1933 Act File No.: 333-104669
1940 Act File No.: 811-266
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
--------------------------------------------------------------------------------
|X| REGISTRATION STATEMENT UNDER SECURITIES ACT OF 1933
|_| Pre-Effective Amendment No.____
|X| Post-Effective Amendment No. 1
and/or
|X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|X| Amendment No. 35
Exact Name of Registrant as Specified in Charter:
TRI-CONTINENTAL CORPORATION
Address of Principal Executive Offices (Number, Street, City, State, Zip Code):
100 PARK AVENUE, NEW YORK, NY 10017
Registrant's Telephone Number, including Area Code:
(212) 850-1864 or (800) 221-2450
Name and Address (Number, Street, City, State, Zip Code) of Agent for Service:
FRANK J. NASTA, ESQ., 100 PARK AVENUE, NEW YORK, NY 10017
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box.
|_|
If appropriate, check the following box:
|_| This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment or Registration Statement.
|_| This Post-Effective Amendment on Form N-2 is filed to register additional
securities for an offering pursuant to Rule 462(b)(1) under the Securities
Act of 1933 and the Securities Act Registration Statement Number of the
earlier effective Registration Statement for the same offering is:
_________
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date the Securities and Exchange Commission, acting pursuant
to said Section 8(a), may determine.
[LOGO] Tri-Continental Corporation
AN INVESTMENT YOU CAN LIVE WITH
Prospectus
May 3, 2004
100 Park Avenue
New York, NY 10017
New York City Telephone (212) 682-7600
Toll-Free Telephone (800) 874-1092
For Retirement Plan Information -- Toll-Free Telephone (800) 445-1777
Tri-Continental Corporation is a diversified, closed-end investment
company--a publicly traded investment fund. The Corporation's Common Stock is
traded on the New York Stock Exchange under the symbol "TY." The closing market
price of the Common Stock on April 2, 2004 was $17.33 per share.
The Corporation invests primarily for the longer term, and over the years
the Corporation's objective has been to produce future growth of both capital
and income while providing reasonable current income. Common stocks have made
up the bulk of investments. However, assets may be held in cash or invested in
all types of securities. See "Investment Objective and Other Policies and
Related Risks." No assurance can be given that the Corporation's investment
objective will be realized. The Corporation's manager is J. & W. Seligman & Co.
Incorporated.
This Prospectus applies to all shares of Common Stock purchased under the
Corporation's various Investment Plans. See "Investment Plans and Other
Services." The shares of Common Stock covered by this Prospectus also may be
issued from time to time by the Corporation to acquire the assets of personal
holding companies, private investment companies or publicly owned investment
companies. See "Issuance of Shares in Connection with Acquisitions."
This Prospectus sets forth concisely the information that a prospective
investor should know about the Corporation before investing. Investors are
advised to read this Prospectus carefully and to retain it for future
reference. Additional information about the Corporation, including a Statement
of Additional Information ("SAI") dated May 3, 2004, has been filed with the
Securities and Exchange Commission. The SAI is available upon request and
without charge by writing or calling the Corporation at the address or
telephone numbers listed above. The SAI is dated the same date as this
Prospectus and is incorporated herein by reference in its entirety. The table
of contents of the SAI appears on page 27 of this Prospectus. In addition,
copies of the 2003 Annual Report to Stockholders of the Corporation will be
furnished, without charge, to investors requesting copies of the SAI. The 2003
Annual Report contains financial statements of the Corporation for the year
ended December 31, 2003, which are incorporated by reference into the SAI. The
Securities and Exchange Commission maintains a web site (www.sec.gov) that
contains the SAI, material incorporated by reference, and other information
filed electronically by the Corporation.
THE SECURITIES AND EXCHANGE COMMISSION HAS NEITHER APPROVED NOR DISAPPROVED
THESE SECURITIES, AND IT HAS NOT DETERMINED THIS PROSPECTUS TO BE ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Common Stock
($.50 par value)
CETRI 1 5/04
TABLE OF CONTENTS
PAGE PAGE
---- ----
Summary of Corporation Expenses............ 3 Computation of Net Asset Value........... 19
Prospectus Summary......................... 4 Dividend Policy and Taxes................ 20
The Corporation............................ 5 Investment Plans and Other Services...... 22
Financial Highlights....................... 6 Issuance of Shares in Connection with
Capitalization at March 31, 2004........... 9 Acquisitions........................... 26
Trading and Net Asset Value Information.... 9 Table of Contents of the Statement of
Investment Objective and Other Policies and Additional Information................. 27
Related Risks............................ 10 Authorization Form for Automatic Dividend
Management of the Corporation.............. 13 Investment and Cash Purchase Plan...... 28
Description of Capital Stock............... 18 Authorization Form for Automatic Check
Description of Warrants.................... 19 Service................................29
SUMMARY OF CORPORATION EXPENSES
The following table illustrates the expenses and fees that the Corporation
expects to incur and that you can expect to bear as a stockholder of the
Corporation.
STOCKHOLDER TRANSACTION EXPENSES
Automatic Dividend Investment and Cash Purchase Plan Fees........ /(1)/
ANNUAL EXPENSES FOR 2003 (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE
TO COMMON STOCK)
Management Fees.................................................. 0.41%
Other Expenses/(2)/.............................................. 0.29%
----
Total Annual Expenses........................................ 0.70%
====
--------
/(1)/ Stockholders participating in the Corporation's investment plans pay a
maximum $2.00 fee per transaction. See "Investment Plans and Other
Services--Automatic Dividend Investment and Cash Purchase Plan" for a
description of the investment plans and services.
/(2)/ Based on actual expenses incurred in 2003.
The following example illustrates the costs you would pay on a $1,000
investment, assuming a 5% annual return:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Tri-Continental Corporation Common Stock $7 $22 $39 $87
The purpose of the table above is to assist you in understanding the various
costs and expenses you will bear directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Management of the
Corporation" and "Investment Plans and Other Services--Automatic Dividend
Investment and Cash Purchase Plan."
The example does not represent actual or anticipated costs, which may be
more or less than those shown. Moreover, the Corporation's actual rate of
return may be more or less than the hypothetical 5% return shown in the example.
3
PROSPECTUS SUMMARY
The following is qualified in its entirety by the more detailed information
included elsewhere in this Prospectus.
