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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 811-00266

 

 

Tri-Continental Corporation

(Exact name of registrant as specified in charter)

 

 

225 Franklin Street, Boston, Massachusetts 02110

(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: (800) 345-6611

Date of fiscal year end: December 31

Date of reporting period: June 30, 2013

 

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

 

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Item 1. Reports to Stockholders.

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Semiannual Report June 30, 2013

 

Tri-Continental Corporation

 

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		Tri-Continental Corporation

 

Letter to Stockholders

 

Dear Stockholders,

We are pleased to present the semiannual stockholder report for Tri-Continental Corporation (the Fund). The report includes the Fund’s investment results and a portfolio of investment and financial statements as of June 30, 2013.

The Fund’s Common Stock gained 11.61%, based on net asset value, and 14.23%, based on market price, for the six months ended June 30, 2013. The Fund’s benchmark, the S&P 500 Index, returned 13.82% during the same six-month period.

During the first half of 2013, the Fund paid two distributions, in accordance with its earned distribution policy, that aggregated $0.3515 per share of Common Stock of the Fund. Distributions are based upon amounts distributed by underlying portfolio companies owned by the Fund.

On April 17, 2013, the Fund held its 83rd Annual Meeting of Stockholders. During the meeting, Stockholders re-elected two Directors and ratified the selection of PricewaterhouseCoopers LLP (PricewaterhouseCoopers) as the Fund’s independent registered public accounting firm for 2013.

Information about the Fund, including daily pricing, current performance, Fund holdings, stockholder reports, the most current prospectus for the Fund, distributions and other information can be found at columbiamanagement.com under the Closed-End Funds tab.

On behalf of the Board, we would like to thank you for your support of Tri-Continental Corporation.

Regards,

 

Stephen R. Lewis

Chairman of the Board

 

Semiannual Report 2013

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Tri-Continental Corporation

 

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		Tri-Continental Corporation

 

Performance Overview

(Unaudited)

 

Performance Summary

 

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Tri-Continental Corporation (the Fund) Common Stock gained 11.61%, based on net asset value, and 14.23%, based on market price, for the six months ended June 30, 2013.

 

>

The Fund’s benchmark, the S&P 500 Index, returned 13.82% for the same six-month period.

 

Average Annual Total Returns (%) (for period ended June 30, 2013)
		Inception		6 Months Cumulative				1 Year				5 Years				10 Years
Market Price		01/05/29			14.23				20.70				5.54				6.13
Net Asset Value		01/05/29			11.61				18.77				5.88				6.06
S&P 500 Index					13.82				20.60				7.01				7.30

The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting columbiamanagement.com.

Returns reflect changes in market price or net asset value, as applicable, and assume reinvestment of distributions. Returns do not reflect the deduction of taxes that investors may pay on distributions or the sale of shares.

The S&P 500 Index, an unmanaged index, measures the performance of 500 widely held, large-capitalization U.S. stocks and is frequently used as a general measure of market performance.

Indices are not available for investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.

 

Price Per Share
		June 30, 2013		March 31, 2013		December 31, 2012
Market Price ($)		17.92		17.55		16.00
Net asset Value ($)		20.54		20.20		18.77

 

Distributions Paid Per Common Share(a)
Payable Date		Per Share Amount ($)
March 26, 2013		0.190
June 25, 2013		0.162

 

(a)	Preferred Stockholders were paid dividends totaling $2.50 per share.

The net asset value of the Fund’s shares may not always correspond to the market price of such shares. Common stock of many closed-end funds frequently trade at a discount from their net asset value. The Fund is subject to stock market risk, which is the risk that stock prices overall will decline over short or long periods, adversely affecting the value of an investment in the Fund.

