700 (1)   
$ 
6,165,460 
Tidewater Inc.    300,400 (1)      14,620,468 
Transocean Inc.*    105,300 (1)      6,455,943 
          27,241,871 
FOOD AND STAPLES           
   RETAILING 4.6%           
Albertson’s, Inc.    1,250,400 (1)      32,072,760 
CVS Corporation    412,800       11,975,328 
Kroger Company (The)*    1,049,400       21,607,146 
Wal-Mart Stores, Inc.    1,023,820       44,863,793 
          110,519,027 
FOOD PRODUCTS 0.5%           
McCormick & Company,           
     Incorporated    380,600       12,418,978 
HEALTH CARE EQUIPMENT           
   AND SUPPLIES 1.0%           
Boston Scientific Corporation*    515,400       12,044,898 
Medtronic, Inc.    217,400       11,656,988 
          23,701,886 
HEALTH CARE PROVIDERS           
   AND SERVICES 1.4% 
         
Aetna Inc.    78,600       6,770,604 
HCA Inc.    241,000       11,548,720 
WellPoint Inc.*    215,200       16,316,464 
          34,635,788 
HOTELS, RESTAURANTS           
   AND LEISURE 0.6%           
Applebee's International, Inc.    669,600       13,850,676 
HOUSEHOLD PRODUCTS 1.0%        
Colgate-Palmolive Company    231,200       12,205,048 
Procter & Gamble           
     Company (The)    219,212       13,034,346 
          25,239,394 
INDUSTRIAL           
   CONGLOMERATES 5.2% 
         
General Electric Company    2,585,550       87,055,469 
Tyco International Ltd.    1,427,640       39,759,774 
          126,815,243 
             
   
Shares
      Value 
 
INSURANCE 2.7%           
American International           
     Group, Inc.    719,000    
$ 
44,549,240 
Prudential Financial, Inc.    310,700       20,990,892 
          65,540,132 
INTERNET SOFTWARE           
   AND SERVICES 1.3%           
Google Inc.*    68,800       21,749,056 
Yahoo!, Inc.*    291,500       9,871,648 
          31,620,704 
MACHINERY 1.5%           
Deere & Company    190,400       11,652,480 
Illinois Tool Works Inc.    284,380       23,413,005 
          35,065,485 
MEDIA 5.3%           
Clear Channel           
     Communications, Inc.    506,400       16,655,496 
Comcast Corporation Class A*    732,500       21,480,562 
News Corp. Class A    1,260,200       19,646,518 
Time Warner Inc.    1,880,300       34,052,233 
Univision Communications Inc.           
     Class A*    770,000       20,428,100 
Viacom Inc.    497,400       16,419,174 
          128,682,083 
METALS AND MINING 0.9%           
Alcoa Inc.    431,300       10,532,346 
Freeport-McMoRan           
     Copper & Gold, Inc. Class B 
  227,600       11,059,084 
          21,591,430 
MULTILINE RETAIL 1.4%           
Dollar General Corporation    1,237,300       22,692,082 
Federated Department           
     Stores, Inc.    179,800       12,023,226 
          34,715,308 
OIL, GAS AND           
   CONSUMABLE FUELS 5.5% 
         
Chevron Corporation    525,900 (1)      34,041,507 
ConocoPhillips    450,200 (1)      31,473,482 
Exxon Mobil Corporation    950,325 (1)      60,383,650 
Pogo Producing Company    108,200 (1)      6,377,308 
          132,275,947 

See footnotes on page 8.

5

Tri-Continental Corporation

Portfolio of Investments (unaudited) 
 