This Prospectus applies to shares of Common Stock of the Corporation. The
Corporation invests primarily for the longer term and has no Charter
restrictions with respect to such investments. Over the years the Corporation's
objective has been to produce future growth of both capital and income while
providing reasonable current income. There can be no assurance that this
objective will be achieved. While common stocks have made up the bulk of
investments, assets may be held in cash or invested in all types of securities
in whatever amounts or proportions J. & W. Seligman & Co. Incorporated (the
"Manager") believes best suited to current and anticipated economic and market
conditions. These may include preferred stock, debt securities, repurchase
agreements, options, illiquid securities and securities of foreign issuers,
each of which could involve certain risks. See "Investment Objective and Other
Policies and Related Risks."
The Manager manages the investment of the assets of the Corporation and
administers its business and other affairs pursuant to a Management Agreement
approved by the Board of Directors and the stockholders of the Corporation. The
Manager also serves as manager of twenty-two other U.S. registered investment
companies which, together with the Corporation, make up the "Seligman Group of
Funds." The aggregate assets of the Seligman Group of Funds at March 31, 2004
were approximately $13.1 billion. The Manager also provides investment
management or advice to institutional and other accounts having a value at March
31, 2004 of approximately $8.3 billion. The Manager's fee is based in part on
the average daily net assets of the Corporation. The management fee rate for
2003 was equivalent to 0.41% of the Corporation's average daily net investment
assets. See "Management of the Corporation."
Shares of Common Stock covered by this Prospectus may be purchased from time
to time by Seligman Data Corp. ("SDC"), the Plan service agent for Automatic
Dividend Investment and Cash Purchase Plans, Individual Retirement Accounts
("IRAs"), Retirement Plans for Self-Employed Individuals, Partnerships and
Corporations, the J. & W. Seligman & Co. Incorporated Matched Accumulation Plan
and the Seligman Data Corp. Employees' Thrift Plan (collectively, the "Plans"),
as directed by participants, and may be sold from time to time by the Plan
service agent for participants in Systematic Withdrawal Plans. See "Investment
Plans and Other Services." Shares will be purchased for the Plans on the New
York Stock Exchange or elsewhere when the market price of the Common Stock is
equal to or less than its net asset value, and any brokerage commissions
applicable to such purchases will be charged pro rata to the Plan participants.
Shares will be purchased for the Plans from the Corporation at net asset value
when the net asset value is lower than the market price, all as more fully
described in this Prospectus.
On November 20, 2003, the Board of Directors authorized the renewal of the
Corporation's ongoing share repurchase plan. The program authorizes the
Corporation to repurchase over a 12-month period up to 5.0% of its then
outstanding Common Stock, provided that the excess of net asset value of a
share of Common Stock over its market price remains greater than 10%. The
shares repurchased under this program are cancelled increasing the number of
authorized but unissued shares available for issuance to participants in the
Plan. The stock repurchase program seeks, among other things, to moderate the
growth in the number of shares outstanding, increase the net asset value of the
Corporation's outstanding shares, reduce the dilutive impact on stockholders
who do not take capital gains distributions in additional shares and increase
the liquidity of the Corporation's Common Stock in
4
the marketplace. Shares acquired by the Corporation from participants in the
Systematic Withdrawal Plan and other stockholder plans, as well as shares
purchased for the Corporation in the open market to meet demand under the
Automatic Dividend and Cash Purchase Plan, are counted towards the repurchase
limit under the program. For the 12-month period ended November 20, 2003, the
Corporation repurchased 7.7 million shares, equivalent to 6.2% of the
outstanding stock at November 21, 2002.
THE CORPORATION
The Corporation is a Maryland corporation formed in 1929 by the
consolidation of two predecessor corporations. It is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified
management investment company of the closed-end type. The Corporation's Common
Stock is listed on the New York Stock Exchange under the symbol "TY." The
average weekly trading volume on that and other exchanges during 2003 was
369,034 shares. The Corporation's Common Stock has historically been traded on
the market at less than net asset value. As of March 31, 2004, the Corporation
had 116,869,051 shares of Common Stock outstanding and net assets attributable
to Common Stock of $2,348,833,376.
5
FINANCIAL HIGHLIGHTS
The Corporation's financial highlights for the years presented below have
been audited by Deloitte & Touche LLP, independent auditors. This information,
which is derived from the financial and accounting records of the Corporation,
should be read in conjunction with the financial statements and notes contained
in the Corporation's 2003 Annual Report, which may be obtained from the
Corporation as provided on the cover page of this Prospectus.
"Per share operating performance" data is designed to allow you to trace the
operating performance, on a per Common share basis, from the beginning net
asset value to the ending net asset value so that you can understand what
effect the individual items have on your investment, assuming it was held
throughout the year. Generally, the per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per Common share amount, using average shares
outstanding.