 

2		Semiannual Report 2013

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Tri-Continental Corporation

 

Portfolio Overview

(Unaudited)

 

 

Semiannual Report 2013			3

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		Tri-Continental Corporation

 

Portfolio Overview (continued)

(Unaudited)

 

 

Portfolio Breakdown (%) (at June 30, 2013)
Common Stocks			69.0
Consumer Discretionary			6.3
Consumer Staples			7.0
Energy			6.7
Financials			12.7
Health Care			8.5
Industrials			7.3
Information Technology			11.9
Materials			3.1
Telecommunication Services			2.9
Utilities			2.6
Convertible Bonds			11.1
Convertible Preferred Stocks			7.9
Consumer Discretionary			0.8
Consumer Staples			1.0
Energy			1.2
Financials			2.8
Industrials			0.5
Utilities			1.6
Corporate Bonds & Notes			11.4
Limited Partnerships			0.0	(a)
Money Market Funds			0.6
Total			100.0

Percentages indicated are based upon total investments. The Fund’s portfolio composition is subject to change.

 

(a)	Rounds to zero.

 

4		Semiannual Report 2013

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Tri-Continental Corporation

 

Portfolio of Investments

June 30, 2013 (Unaudited)

(Percentages represent value of investments compared to net assets)

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			5

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		Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

6		Semiannual Report 2013

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Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			7

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		Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

8		Semiannual Report 2013

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Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			9

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		Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

10		Semiannual Report 2013

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Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

Investments in Derivatives

Futures Contracts Outstanding at June 30, 2013

 

Notes to Portfolio of Investments

 

(a)	Non-income producing.

 

(b)	At June 30, 2013, investments in securities included securities valued at $781,044 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts.

 

(c)

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2013, the value of these securities amounted to $102,991,085 or 7.77% of net assets.

 

(d)	Variable rate security.

 

(e)	Represents securities that have defaulted on payment of interest. The Fund has stopped accruing interest on these securities. At June 30, 2013, the value of these securities amounted to $10,000, which represents less than 0.01% of net assets.

 

(f)	Identifies issues considered to be illiquid as to their marketability. The aggregate value of such securities at June 30, 2013 was $170,003, representing 0.01% of net assets. Information concerning such security holdings at June 30, 2013 is as follows:

 

 

(g)

At June 30, 2013, 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 Directors of the Fund. The acquisition dates of investment in the limited partnership, along with the cost and value at June 30, 2013, were as follows:

 

 

(h)	The rate shown is the seven-day current annualized yield at June 30, 2013.

 

(i)

As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of its outstanding voting securities, or a company which is under common ownership or control with the Fund. Holdings and transactions in these affiliated companies during the period ended June 30, 2013, are as follows:

 

Abbreviation Legend

ADR		American Depositary Receipt

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:

 

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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.).

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			11

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		Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

Fair Value Measurements (continued)

 

 

>

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 may 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.

Under the direction of the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for carrying out the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.

The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third- party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.

For investments categorized as Level 3, the Committee monitors information similar to that described above, which may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in fair value. This data is also used to corroborate, when available, information received from approved pricing vendors and brokers. Various factors impact the frequency of monitoring this information (which may occur as often as daily). However, the Committee may determine that changes to inputs, assumptions and models are not required as a result of the monitoring procedures performed.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

12		Semiannual Report 2013

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Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

Fair Value Measurements (continued)

 

The following table is a summary of the inputs used to value the Fund’s investments at June 30, 2013:

 

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

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.

There were no transfers of financial assets between Levels 1 and 2 during the period.

Derivative instruments are valued at unrealized appreciation (depreciation).

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			13

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		Tri-Continental Corporation

 

Portfolio of Investments (continued)

June 30, 2013 (Unaudited)

 

Fair Value Measurements (continued)

 

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

 

 

(a)

Change in unrealized appreciation (depreciation) relating to securities held at June 30, 2013 was ($55,477).

The Fund does not hold any significant investments with unobservable inputs which are categorized as Level 3.