September 30, 2005 

    Shares      Value 
 
          
PERSONAL           
   PRODUCTS 0.9%           
Avon Products, Inc.    385,500   
$ 
10,408,500 
Gillette Company    206,200      12,000,840 
          22,409,340 
PHARMACEUTICALS 9.9%           
Andrx Corp.*    1,208,700      18,644,197 
Forest Laboratories, Inc.*    488,200      19,025,154 
Johnson & Johnson    750,163      47,470,315 
Lilly Eli & Company    310,600      16,623,312 
Novartis (ADR)    506,300      25,821,300 
Pfizer Inc.    2,186,038      54,585,369 
Sanofi-Aventis (ADR)    288,500      11,987,175 
Valeant Pharmaceuticals           
     International    980,100      19,680,408 
Wyeth    532,300      24,629,521 
          238,466,751 
SEMICONDUCTORS AND           
   SEMICONDUCTOR           
   EQUIPMENT 2.7%           
Advanced Micro Devices, Inc.*    915,000      23,058,000 
Broadcom Corporation Class A*    398,500      18,695,628 
Intel Corporation    944,590      23,279,421 
          65,033,049 
SOFTWARE 6.1%           
Computer Associates           
     International, Inc.    808,500      22,484,385 
Mercury Interactive           
     Corporation*    321,600      12,732,144 
Microsoft Corporation    2,933,056      75,452,866 
Symantec Corporation*    1,569,174      35,533,945 
          146,203,340 
SPECIALTY RETAIL 1.8%           
The Gap, Inc.    658,200      11,472,426 
The Home Depot, Inc.    491,600      18,749,624 
Limited Brands, Inc.    608,300      12,427,569 
          42,649,619 
THRIFTS AND           
   MORTGAGE FINANCE 1.5% 
         
Freddie Mac    223,700      12,630,102 
Fannie Mae    544,700      24,413,454 
          37,043,556 

 
Shares, Principal Amount,
     
 
Partnership Interest
     
 
or Shares Subject to Call
    Value 
 
          
TOBACCO 2.5%         
Altria Group, Inc. 
835,480
  shs.   $ 61,583,231 
   
WIRELESS         
   TELECOMMUNICATION
       
   SERVICES 2.8%         
American Tower Corporation        
     Class A*  1,232,600       30,753,369 
Nextel Partners, Inc. Class A* 503,100       12,620,263 
Sprint Nextel Corporation  981,900       23,349,582 
        66,723,214 
   
TOTAL COMMON STOCKS        
   AND WARRANTS 
      2,374,002,219 
     
US TREASURY NOTES 0.3%
         
US Treasury Notes 
       
     3.375%, 2/28/2007 
$6,900,000
(1)      6,826,694 
TRI-CONTINENTAL        
   FINANCIAL DIVISION 0.1%
       
WCAS Capital         
     Partners II, L.P.† 
4,301,124       1,792,911 
Whitney Subordinated 
       
     Debt Fund, L.P.† 
1,507,882       410,272 
TOTAL TRI-CONTINENTAL        
   FINANCIAL DIVISION
      2,203,183 
   
CALL OPTIONS         
   PURCHASED 0.4%
       
CHEMICALS 0.0%         
E.I. Du Pont de Nemours and        
     Company, expiring 
       
     January 2008 at $35 
150,000   shs.     1,080,000 
COMMUNICATIONS         
   EQUIPMENT 0.1% 
       
Corning Incorporated,         
     expiring January 2006 at $20
1,378,200       2,067,300 
ELECTRONIC EQUIPMENT
       
   AND INSTRUMENTS 0.0% 
       
Symbol Technologies Inc.,         
     expiring January 2006 at $10
780,900       702,810 
FOOD AND STAPLES         
   RETAILING 0.0% 
       
Albertson's, Inc., expiring         
     March 2006 at $25 
222,400       511,520 

See footnotes on page 8.

6

Tri-Continental Corporation

Portfolio of Investments (unaudited)
September 30, 2005

 
Principal Amount or
     
 
Shares Subject to Call
    Value 
 
     
INDUSTRIAL         
   CONGLOMERATES 0.1%         
3M Company, expiring         
     January 2008 at $70 
249,000
  shs.   $ 3,037,800 
   
PHARMACEUTICALS 0.2% 
       
Andrx Corporation, expiring         
     January 2008 at $15  796,800       3,346,560 
WIRELESS         
   TELECOMMUNICATION         
   SERVICES 0.0%         
Nextel Partners Inc.,         
     expiring October 2005 at $30  166,600       8,330 
Nextel Partners Inc., expiring 
       