PER SHARE OPERATING PERFORMANCE, TOTAL
(FOR A SHARE OF COMMON STOCK
------------------------------------------------
2003 2002 2001 2000
---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................................ $ 15.72 $ 21.69 $ 25.87 $ 32.82
---------- ---------- ---------- ----------
Net investment income..................................................... 0.18 0.25 0.32 0.35
Net realized and unrealized investment gain (loss)........................ 3.84 (5.95) (3.02) (3.25)
Net realized and unrealized gain (loss) from foreign currency transactions -- -- -- --
---------- ---------- ---------- ----------
Increase (decrease) from investment operations............................ 4.02 (5.70) (2.70) (2.90)
Dividends paid on Preferred Stock......................................... (0.02) (0.01) (0.01) (0.02)
Dividends paid on Common Stock............................................ (0.17) (0.26) (0.28) (0.33)
Distribution from net gain realized....................................... -- -- (1.11) (3.30)
Issuance of Common Stock in gain distributions............................ -- -- (0.08) (0.40)
Issuance of Common Stock upon Warrant exercise*........................... -- -- -- --
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value................................ 3.83 (5.97) (4.18) (6.95)
---------- ---------- ---------- ----------
Net asset value, end of year.............................................. $ 19.55 $ 15.72 $ 21.69 $ 25.87
========== ========== ========== ==========
Adjusted net asset value, end of year*.................................... $ 19.51 $ 15.69 $ 21.65 $ 25.82
Market value, end of year................................................. $ 16.40 $ 13.25 $ 18.75 $ 21.1875
TOTAL INVESTMENT RETURN:
Based upon market value................................................... 25.24% (28.18)% (5.22)% (11.56)%
Based upon net asset value................................................ 25.84% (26.35)% (10.20)% (8.29)%
RATIOS AND SUPPLEMENTAL DATA:**
Expenses to average net investment assets................................. 0.68% 0.67% 0.59% 0.54%
Expenses to average net assets for Common Stock........................... 0.70% 0.68% 0.60% 0.54%
Net investment income to average net investment assets.................... 1.03% 1.29% 1.36% 1.10%
Net investment income to average net assets for
Common Stock............................................................. 1.05% 1.31% 1.37% 1.11%
Portfolio turnover rate................................................... 138.65% 152.79% 124.34% 54.13%
Net investment assets, end of year (000s omitted):
For Common Stock........................................................ $2,310,999 $1,958,295 $2,873,655 $3,458,009
For Preferred Stock..................................................... 37,637 37,637 37,637 37,637
---------- ---------- ---------- ----------
Total net investment assets............................................... $2,348,636 $1,995,932 $2,911,292 $3,495,646
========== ========== ========== ==========
--------
* Assumes the exercise of outstanding warrants. Warrant exercise terms were:
December 29, 1993 to December 21, 1994--11.95 shares at $1.88 per share;
December 22, 1994 to December 27, 1995--12.77 shares at $1.76 per share;
December 28, 1995 to July 1, 1996--13.54 shares at $1.66 per share; July 2,
1996 to December 20, 1996--13.79 shares at $1.63 per share; December 21,
1996 to July 1, 1997--14.69 shares at $1.53 per share; July 2,1997 to
December 19, 1997--14.99 shares at $1.50 per share; December 20, 1997 to
June 23, 1998--16.06 shares at $1.40 per share; June 24, 1998 to December
18, 1998--16.78 shares at $1.34 per share; December 19, 1998 to June 24,
1999--17.85 shares at $1.26 per share; June 25, 1999 to December 16,
1999--18.14 shares at $1.24 per share;
6
The total investment return based on market value measures the Corporation's
performance assuming you purchased shares of the Corporation at the market
value as of the beginning of the year, invested dividends and capital gains
paid as provided for in the Corporation's Automatic Dividend Investment and
Cash Purchase Plan, and then sold your shares at the closing market value per
share on the last day of the year. The computation does not reflect any sales
commissions you may incur in purchasing or selling shares of the Corporation.
The total investment return based on net asset value is similarly computed
except that the Corporation's net asset value is substituted for the
corresponding market value.
INVESTMENT RETURN, RATIOS AND SUPPLEMENTAL DATA
OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
$ 34.13 $ 32.06 $ 29.28 $ 27.58 $ 23.70 $ 27.49
---------- ---------- ---------- ---------- ---------- ----------
0.48 0.54 0.60 0.68 0.74 0.83
2.90 7.01 6.94 4.84 6.14 (1.69)
-- (.01) (0.17) (0.02) 0.03 0.02
---------- ---------- ---------- ---------- ---------- ----------
3.38 7.54 7.37 5.50 6.91 (0.84)
(0.02) (0.02) (0.02) (0.02) (0.02) (0.03)
(0.48) (0.52) (0.60) (0.66) (0.73) (0.79)
(3.79) (4.28) (3.45) (2.72) (2.01) (1.90)
(0.40) (0.65) (0.52) (0.40) (0.27) (0.23)
-- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
(1.31) 2.07 2.78 1.70 3.88 (3.79)
---------- ---------- ---------- ---------- ---------- ----------
$ 32.82 $ 34.13 $ 32.06 $ 29.28 $ 27.58 $ 23.70
========== ========== ========== ========== ========== ==========
$ 32.75 $ 34.06 $ 31.99 $ 29.22 $ 27.52 $ 23.65
$ 27.875 $ 28.50 $ 26.6875 $ 24.125 $ 22.625 $ 19.875
12.57% 26.19% 27.96% 21.98% 27.95% (5.07)%
10.67% 25.80% 26.65% 21.45% 30.80% (2.20)%
0.56% 0.58% 0.60% 0.62% 0.63% 0.64%
0.56% 0.58% 0.60% 0.63% 0.64% 0.65%
1.36% 1.59% 1.80% 2.27% 2.71% 3.08%
1.38% 1.60% 1.82% 2.31% 2.75% 3.14%
42.83% 63.39% 83.98% 53.96% 62.28% 70.38%
$4,109,863 $4,002,516 $3,391,816 $2,835,026 $2,469,149 $1,994,098
37,637 37,637 37,637 37,637 37,637 37,637
---------- ---------- ---------- ---------- ---------- ----------
$4,147,500 $4,040,153 $3,429,453 $2,872,663 $2,506,786 $2,031,735
========== ========== ========== ========== ========== ==========
December 17, 1999 to June 21, 2000--19.56 shares at $1.15 per share; June 22,
2000 to December 17, 2000--19.90 shares at $1.13 per share; December 18, 2000
to December 17, 2001--21.63 shares at $1.04 per share; and subsequently,
22.50 shares at $1.00 per share.
**The ratios of expenses and net investment income to average net investment
assets and to average net assets for Common Stock for the years presented do
not reflect the effect of dividends paid to Preferred Stockholders.
7
SENIOR SECURITIES -- $2.50 CUMULATIVE PREFERRED STOCK
The following information is being presented with respect to the
Corporation's $2.50 Cumulative Preferred Stock. The first column presents the
number of Preferred shares outstanding at the end of each of the periods
presented. Asset Coverage represents the total amount of net assets of the
Corporation in relation to each share of Preferred Stock outstanding as of the
end of the respective periods. The involuntary liquidation preference is the
amount each share of Cumulative Preferred Stock would be entitled to upon
involuntary liquidation of these shares.
YEAR-END INVOLUNTARY AVERAGE DAILY
ASSET LIQUIDATION MARKET
TOTAL SHARES COVERAGE PREFERENCE VALUE
YEAR OUTSTANDING PER SHARE PER SHARE PER SHARE
---- ------------ --------- ----------- -------------
2003 752,740 $3,120 $50 $44.16
2002 752,740 2,654 50 40.61
2001 752,740 3,868 50 37.57
2000 752,740 4,644 50 34.72
1999 752,740 5,510 50 37.31
1998 752,740 5,367 50 40.27
1997 752,740 4,556 50 35.62
1996 752,740 3,816 50 34.28
1995 752,740 3,330 50 33.37
1994 752,740 2,699 50 34.12
8
CAPITALIZATION AT MARCH 31, 2004
AMOUNT HELD
BY REGISTRANT
OR FOR ITS
TITLE OF CLASS AUTHORIZED OUTSTANDING ACCOUNT
-------------- ---------- ----------- -------------
$2.50 Cumulative Preferred Stock,
$50 par value.................. 1,000,000 shs. 752,740 shs. -0- shs.