The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain limited partnership securities classified as Level 3 are valued using a market approach. To determine fair value for these securities, management considered various factors which may have included, but were not limited to, the Fund’s pro-rata interest in the limited partnership’s capital balance, estimated earnings of the respective company, and the position of the security within the respective company’s capital structure. Significant increases (decreases) to any of these inputs would result in a significantly lower (higher) fair value measurement. Generally, a change in the fund’s pro-rata interest would result in a change to the limited partnership’s capital balance.

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.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

14		Semiannual Report 2013

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Tri-Continental Corporation

 

Statement of Assets and Liabilities

June 30, 2013 (Unaudited)

 

Assets
Investments, at value
Unaffiliated issuers (identified cost $1,158,285,457)			$1,315,738,296
Affiliated issuers (identified cost $3,193,699)			3,193,699
Total investments (identified cost $1,161,479,156)			1,318,931,995
Receivable for:
Investments sold			13,935,405
Dividends			1,254,885
Interest			4,190,980
Equity-linked notes (Note 8)			1,921,817
Other assets			43,681
Total assets			1,340,278,763
Liabilities
Payable for:
Investments purchased			14,133,995
Common Stock payable			20
Preferred Stock dividends			470,463
Variation margin			13,082
Due to broker			114,750
Investment management fees			12,908
Stockholder servicing and transfer agent fees			5,044
Administration fees			2,023
Compensation of board members			40,932
Stockholders’ meeting fees			9,225
Other expenses			475,069
Total liabilities			15,277,511
Net assets			1,325,001,252
Preferred stock			37,637,000
Net assets for Common Stock			$1,287,364,252
Net asset value per share of outstanding Common Stock			$20.54
Market price per share of Common Stock			$17.92

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			15

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		Tri-Continental Corporation

 

Statement of Capital Stock and Surplus

June 30, 2013 (Unaudited)

 

Capital Stock
$2.50 Cumulative Preferred Stock, $50 par value, assets coverage per share $1,760
Shares issued and outstanding — 752,740			$37,637,000
Common Stock, $0.50 par value:
Shares issued and outstanding — 62,673,356			31,336,678
Surplus
Capital surplus			1,637,880,743
Undistributed net investment income			290,349
Accumulated net realized loss			(539,629,233	)
Unrealized appreciation (depreciation) on:
Investments — unaffiliated issuers			157,452,839
Futures contracts			32,876
Net assets			$1,325,001,252

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

16		Semiannual Report 2013

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Tri-Continental Corporation

 

Statement of Operations

Six Months Ended June 30, 2013 (Unaudited)

 

Net investment income
Income:
Dividends — unaffiliated issuers			$14,797,108
Dividends — affiliated issuers			2,355
Interest			9,150,046
Foreign taxes withheld			(44,985	)
Total income			23,904,524
Expenses:
Investment management fees			2,276,279
Stockholder servicing and transfer agent fees			199,114
Administration fees			357,384
Compensation of board members			22,680
Stockholders’ meeting fees			45,362
Custodian fees			8,463
Printing and postage fees			51,002
Professional fees			30,723
Other			115,853
Total expenses			3,106,860
Net investment income(a)			20,797,664
Realized and unrealized gain (loss) — net
Net realized gain (loss) on:
Investments			62,616,105
Futures contracts			490,890
Net realized gain			63,106,995
Net change in unrealized appreciation (depreciation) on:
Investments			49,769,209
Futures contracts			13,078
Net change in unrealized appreciation (depreciation)			49,782,287
Net realized and unrealized gain			112,889,282
Net increase in net assets resulting from operations			$133,686,946

 

(a)	Net investment income for Common Stock is $19,856,739, which is net of Preferred Stock dividends of $940,925.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			17

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		Tri-Continental Corporation

 

Statement of Changes in Net Assets

 