     October 2005 at $27.50  253,600       19,020 
Nextel Partners Inc., expiring 
       
     November 2005 at $27.50  168,800       42,200 
Nextel Partners Inc., expiring 
       
     November 2005 at $30  513,100       51,310 
Nextel Partners Inc., expiring 
       
     January 2007 at $25  320,000       752,000 
        872,860 
   
TOTAL CALL OPTIONS         
   PURCHASED        11,618,850 
   
SHORT-TERM HOLDINGS 1.4%        
   US TREASURY NOTES 0.7% 
       
US Treasury Notes         
     5.75%, 11/15/2005  $6,050,000 (1)      6,067,727 
US Treasury Notes         
     1.875%, 12/31/2005  5,950,000 (1)      5,926,063 
US Treasury Notes         
     2.25%, 4/30/2006  5,615,000 (1)      5,561,483 
        17,555,273 
   
REPURCHASE         
   AGREEMENT 0.7%         
State Street Bank 3.1%, dated 
       
     9/30/2005, maturing 10/3/2005,         
     in the amount of $17,139,427,         
     collateralized by: $17,680,000         
     US Treasury Notes 3.625%,         
     7/15/2006, with a fair market         
     value of $17,481,100  17,135,000       17,135,000 

   
Shares 
     
   
Subject to Call/Put 
    Value  
 
     
TOTAL SHORT-TERM             
     HOLDINGS          $  34,690,273  
         
 
TOTAL INVESTMENTS         
   100.6%            2,429,341,219  
OTHER ASSETS LESS 
           
   LIABILITIES (0.6%)            (13,807,725 )
 
NET INVESTMENT 
           
   ASSETS 100.0%          $  2,415,533,494  
         
 
CALL AND PUT             
   OPTIONS WRITTEN             
CALL OPTIONS WRITTEN 
           
Amgen Inc. expiring             
     October 2005 at $85    67,500      $  (50,625 )
Chevron Corporation,             
     expiring October 2005             
     at $65    263,000        (355,050 )
ConocoPhillips, expiring             
     October 2005 at $70    225,000        (416,250 )
Exxon Mobil Corporation, 
           
     expiring October 2005             
     at $65    317,500        (238,125 )
National Oilwell Varco Inc. 
           
     expiring October 2005             
     at $65    93,700        (257,675 )
Pogo Producing Company, 
           
     expiring October 2005             
     at $55    108,200        (481,490 )
Tidewater Inc. expiring             
     October 2005 at $45    300,400        (1,171,560 )
Transocean Inc., expiring             
     October 2005 at $65    105,300        (73,710 )
 
            (3,044,485 )
 
PUT OPTIONS WRITTEN 
           
Albertson’s, Inc. expiring             
     March 2006 at $25    222,400        (422,560 )
Apple Computer, Inc.,             
     expiring October 2005             
     at $52.50    115,200        (201,600 )
Corning Incorporated,             
     expiring November 2005             
     at $17.50    337,800        (168,900 )

See footnotes on page 8.

7

Tri-Continental Corporation

Portfolio of Investments (unaudited)
September 30, 2005
               
   
Shares Subject to Put 
    Value  
 
     
PUT OPTIONS WRITTEN (continued)         
Nextel Partners, Inc.             
     expiring January 2007 
           
     at $30    182,600     
$ 
(913,000 ) 
 
 
            (1,706,060 ) 
 
 
TOTAL CALL AND             
   PUT OPTIONS WRITTEN 
       
$ 
(4,750,545 ) 
 
 

*
       Non-income producing security.
**
   The cost of investments for federal income tax purposes was $2,380,449,749. The tax basis gross unrealized appreciation and depreciation of portfolio securities were $211,439,584 and $162,548,114, respectively.
†
   At September 30, 2005, the Tri-Continental Financial Division 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 September 30, 2005, were as follows:
               
        Investment   
Acquisition Date(s) 
 
Cost 
 
Value 
 
          
          
  WCAS Capital Partners II, L.P.   
12/11/90 to 3/24/98 
 
$
4,301,124 
 
$
1,792,911 
  Whitney Subordinated Debt Fund, L.P.   
7/12/89 to 11/10/98 
 
1,507,882 
 
410,272 
  Total       
$
5,809,006 
 
$
2,203,183 

(1) All or part of the security is held as collateral for options written.