Common Stock,
$0.50 par value................ 159,000,000 shs.* 116,869,051 shs. -0- shs.
Warrants to purchase
Common Stock................... 12,874 wts. 12,874 wts. -0- wts.
--------
* 291,825 shares of Common Stock were reserved for issuance upon the exercise
of outstanding Warrants.
TRADING AND NET ASSET VALUE INFORMATION
The following table shows the high and low sale prices of the Corporation's
Common Stock on the composite tape for issues listed on the New York Stock
Exchange for each calendar quarter since the beginning of 2001 as well as the
net asset values and the range of the percentage discounts to net asset value
per share that correspond to such prices.
Corresponding
Corresponding Discount to Net
Market Price Net Asset Value Asset Value
--------------- --------------- ----------------
2002 High Low High Low High Low
---- ------ ------ ------ ------ ------ ------
1st Q $19.83 $18.38 $22.21 $20.65 (10.72)% (10.99)%
2nd Q 19.41 16.10 21.20 18.31 (8.44) (12.07)
3rd Q 15.99 12.95 17.92 14.90 (10.77) (13.09)
4th Q 14.83 12.68 16.58 14.42 (10.55) (12.07)
2003
----
1st Q 14.11 12.27 16.60 14.32 (15.00) (14.32)
2nd Q 15.23 12.93 17.75 15.19 (14.20) (14.88)
3rd Q 15.64 14.54 18.37 16.90 (14.86) (13.96)
4th Q 16.40 15.21 19.55 17.90 (16.11) (15.03)
2004
----
1st Q 17.69 16.40 20.56 19.52 (13.96) (15.98)
The Corporation's Common Stock has historically been traded on the market at
less than net asset value. The closing market price, net asset value and
percentage discount to net asset value per share of the Corporation's Common
Stock on March 31, 2004 were $17.20, $20.10 and (14.43)%, respectively.
9
INVESTMENT OBJECTIVE AND OTHER POLICIES AND RELATED RISKS
The Corporation invests primarily for the longer term and has no Charter
restrictions with respect to such investments. Over the years, the
Corporation's investment objective has been to produce future growth of both
capital and income while providing reasonable current income. There can be no
assurance that this objective will be achieved. While common stocks have made
up the bulk of investments, assets may be held in cash or invested in all types
of securities, that is, in bonds, debentures, notes, preferred and common
stocks, rights and warrants (subject to limitations as set forth in the SAI),
and other securities, in whatever amounts or proportions the Manager believes
best suited to current and anticipated economic and market conditions.
The management's present investment policies, in respect to which it has
freedom of action, are:
(1) it keeps investments in individual issuers within the limits
permitted diversified companies under the 1940 Act (i.e., 75% of its total
assets must be represented by cash items, government securities, securities
of other investment companies, and securities of other issuers which, at the
time of investment, do not exceed 5% of the Corporation's total assets at
market value in the securities of any issuer and do not exceed 10% of the
voting securities of any issuer);
(2) it does not make investments with a view to exercising control or
management except that it has an investment in SDC;
(3) it ordinarily does not invest in other investment companies, but it
may purchase up to 3% of the voting securities of such investment companies,
provided purchases of securities of a single investment company do not
exceed in value 5% of the total assets of the Corporation and all
investments in investment company securities do not exceed 10% of total
assets; and
(4) it has no fixed policy with respect to portfolio turnover and
purchases and sales in the light of economic, market and investment
considerations. The portfolio turnover rates for the ten fiscal years ended
December 31, 2003 are shown under "Financial Highlights."
The foregoing investment objective and policies may be changed by management
without stockholder approval, unless such a change would change the
Corporation's status from a "diversified" to a "non-diversified" company under
the 1940 Act.
The Corporation's stated fundamental policies relating to the issuance of
senior securities, the borrowing of money, the underwriting of securities of
other issuers, the concentration of investments in a particular industry or
groups of industries, the purchase or sale of real estate and real estate
mortgage loans, the purchase or sale of commodities or commodity contracts, and
the making of loans may not be changed without a vote of stockholders. A more
detailed description of the Corporation's investment policies, including a list
of those restrictions on the Corporation's investment activities which cannot
be changed without such a vote, appears in the SAI. Within the limits of these
fundamental policies, management has reserved freedom of action.
REPURCHASE AGREEMENTS: The Corporation may enter into repurchase agreements
with respect to debt obligations which could otherwise be purchased by the
Corporation. A repurchase agreement is an instrument under which the
Corporation may acquire an underlying debt instrument and simultaneously obtain
the commitment of the seller (a commercial bank or a broker or dealer) to
repurchase the security at an agreed upon price and date within a number of
days (usually not more than seven days from the date of purchase). The value
10
of the underlying securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. The
Corporation will make payment for such securities only upon physical delivery
or evidence of book transfer to the account of the Corporation's custodian.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Corporation's ability to dispose of the underlying securities.
ILLIQUID SECURITIES: The Corporation may invest up to 15% of its net
investment assets in illiquid securities, including restricted securities
(i.e., securities not readily marketable without registration under the
Securities Act of 1933, as amended (the "1933 Act")) and other securities that
are not readily marketable. The Corporation may purchase restricted securities
that can be offered and sold to "qualified institutional buyers" under Rule
144A of the 1933 Act, and the Corporation's Board of Directors may determine,
when appropriate, that specific Rule 144A securities are liquid and not subject
to the 15% limitation on illiquid securities. Should this determination be
made, the Board of Directors will carefully monitor the security (focusing on
such factors, among others, as trading activity and availability of
information) to determine that the Rule 144A security continues to be liquid.
This investment practice could have the effect of increasing the level of
illiquidity in the Corporation, if and to the extent that qualified
institutional buyers become for a time uninterested in purchasing Rule 144A
securities.