		Six Months Ended June 30, 2013 (Unaudited)				Year Ended December 31, 2012
Operations
Net investment income			$20,797,664				$40,135,438
Net realized gain			63,106,995				88,428,406
Net change in unrealized appreciation (depreciation)			49,782,287				36,171,162
Net increase in net assets resulting from operations			133,686,946				164,735,006
Distributions to Stockholders
Net investment income
Preferred Stock			(940,925	)			(1,881,850	)
Common Stock			(22,028,240	)			(37,995,752	)
Total Distributions to Stockholders			(22,969,165	)			(39,877,602	)
Increase (decrease) in net assets from capital stock activity			(6,638,745	)			(19,731,798	)
Total increase in net assets			104,079,036				105,125,606
Net assets at beginning of period			1,220,922,216				1,115,796,610
Net assets at end of period			$1,325,001,252				$1,220,922,216
Undistributed net investment income			$290,349				$2,461,850

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

18		Semiannual Report 2013

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Tri-Continental Corporation

 

Statement of Changes in Net Assets (continued)

 

		Six Months Ended June 30, 2013 (Unaudited)								Year Ended December 31, 2012
		Shares				Dollars ($)				Shares				Dollars ($)
Capital stock activity
Common Stock issued at market price in distributions			376,318				6,669,143				747,244				11,809,653
Common Stock issued for investment plan purchases			54,333				940,882				344,461				5,377,332
Common Stock purchased from investment plan participants			(497,887	)			(8,715,658	)			(1,549,971	)			(24,265,282	)
Common Stock purchased in the open market			(312,346	)			(5,533,112	)			(806,299	)			(12,683,718	)
Net proceeds from issuance of shares of Common Stock upon exercise of warrants			—				—				32,487				30,217
Total net decrease			(379,582	)			(6,638,745	)			(1,232,078	)			(19,731,798	)

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2013			19

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		Tri-Continental Corporation

 

Financial Highlights

 

Per share operating performance data is designed to allow investors to trace the operating performance, on a per Common Stock 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 Stock share amounts, using average Common Stock shares outstanding during the period.

Total return measures the Fund’s performance assuming that investors purchased shares of the Fund at the market price or net asset value as of the beginning of the period, invested all distributions paid, as provided for in the Fund’s Prospectus and Automatic Dividend Investment and Cash Purchase Plan, and then sold their shares at the closing market price or net asset value per share on the last day of the period. The computations do not reflect any sales charges or transaction costs on your investment or taxes investors may incur on distributions or on the sale of shares of the Fund, and are not annualized for periods of less than one year.

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

 

			Six  Months Ended June 30, 2013				Year Ended December 31,
			(Unaudited)				2012				2011				2010				2009				2008
Per share data
Net asset value, beginning of period			$18.77				$16.77				$15.96				$13.73				$11.29				$23.03
Income from investment operations
Net investment income			0.32				0.63				0.33				0.30				0.20				0.52
Net realized and unrealized gain (loss)			1.81				2.00				0.79				2.28				2.42				(9.88	)
Increase from payments by affiliate			—				—				—				—				0.04				—
Total from investment operations			2.13				2.63				1.12				2.58				2.66				(9.36	)
Less distributions to Stockholders from:
Net investment income
Preferred Stock			(0.01	)			(0.03	)			(0.03	)			(0.03	)			(0.03	)			(0.02	)
Common Stock			(0.35	)			(0.60	)			(0.28	)			(0.25	)			(0.17	)			(0.50	)
Net realized gains
Common Stock			—				—				—				—				—				(0.39	)
Tax return of capital
Common Stock			—				—				—				—				(0.02	)			(1.22	)
Total distributions to Stockholders			(0.36	)			(0.63	)			(0.31	)			(0.28	)			(0.22	)			(2.13	)
Capital stock transactions at market price			—				—				—				(0.07	)			—				(0.25	)(a)
Net asset value, end of period			$20.54				$18.77				$16.77				$15.96				$13.73				$11.29
Adjusted net asset value, end of period(b)			$20.48				$18.71				$16.72				$15.90				$13.69				$11.26
Market value, end of period			$17.92				$16.00				$14.23				$13.76				$11.52				$9.86
Total return
Based upon net asset value			11.61	%			16.24	%			7.15	%			18.58	%			24.11	%(c)			(43.77	%)
Based upon market value			14.23	%			16.77	%			5.46	%			21.85	%			19.24	%			(45.89	%)
Ratios to average net assets(d)
Expenses to average net assets for Common Stock			0.50	%(e)			0.52	%			0.59	%			0.60	%			0.98	%			0.73	%
Net investment income to average net assets for Common Stock			3.19	%(e)			3.28	%			1.80	%			1.84	%			1.46	%			2.96	%
Supplemental data
Net assets, end of period (000s):
Common Stock			$1,287,364				$1,183,285				$1,078,160				$1,061,251				$946,344				$893,899
Preferred Stock			37,637				37,637				37,637				37,637				37,637				37,637
Total net assets			$1,325,001				$1,220,922				$1,115,797				$1,098,888				$983,981				$931,536
Portfolio turnover			33	%			68	%			97	%			86	%			70	%			111	%