ADR - American Depositary Receipt.

Security Valuation - Securities (including options) 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, inter-day market disruptions, intra-day trading halts, and extreme market volatility.

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.

8

Tri-Continental Corporation

Stockholder Services

     Tri-Continental provides a number of services to make maintaining an investment in its Common Stock more convenient. Please consult Tri-Continental’s prospectus for the terms and conditions of these services.

Automatic Dividend Investment and Cash Purchase Plan. Subject to the terms and conditions set forth in the prospectus, Stockholders may automatically purchase additional shares with dividends and capital gains. There is no charge for this service. Stockholders may also, subject to the terms and conditions of the prospectus, purchase additional shares directly from the Corporation. There is a service fee of a maximum of $2.00 for each cash purchase transaction.

Automatic Cash Withdrawal Plan. Stockholders who hold common shares with a market value of $5,000 or more may elect to receive a fixed amount from their investment at regular intervals by selling their shares to the Corporation.

Traditional Individual Retirement Account (IRA). Stockholders who have earned income and are under age 70 1 / 2 may contribute up to $4,000 per year to a Traditional IRA for 2005. A working or non-working spouse may also contribute up to $4,000 to a separate Traditional IRA for 2005. Additionally, individuals who reach age 50 prior to the end of a taxable year may make “catch-up contributions” to a Traditional IRA of up to $500 (increasing to $1,000 for years beginning after 2005). Contributions to a Traditional IRA may be deductible or non-deductible. If you are single and not covered by an employer’s retirement plan, your contribution will always be deductible. For individuals who are covered by a plan, contributions will be fully deductible if your modified adjusted gross income (MAGI) in 2005 is less than $50,000. For spouses who are both covered by a plan, contributions will be fully deductible if your MAGI is less than $70,000. If one spouse does not work or is not covered by a retirement plan, that spouse’s contribution will be fully deductible provided your household MAGI does not exceed $150,000. If your contribution is not deductible, you may still take advantage of the tax-deferred accumulation of earnings in your Traditional IRA.

Rollover IRA. You may be eligible to roll over a distribution of assets received from another IRA, a qualified employee benefit plan, or tax-deferred annuity into a Rollover IRA with Tri-Continental. To avoid a tax penalty, the transfer to a Rollover IRA must occur within 60 days of receipt of the qualifying distribution. If you do not make a direct transfer of a distribution from a qualified employee benefit plan or a tax-deferred annuity to a Rollover IRA, the payor of the distribution must withhold 20% of the distribution.

Roth IRA. You (and a working or non-working spouse) may each make an after-tax contribution of up to $4,000 per year to a Roth IRA provided you have earned income and meet the eligibility requirements. Your MAGI must be less than $95,000 (individuals) or $150,000 (married couples) to be eligible to make a full contribution to a Roth IRA. You are eligible to make a partial Roth IRA contribution if your MAGI is below $110,000 (individuals) or $160,000 (married couples). Total combined contributions to a Roth IRA and a Traditional IRA cannot exceed $4,000 in any year. Additionally, individuals who reach age 50 prior to the end of a taxable year may make “catch-up contributions” to either a Roth IRA or Traditonal IRA of up to $500 (increasing to $1,000 for years beginning after 2005). Earnings grow tax-free and will be distributed to you tax-free and penalty-free provided that you hold your account for at least five years and you take the distribution either after age 59 1 / 2 , for disability, upon death, or to make a first-time home purchase (up to $10,000). Unlike

9

Tri-Continental Corporation

Stockholder Services (continued)

a Traditional IRA, you may contribute to a Roth IRA even if you are over age 70 1 / 2 (if you have earned income), and you are not required to take minimum distributions at age 70 1 / 2 . You may convert an existing Traditional IRA to a Roth IRA to take advantage of tax-free distributions. You must pay taxes on any earnings and deductible contributions in your Traditional IRA when converting it to a Roth IRA. Talk to your financial advisor for more details on converting your Traditional IRA.