FOREIGN SECURITIES: The Corporation may invest in commercial paper and
certificates of deposit issued by foreign banks and may invest in other
securities of foreign issuers directly or through American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs"), European Depositary Receipts
("EDRs") or Global Depositary Receipts ("GDRs") (collectively, "Depositary
Receipts"). Foreign investments may be affected favorably or unfavorably by
changes in currency rates and exchange control regulations. There may be less
information available about a foreign company than about a U.S. company and
foreign companies may not be subject to reporting standards and requirements
comparable to those applicable to U.S. companies. Foreign securities may not be
as liquid as U.S. securities. Securities of foreign companies may involve
greater market risk than securities of U.S. companies, and foreign brokerage
commissions and custody fees are generally higher than those in the United
States. Investments in foreign securities may also be subject to local economic
or political risks, political instability and possible nationalization of
issuers. ADRs and ADSs are instruments generally issued by domestic banks or
trust companies that represent the deposits of a security of a foreign issuer.
ADRs and ADSs may be publicly traded on exchanges or over-the-counter in the
United States and are quoted and settled in dollars at a price that generally
reflects the dollar equivalent of the home country share price. EDRs and GDRs
are typically issued by foreign banks or trust companies and traded in Europe.
Depositary Receipts may be issued under sponsored or unsponsored programs. In
sponsored programs, the issuer has made arrangements to have its securities
traded in the form of a Depositary Receipt. In unsponsored programs, the
issuers may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, the issuers of securities represented by unsponsored
Depositary Receipts are not obligated to disclose material information in the
United States and, therefore, the import of such information may not be
reflected in the market value of such receipts. The Corporation may invest up
to 10% of its total assets in foreign securities that it holds directly, but
this 10% limit does not apply to foreign securities held through Depositary
Receipts or to commercial paper and certificates of deposit issued by foreign
banks.
LEVERAGE: Senior securities issued or money borrowed to raise funds for
investment have a prior fixed dollar claim on the Corporation's assets and
income. Any gain in the value of securities purchased or in income received in
excess of the cost of the amount borrowed or interest or dividends payable
causes the net asset value
11
of the Corporation's Common Stock or the income available to it to increase
more than otherwise would be the case. Conversely, any decline in the value of
securities purchased or income received on them to below the asset or income
claims of the senior securities or borrowed money causes the net asset value of
the Common Stock or income available to it to decline more sharply than would
be the case if there were no prior claim. Funds obtained through senior
securities or borrowings thus create investment opportunity, but they also
increase exposure to risk. This influence ordinarily is called "leverage." As
of March 31, 2004, the only senior securities of the Corporation outstanding
were 752,740 shares of its $2.50 Cumulative Preferred Stock, $50 par value.
Based on its March 31, 2004 asset value, the Corporation's portfolio requires
an annual return of 0.08% in order to cover dividend payments on the Preferred
Stock. For a description of such payments, see "Description of Capital Stock."
The following table illustrates the effect of leverage relating to presently
outstanding Preferred Stock on the return available to a holder of the
Corporation's Common Stock.
Assumed return on portfolio
(net of expenses)....................... -10% -5% 0% 5% 10%
Corresponding return to common stockholder -10.24% -5.16% -0.08% 5.00% 10.08%
The purpose of the table above is to assist you in understanding the effects
of leverage. The percentages appearing in the table do not represent actual or
anticipated returns, which may be greater or less than those shown.
RISKS: Stock prices fluctuate. Therefore, as with any fund that invests in
stocks, the Corporation's net asset value and market price will fluctuate,
especially in the short term. You may experience a decline in the value of your
investment and you could lose money if you sell your shares at a price lower
than you paid for them.
Although the Corporation seeks current income consistent with its primary
benchmark, the S&P 500 Index, the Corporation can only distribute its "net"
current income (i.e., current income minus all applicable Corporation expenses)
to shareholders. Therefore, this amount may be lower than the current income
produced by the S&P 500 Index.
The Corporation may not invest 25% or more of its total assets in securities
of companies in any one industry. The Corporation may, however, invest a
substantial percentage of its assets in certain industries or economic sectors
believed to offer good investment opportunities. If an industry or economic
sector in which the Corporation is invested falls out of favor, the
Corporation's performance may be negatively affected.
The Corporation's performance may be affected by the broad investment
environment in the U.S. or international securities markets, which is
influenced by, among other things, interest rates, inflation, politics, fiscal
policy, and current events.
Stocks of large U.S. companies, like those in which the Corporation usually
invests, experienced an extended period of strong performance in the mid- to
late 1990s, followed by an extended period of volatility. During these volatile
periods, the value of large company stocks have periodically declined in a
material amount. To the extent large company stocks were to experience similar
declines in the future, the Corporations' performance would be adversely
impacted.
12
Foreign securities or illiquid securities in the Corporation's portfolio
involve higher risk and may subject the Corporation to higher price volatility.
Investing in securities of foreign issuers involves risks not associated with
U.S. investments, including settlement risks, currency fluctuations, local
withholding and other taxes, different financial reporting practices and
regulatory standards, high costs of trading, changes in political conditions,
expropriation, investment and repatriation restrictions, and settlement and
custody risks.
The Corporation may actively and frequently trade securities in its
portfolio to carry out its principal strategies. A high portfolio turnover rate
increases transaction costs which may increase the Corporation's expenses.
Frequent and active trading may cause adverse tax consequences for investors in
the Corporation due to an increase in short-term capital gains.
An investment in the Corporation is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
MANAGEMENT OF THE CORPORATION
THE MANAGER: In accordance with the applicable laws of the State of
Maryland, the Board of Directors provides broad supervision over the affairs of
the Corporation. Pursuant to a Management Agreement approved by the Board and
the stockholders, the Manager manages the investment of the assets of the
Corporation and administers its business and other affairs. In that connection,
the Manager makes purchases and sales of portfolio securities consistent with
the Corporation's investment objective and policies.