Notes to Financial Highlights

 

(a)	Reflects the issuance of Common Stock in distributions.

 

(b)	Assumes the exercise of outstanding warrants.

 

(c)	The Fund received a payment by an affiliate. Had the Fund not received this payment, the total return would have been lower by 0.47%.

 

(d)	In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios.

 

(e)	Annualized.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

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Notes to Financial Statements

June 30, 2013 (Unaudited)

 

 

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		Tri-Continental Corporation

 

Notes to Financial Statements (continued)

June 30, 2013 (Unaudited)

 

 

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Notes to Financial Statements (continued)

June 30, 2013 (Unaudited)

 

 

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		Tri-Continental Corporation

 

Notes to Financial Statements (continued)

June 30, 2013 (Unaudited)

 

 

24		Semiannual Report 2013

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Notes to Financial Statements (continued)

June 30, 2013 (Unaudited)

 

 

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		Tri-Continental Corporation

 

Notes to Financial Statements (continued)

June 30, 2013 (Unaudited)

 

 

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Notes to Financial Statements (continued)

June 30, 2013 (Unaudited)

 

of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.

There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.

 

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		Tri-Continental Corporation

 

Results of Meeting of Stockholders

(Unaudited)

 

The 83rd Annual Meeting of Stockholders of Tri-Continental Corporation (the Corporation) was held on April 17, 2013. Stockholders voted in favor of each of the two proposals. The description of each proposal and number of shares voted are as follows:

Proposal 1

To elect two Directors to the Corporation’s Board, each to hold office until the 2016 Annual Meeting of Stockholders and all until their successors are elected and qualify:

 

Director		For				Withheld
Leroy C. Richie			39,367,764				8,229,988
William F. Truscott			39,402,005				8,195,747

Proposal 2

To ratify the selection of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for 2013:

 

For		Against				Abstain
42,035,837			3,396,943				2,164,976

 

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Tri-Continental Corporation

 

Approval of Investment Management Services Agreement

 

Columbia Management Investment Advisers, LLC (Columbia Management or the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves as the investment manager to Tri-Continental Corporation (the Corporation). Under an investment management services agreement (the IMS Agreement), Columbia Management provides investment advice and other services to the Corporation and other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).

On an annual basis, the Corporation’s Board of Directors (the Board), including the independent Board members (the Independent Directors), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in January, March and April 2013, including reports based on analyses of data provided by an independent organization (Lipper) and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors (Independent Legal Counsel) in a letter to the Investment Manager, to assist the Board in making this determination. All of the materials presented in January, March and April were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee, and the final materials (including proposed additional breakpoints in IMS fees for certain Funds) were revised to reflect discussion and subsequent requests made by the Contracts Committee. In addition, throughout the year, the Board (or its committees) regularly meets with portfolio management teams and senior management personnel, and reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. Further, the Board retained an independent consulting firm, Bobroff Consulting (the Independent Consultant), to assist the Independent Directors in their review of IMS fees, expense caps and Ameriprise Financial’s profitability. The Board also accords appropriate weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement.