Retirement Planning — Qualified Plans. Unincorporated businesses and the self-employed may take advantage of the same benefits in their retirement plans that are available to corporations. Contribution levels can go as high as 100% of earned income (reduced by plan contributions), to a maximum of $42,000 per participant. For retirement plan purposes, no more than $210,000 may be taken into account as earned income under the plan in 2005. Social Security integration and employee vesting schedules are also available as options in the Tri-Continental prototype retirement plans. Although you already may be participating in an employer’s retirement plan, you may be eligible to establish another plan based upon income from other sources, such as director’s fees.

Retirement Plan Services provides information about our prototype retirement plans. The toll-free telephone number is (800) 445-1777 in the US and (212) 682-7600 outside the US.

Gifts Free of Federal Tax are often made using Tri-Continental Common Stock. You may give as much as $11,000 a year to as many individuals as desired free of federal gift tax, and a married couple may give up to $22,000 a year.

Stock Repurchase Program. On November 18, 2004, the Board of Directors authorized the renewal of Tri-Continental’s ongoing share repurchase program. The program authorizes the Corporation to repurchase up to 5.6% of the Corporation’s shares during the period from renewal through December 31, 2005, provided that the discount of a share’s market price to its net asset value (“NAV”) remains greater than 10%. The stock repurchase plan seeks, among other things, to moderate the growth in the number of shares outstanding, increase the net asset value of outstanding shares, increase the liquidity of Tri-Continental’s common stock, and reduce the dilutive impact on Stockholders who do not take capital gains distributions, when such distributions are made, in additional shares.

     Between November 18, 2004 and September 30, 2005, 4,812,667 million shares were repurchased. This is approximately 4.2% of the shares outstanding at the beginning of the period. The repurchase of additional shares is expected to continue through December 31, 2005, as long as the discount remains above 10%. On November 17, 2005, the Board of Directors voted to renew the Corporation’s share repurchase program through 2006.

10

Tri-Continental Corporation

Board of Directors

Robert B. Catell (2,3)
Chairman, Chief Executive Officer and Director
     KeySpan Corporation

John R. Galvin (1,3)
Dean Emeritus, Fletcher School of Law and
     Diplomacy at Tufts University

Alice S. Ilchman (2,3)
President Emerita, Sarah Lawrence College
Director, Jeannette K. Watson Summer Fellowship
Trustee, Committee for Economic Development

Frank A. McPherson (2,3)
Retired Chairman of the Board and Chief Executive
     Officer, Kerr-McGee Corporation
Director, ConocoPhillips
Director, Integris Health

Betsy S. Michel (1,3)
Trustee, The Geraldine R. Dodge Foundation

William C. Morris
Chairman, J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.

Leroy C. Richie (1,3)
Chairman and Chief Executive Officer,
     Q Standards Worldwide, Inc.
Director, Kerr-McGee Corporation

Robert L. Shafer (2,3)
Ambassador and Permanent Observer of the Sovereign
     Military Order of Malta to the United Nations

James N. Whitson (1,3)
Retired Executive Vice President and Chief Operating
     Officer, Sammons Enterprises, Inc.
Director, CommScope, Inc.

Brian T. Zino
Director and President,
     J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICI Mutual Insurance Company
Member of the Board of Governors,
     Investment Company Institute

Member: (1) Audit Committee
               (2) Director Nominating Committee
               (3) Board Operations Committee


11

Tri-Continental Corporation

Executive Officers

William C. Morris
Chairman

Brian T. Zino
President and Chief Executive Officer

John B. Cunningham
Vice President

Eleanor T. M. Hoagland
Vice President and Chief Compliance Officer

Charles W. Kadlec
Vice President		 Michael F. McGarry
Vice President

Thomas G. Rose
Vice President

Lawrence P. Vogel
Vice President and Treasurer

Frank J. Nasta
Secretary


Additional Fund Information

Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017

Stockholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017		 Important Telephone Numbers
(800) TRI-1092      Stockholder Services
(800) 445-1777      Retirement Plan Services
(212) 682-7600      Outside the United States
(800) 622-4597      24-Hour Automated
                               Telephone Access Service


12

 
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.

CETRI3c 9/05