The Manager also serves as manager of twenty-two other U.S. registered
investment companies of the Seligman Group of Funds. These other companies are:
Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman
Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc.,
Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Global Fund
Series, Inc., Seligman High Income Fund Series, Seligman Income and Growth
Fund, Inc., Seligman Investment Grade Fixed Income Fund, Inc., Seligman LaSalle
Real State Fund Series, Inc. Seligman Municipal Fund Series, Inc., Seligman
Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman New
Technologies Fund, Inc., Seligman New Technologies Fund II, Inc., Seligman
Pennsylvania Municipal Fund Series, Seligman Portfolios, Inc., Seligman Quality
Municipal Fund, Inc., Seligman Select Municipal Fund, Inc., Seligman Time
Horizon/Harvester Series, Inc. and Seligman Value Fund Series, Inc. The address
of the Manager is 100 Park Avenue, New York, NY 10017. Mr. William C. Morris,
Chairman of the Manager and Chairman of the Board of Directors and Chairman of
the Corporation owns a majority of the outstanding voting securities of the
Manager and is a controlling person of the Manager.
As compensation for the services performed and the facilities and personnel
provided by the Manager, the Corporation pays to the Manager promptly after the
end of each month a fee, calculated on each day during such month, equal to the
Applicable Percentage of the daily net assets of the Corporation at the close
of business on the previous business day. The term "Applicable Percentage"
means the amount (expressed as a percentage and rounded to the nearest one
millionth of one percent) obtained by dividing (i) the Fee Amount by (ii) the
Fee Base. The term "Fee Amount" means the sum on an annual basis of:
13
0.45 of 1% of the first $4 billion of Fee Base
0.425 of 1% of the next $2 billion of Fee Base
0.40 of 1% of the next $2 billion of Fee Base, and
0.375 of 1% of the Fee Base in excess of $8 billion.
The term "Fee Base" as of any day means the sum of the net assets at the close
of business on the previous day of each of the investment companies registered
under the 1940 Act for which the Manager or any affiliated company acts as
investment adviser or manager (including the Corporation).
The Corporation's portfolio is managed by the Manager's Core Equity Group,
headed by Mr. Richard R. Schmaltz. Mr. Schmaltz is a Managing Director and
Chief Investment Officer of the Manager and is Vice President and Portfolio
Manager of the Corporation. Mr. Schmaltz is also Vice President and Portfolio
Manager of Seligman Common Stock Fund, Inc. and Vice President and Co-Portfolio
Manager of Seligman Income and Growth Fund, Inc., as well as Vice President of
Seligman Portfolios, Inc. and Portfolio Manager of its Seligman Common Stock
Portfolio and Co-Portfolio Manager of its Seligman Income and Growth Portfolio.
Prior to his early retirement in 2001, Mr. Schmaltz was a Managing Director of
the Manager as well as the Manager's Director of Investments.
The Corporation pays all its expenses other than those assumed by the
Manager, including brokerage commissions, fees and expenses of independent
attorneys and auditors, taxes and governmental fees, cost of stock
certificates, expenses of printing and distributing prospectuses, expenses of
printing and distributing reports, notices and proxy materials to stockholders,
expenses of printing and filing reports and other documents with governmental
agencies, expenses of stockholders' meetings, expenses of corporate data
processing and related services, stockholder record-keeping and stockholder
account services, fees and disbursements of transfer agents and custodians,
expenses of disbursing dividends and distributions, fees and expenses of
directors of the Corporation not employed by the Manager or its affiliates,
insurance premiums and extraordinary expenses such as litigation expenses.
The Management Agreement provides that it will continue in effect until
December 29 of each year if such continuance is approved in the manner required
by the 1940 Act (i.e., by a vote of a majority of the Board of Directors or of
the outstanding voting securities of the Corporation and by a vote of a
majority of Directors who are not parties to the Management Agreement or
interested persons of any such party) and if the Manager shall not have
notified the Corporation at least 60 days prior to December 29 of any year that
it does not desire such continuance. The Management Agreement may be terminated
by the Corporation, without penalty, on 60 days' written notice to the Manager
and will terminate automatically in the event of its assignment.
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FREQUENTLY ASKED QUESTIONS ABOUT REGULATORY MATTERS
In response to recent developments regarding disruptive and illegal trading
practices in the mutual fund industry, the following discussion has been
prepared to provide shareholders with important information.
For purposes of this discussion, J. & W. Seligman & Co. Incorporated and its
affiliates and related parties are referred to as "Seligman" or the "Manager,"
and the Seligman registered investment companies are referred to as the
"Seligman Funds."
Q1. HAVE ANY SELIGMAN EMPLOYEES ENGAGED IN IMPROPER TRADING?
A. The Manager has conducted an internal review of employee trading in shares
of the Seligman Funds and has not found improper trading activity by
Seligman employees.
Q2. DOES SELIGMAN HAVE ANY POLICIES RELATING TO EMPLOYEE INVESTMENT IN THE
SELIGMAN FUNDS?
A. A majority of Seligman employees invest in the Seligman Funds, either
directly or through the Seligman 401(k) plans. Trading by employees is
monitored by the Manager's legal department and is subject to the
Manager's Code of Ethics. In addition, unlike many 401(k) plans that
permit daily trading, the Seligman 401(k) plans permit only weekly trading
activity. All Seligman employees have been informed that excessive trading
with respect to the Seligman Funds, or trading in the Seligman Funds based
upon inside information, is inappropriate and may, in certain cases, be
illegal. Employees who engage in inappropriate trading will be subject to
disciplinary action, which may include termination of employment.
Q3. HAS SELIGMAN ENGAGED IN IMPROPER DISCLOSURE OF A FUND'S PORTFOLIO HOLDINGS?
A. The Manager has found no improprieties relating to the disclosure of a
Fund's portfolio holdings. The Manager has not disclosed and does not
disclose a Fund's portfolio holdings prior to public dissemination, unless
such disclosure is made for legitimate business purposes and only if the
Manager believes that such disclosure will not be detrimental to a Fund's
interest.
Q4. WHAT IS SELIGMAN'S POLICY WITH REGARD TO RECEIPT OF LATE TRADES (I.E.,
AFTER 4:00 PM EASTERN TIME)?
A. Seligman does not accept late trades directly from Fund shareholders or
prospective shareholders. The large majority of mutual fund trades
submitted to Seligman are from broker-dealer firms and other financial
intermediaries on behalf of their clients. These intermediaries have an
obligation to ensure that trades submitted to the Seligman Funds after
4:00 pm on a trading day for that day's net asset value were, in fact,
received by those entities by 4:00 pm on that day. This applies to all
trades from intermediaries, including those that are transmitted
electronically to Seligman after the market closes. Although the Seligman
Funds and the Manager, like other mutual fund groups, cannot determine the
time at which orders received through financial intermediaries were
placed, the Manager expects mutual fund trades submitted to Seligman by
financial intermediaries to comply with all applicable laws and
regulations. Seligman has contacted every financial intermediary that
offers, sells, or purchases shares of the Seligman Funds in order to
remind all of them of their responsibility to have reasonable policies and
procedures to ensure that they comply with their legal and contractual
obligations.