The Board, at its April 15-17, 2013 in-person Board meeting (the April Meeting), considered the renewal of the IMS Agreement for an additional one-year term. At the April Meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement.

Nature, Extent and Quality of Services Provided by Columbia Management

The Independent Directors analyzed various reports and presentations they had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Independent Directors specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the recent globalization initiative, which fosters increased worldwide investment support of global products, continued investment in upgrading technology (such as the implementation of new systems and hardware), the hiring of a Chief Interest Rate Strategist as part of Columbia Management’s fixed income team and the addition of Columbia Management investment personnel to the Asset Allocation, Quantitative and Technology teams. The Independent Directors noted the information they received concerning Columbia Management’s ability to retain its key portfolio management personnel. In this regard, the Independent Directors took into account their comprehensive discussions with Columbia Management’s Chief Investment Officer (the CIO), observing the organizational depth of Columbia Management and the capabilities of its investment personnel. The Independent Directors also recalled the information the CIO provided them identifying the strengths and areas for enhancement of each Columbia Management investment team, as well as the discussion with the CIO regarding the investment personnel talent being infused to enhance support for certain Funds. The Independent Directors also observed the materials demonstrating the strength and depth of Columbia Management’s equity and fixed income research departments.

In connection with the Board’s evaluation of the overall package of services provided by Columbia Management, the Board also considered the quality of administrative services provided to the Corporation by Columbia Management, recalling the information it received highlighting significant achievements in 2012 in the performance of administrative services (such as strong accounting performance measures, refined derivatives processing and enhancements to the electronic communications under the affiliated and unaffiliated service provider oversight program). In evaluating the quality of services provided under the IMS Agreement and the Corporation’s Administrative Services Agreement, the Independent Directors also took into account the organization and strength of the Corporation’s and its service providers’ compliance programs. In addition, the Board also reviewed the financial condition of Columbia Management (and its affiliates) and each entity’s ability to carry out its responsibilities under the IMS Agreement and the Corporation’s other services agreements with affiliates of Ameriprise Financial, observing the financial strength of Ameriprise Financial, with its solid balance sheet. The Board also discussed the

 

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		Tri-Continental Corporation

 

Approval of Investment Management Services Agreement (continued)

 

acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality.

Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Corporation.

Investment Performance

For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Corporation. In this regard, the Board considered detailed reports providing the results of analyses performed by an independent organization showing, for various periods, the performance of the Corporation, the performance of a benchmark index, the percentage ranking of the Corporation among its comparison group and the net assets of the Corporation. The Board observed that the Corporation’s investment performance met expectations.

Comparative Fees, Costs of Services Provided and the Profits Realized by Columbia Management and its Affiliates from their Relationships with the Corporation

The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (based on analyses conducted by an independent organization) showing a comparison of the Corporation’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Corporation’s contribution to Columbia Management’s profitability.

The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with few defined exceptions) are generally in line with the “pricing philosophy” (i.e., that the total expense ratio of the Fund is no higher than the median expense ratio of funds in the same comparison universe of the Fund). In this connection, the Board also considered the Independent Consultant’s report that concluded that the Funds’ expense cap philosophy of assuring that each Fund’s total expense ratio is not above its peer universe median ratio is reasonable. The Board took into account that the Corporation’s total expense ratio (after considering proposed expense caps/waivers) was below the peer universe’s median expense ratio shown in the reports. Based on its review, the Board concluded that the Corporation’s investment management fee was fair and reasonable in light of the extent and quality of services that the Corporation receives.