The Manager has found no instances of Fund shareholders engaging in late
trading directly with the Seligman Funds. Seligman will cooperate with and
support any governmental or regulatory investigation
15
to identify and hold accountable any financial intermediary that has
submitted orders in violation of applicable laws or regulations.
Q5. WHAT IS SELIGMAN'S POLICY REGARDING MARKET TIMING?
A. Seligman has policies and procedures in place to restrict trades that, in
its judgment, could prove disruptive in the management of portfolios of
the Seligman Funds. As part of the Manager's procedures, the Manager
frequently rejects trades, issues warning letters, and prohibits accounts
from making further exchanges. Since September 2003, when the first
proceedings relating to trading practices within the mutual fund industry
were publicly announced, Seligman has taken additional steps to strengthen
its policies and procedures.
Q6. IS SELIGMAN CONDUCTING AN INTERNAL INQUIRY INTO WHETHER IT OR ANY OF ITS
PERSONNEL PARTICIPATED IN OR FACILITATED VIOLATIONS OF LAW OR INTERNAL
POLICIES RELATING TO MARKET TIMING OR LATE TRADING?
A. Like other investment advisers, the Manager has conducted, and is
continuing to conduct, an internal review with respect to market timing
and late trading. In addition, the Manager is conducting a broader review
of its compliance policies and procedures beyond those relating to market
timing and late trading.
The Manager has found no instances of Fund shareholders engaging in late
trading directly with the Seligman Funds.
Last September, the Manager had one market timing arrangement, a result of
which frequent trading by a client was permitted to occur. This
arrangement was in the process of being closed down by the Manager before
the first proceedings relating to trading practices within the mutual fund
industry were publicly announced later that month. Based on a review of
the Manager's records for the past three years, the Manager identified
three other market timing arrangements. All three had already been
terminated prior to the end of September 2002.
The results of the Manager's internal review have been presented to the
Independent Directors of the Boards of the Seligman Funds. Although a
review by the Independent Directors is not final, the Manager is confident
that any financial impact of these arrangements on the Seligman Funds was
minimal. If any Seligman Fund has incurred financial harm as a result of
violations of law or internal policies by the Manager or its employees,
the Manager will make restitution to that Fund. In addition, other
measures have been and will be taken as appropriate, including
disciplining employees.
Q7. DOES SELIGMAN DISCLOSE ITS INTERNAL MARKET TIMING PROCEDURES?
A. Seligman's market timing control procedures are proprietary. The Manager
believes that disclosing these procedures will reduce their effectiveness.
Q8. WHAT NEW PRACTICES ARE BEING CONSIDERED TO PREVENT MARKET TIMING ABUSES?
A. Like other members of the mutual fund industry, Seligman is considering
numerous options, including the implementation of redemption fees.
Seligman also has contacted every financial intermediary that offers,
sells, or purchases shares of the Seligman Funds in order to inform all of
them that they must have reasonable policies and procedures to ensure that
they do not knowingly permit or facilitate excessive
16
trading of the Seligman Funds or knowingly use or facilitate any methods
designed to disguise such trading in the Seligman Funds.
Q9. IS SELIGMAN INVOLVED WITH ANY SEC INVESTIGATION RELATING TO MARKET TIMING
OR LATE TRADING?
A. The SEC and the Attorney General of the State of New York are reviewing
the matters discussed herein. In addition, the Manager has responded to an
information request from the Securities Division of the Commonwealth of
Massachusetts relating to an investigation of an unaffiliated third party.
As always, the Manager will continue to cooperate fully with the SEC and
state authorities.
Q10. DOES SELIGMAN HAVE ANY MARKET TIMING ARRANGEMENTS AT THE CURRENT TIME?
A. Seligman has none. In addition, Seligman has strengthened existing
controls to discourage and help prevent market timing.
Q11. HAVE ANY OTHER MATTERS COME TO SELIGMAN'S ATTENTION IN THE COURSE OF ITS
INTERNAL INQUIRY?
A. The Manager has also reviewed its practice of placing some of the Funds'
orders to buy and sell portfolio securities with brokerage firms in
recognition of their sales of the Seligman Funds. This is a common
practice and permissible when done properly. Although the Manager believes
that the execution of all such orders was consistent with its best
execution obligations, the Manager may have violated applicable
requirements for certain of such orders as a result of compensation
arrangements the Manager had with certain brokerage firms. The Manager is
confident that the Seligman Funds did not pay higher brokerage commissions
in connection with those orders than the Seligman Funds would otherwise
have paid for comparable transactions.
The Manager is conducting an investigation of these matters and is making
interim reports to the Independent Directors of the Boards of the Seligman
Funds, who will determine any appropriate measures to be taken. In October
2003, the Manager ceased placing Fund orders to buy and sell portfolio
securities with brokerage firms in recognition of their Fund sales. The
Manager is also responding to information requests from the SEC relating
to Seligman's use of revenue sharing and fund portfolio brokerage
commissions. As always, the Manager will continue to cooperate with the
SEC.
Q12. HAVE ANY EMPLOYEES BEEN DISCIPLINED IN CONNECTION WITH THE MANAGER'S
OVERALL INTERNAL REVIEW?
A. One employee has left Seligman. Other disciplinary measures will be taken
as appropriate.
17
DESCRIPTION OF CAPITAL STOCK
(a) DIVIDEND RIGHTS: Common Stockholders are entitled to receive dividends
only if and to the extent declared by the Board of Directors and only after (i)
such provisions have been made for working capital and for reserves as the
Board may deem advisable, (ii) full cumulative dividends at the rate of $0.625
per share per quarterly dividend period have been paid on the Preferred Stock
for all past quarterly periods and have been provided for the current quarterly
period, and (iii) such provisions have been made for the purchase or for the
redemption (at a price of $55 per share) of the Preferred Stock as the Board
may deem advisable. In any event, no dividend may be declared upon the Common
Stock unless, at the time of such declaration, the net assets of the
Corporation, after deducting the amount of such dividend and the amount of all
unpaid dividends declared on the Preferred Stock, shall be at least equal to
$100 per outstanding share of Preferred Stock. The equivalent figure was
$3,170.38 at March 31, 2004.