The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Corporation. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing, operating and distributing the Funds. In this regard, the Board observed that 2012 profitability approximates 2011 profitability and that, as was the case in 2011, 2012 profitability remained generally in line with (and, in many cases, lower than) the reported profitability of other asset management firms. Further, the Board considered the Independent Consultant’s report that concluded that Columbia Management’s profitability, particularly in comparison to industry competitors, was reasonable and not excessive. It also took into account the indirect economic benefits flowing to Columbia Management or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Funds should permit the Investment Manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable.

Economies of Scale to be Realized

The Board noted that the management fee schedule does not contain breakpoints that reduce the fee rate on assets above specified levels. However, due to the Corporation’s closed-end structure, the Board did not view the potential for realization of economies of scale as the Corporation’s assets grow to be a material factor in its deliberations.

Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 17, 2013, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement.

 

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Important Information About This Report

 

Each fund mails one stockholder report to each stockholder address. If you would like more than one report, please call shareholder services at 800.345.6611 and additional reports will be sent to you.

The policy of the Board is to vote the proxies of the companies in which each fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary; visiting columbiamanagement.com; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding how each fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting columbiamanagement.com; or searching the website of the SEC at sec.gov.

Each fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each fund’s Form N-Q is available on the SEC’s website at sec.gov and 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. Each fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling 800.345.6611.

 

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Tri-Continental Corporation

P.O. Box 8081

Boston, MA 02266-8081

columbiamanagement.com

 

You should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. A prospectus containing information about the Fund (including its investment objectives, risks, charges, expenses and other information about the Fund) may be obtained by contacting your financial advisor or Columbia Management Investment Services Corp. at 800.345.6611. The prospectus should be read carefully before investing in the Fund. Tri-Continental is managed by Columbia Management Investment Advisers, LLC. This material is distributed by Columbia Management Investment Distributors, Inc., member FINRA.

© 2013 Columbia Management Investment Advisers, LLC. All rights reserved.

 

SAR240_12_C01_(08/13)

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Item 2. Code of Ethics.

Not applicable for semiannual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semiannual reports.

Item 4. Principal Accountant Fees and Services.

Not applicable for semiannual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.

Item 6. Investments

 

(a)

The registrant’s “Schedule I – Investments in securities of unaffiliated issuers” (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR.

 

(b)

Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable for semiannual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable for semiannual reports.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)				Maximum Number of Shares that May Yet Be Purchased Under the  Plans or Programs(1)
01-01-13 to 01-31-13			120,654			$	16.78				120,654				3,031,993
02-01-13 to 02-28-13			134,659				17.11				134,659				2,897,334
03-01-13 to 03-31-13			95,302				17.43				95,302				2,802,032
04-01-13 to 04-30-13			198,240				17.59				198,240				2,603,792
05-01-13 to 05-31-13			162,707				18.38				162,707				2,441,085
06-01-13 to 06-30-13			98,671				18.05				98,671				2,342,414

 

(1)

The registrant has a stock repurchase program. For 2013, the registrant is authorized to repurchase up to 5% of its outstanding Common Stock directly from stockholders and in the open market, provided that, with respect to shares repurchased in the open market the excess of the net asset value of a share of Common Stock over its market price (the discount) is greater than 10%.

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Item 10. Submission of Matters to a Vote of Security Holders.

There were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.

Item 11. 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 material information required to be disclosed by the registrant in Form N-CSR 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 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) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not applicable for semiannual reports.

(a)(2) 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.

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(a)(3) None.

(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.

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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 (Signature and Title)		/s/ J. Kevin Connaughton
		J. Kevin Connaughton, President and Principal Executive Officer

Date		August 15, 2013

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 (Signature and Title)		/s/ J. Kevin Connaughton
		J. Kevin Connaughton, President and Principal Executive Officer

Date		August 15, 2013

By (Signature and Title)		/s/ Michael G. Clarke
		Michael G. Clarke, Treasurer and Chief Financial Officer

Date		August 15, 2013