(b) VOTING RIGHTS: The Preferred Stock is entitled to two votes and the
Common Stock is entitled to one vote per share at all meetings of stockholders.
In the event of a default in payments of dividends on the Preferred Stock
equivalent to six quarterly dividends, the Preferred Stockholders are entitled,
voting separately as a class to the exclusion of Common Stockholders, to elect
two additional directors, such right to continue until all arrearages have been
paid and current Preferred Stock dividends are provided for. Notwithstanding
any provision of law requiring any action to be taken or authorized by the
affirmative vote of the holders of a designated portion of all the shares or of
the shares of each class, such action shall be effective if taken or authorized
by the affirmative vote of a majority of the aggregate number of the votes
entitled to vote thereon, except that a class vote of Preferred Stockholders is
also required to approve certain actions adversely affecting their rights. Any
change in the Corporation's fundamental policies may also be authorized by the
vote of 67% of the votes present at a meeting if the holders of a majority of
the aggregate number of votes entitled to vote are present or represented by
proxy.
Consistent with the requirements of Maryland law, the Corporation's Charter
provides that the affirmative vote of two-thirds of the aggregate number of
votes entitled to be cast thereon shall be necessary to authorize any of the
following actions: (i) the dissolution of the Corporation; (ii) a merger or
consolidation of the Corporation (in which the Corporation is not the surviving
corporation) with (a) an open-end investment company or (b) a closed-end
investment company, unless such closed-end investment company's Articles of
Incorporation require a two-thirds or greater proportion of the votes entitled
to be cast by such company's stock to approve the types of transactions covered
by clauses (i) through (iv) of this paragraph; (iii) the sale of all or
substantially all of the assets of the Corporation to any person (as such term
is defined in the 1940 Act); or (iv) any amendment of the Charter of this
Corporation which makes any class of the Corporation's stock a redeemable
security (as such term is defined in the 1940 Act) or reduces the two-thirds
vote required to authorize the actions listed in this paragraph. This could
have the effect of delaying, deferring or preventing changes in control of the
Corporation.
(c) LIQUIDATION RIGHTS: In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after payment to the
Preferred Stockholders of an amount equal to $50 per share plus dividends
accrued or in arrears, the Common Stockholders are entitled, to the exclusion
of the Preferred Stockholders, to share ratably in all the remaining assets of
the Corporation available for distribution to stockholders.
(d) OTHER PROVISIONS: Common Stockholders do not have preemptive,
subscription or conversion rights, and are not liable for further calls or
assessments. The Corporation's Board of Directors (other than any directors
18
who may be elected to represent Preferred Stockholders as described above) are
classified as nearly as possible into three equal classes with a maximum
three-year term so that the term of one class of directors expires annually.
Such classification provides continuity of experience and stability of
management while providing for the election of a portion of the Board of
Directors each year. Such classification could have the effect of delaying,
deferring or preventing changes in control of the Corporation.
The Board of Directors may classify or reclassify any unissued stock of any
class with or without par value (including Preferred Stock and Common Stock)
into one or more classes of preference stock on a parity with, but not having
preference or priority over, the Preferred Stock by fixing or altering before
the issuance thereof the designations, preferences, voting powers, restrictions
and qualifications of, the fixed annual dividends on, the times and prices of
redemption, the terms of conversion, the number and/or par value of the shares
and other provisions of such stock to the full extent permitted by the laws of
Maryland and the Corporation's Charter. Stockholder approval of such action is
not required.
DESCRIPTION OF WARRANTS
The Corporation's Charter and Warrant certificates provide that each Warrant
represents the right during an unlimited time to purchase one share of Common
Stock at a price of $22.49 per share, subject to increase in the number of
shares purchasable and adjustment of the price payable pursuant to provisions
of the Charter requiring such adjustments whenever the Corporation issues any
shares of Common Stock at a price less than the Warrant purchase price in
effect immediately prior to issue. Each Warrant presently entitles the holder
to purchase 22.50 shares of Common Stock at $1.00 per share. There were 12,874
Warrants outstanding at March 31, 2004. Fractional shares of Common Stock are
not issued upon the exercise of Warrants. In lieu thereof, the Corporation
issues scrip certificates representing corresponding fractions of the right to
receive a full share of Common Stock if exchanged by the end of the second
calendar year following issuance or of the proceeds of the sale of a full share
if surrendered during the next four years thereafter.
COMPUTATION OF NET ASSET VALUE
Net asset value per share of Common Stock is determined by dividing the
current value of the assets of the Corporation less its liabilities and the
prior claim of the Preferred Stock by the total number of shares of Common
Stock outstanding. Securities owned by the Corporation for which market
quotations are readily available are valued at current market value or, in
their absence, fair value determined in accordance with procedures approved by
the Board of Directors. Securities traded on national exchanges are valued at
the last sales prices, or in their absence and in the case of over-the-counter
securities, a mean of bid and asked prices. United Kingdom securities and
securities for which there are no recent sales transactions are valued based on
quotations provided by primary market makers in such securities. Any securities
for which recent market quotations are not readily available are valued at fair
value determined in accordance with procedures approved by the Board of
Directors. Short-term holdings maturing in 60 days or less are generally valued
at amortized cost if their original maturity was 60 days or less. Short-term
holdings with more than 60 days remaining to maturity will be valued at current
market value until the 61st day prior to maturity, and will then be valued on
an amortized cost basis based on the value of such date unless the Board
determines that this amortized cost value does not represent fair market value.
19
All assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars by a pricing service based upon the mean of the bid
and asked prices of such currencies against the U.S. dollar quoted by a major
bank which is a regular participant in the institutional foreign exchange
markets.
Net asset value of the Common Stock is determined daily, Monday through
Friday, as of the close of regular trading on the New York Stock Exchange
(normally, 4:00 p.m. Eastern time) each day the New York Stock Exchange is open
for trading.
DIVIDEND POLICY AND TAXES
DIVIDENDS: Dividends are paid quarterly on the Preferred Stock and on the
Common Stock in amounts representing substantially all of the net investment
income earned each year. Payments on the Preferred Stock are in a fixed amount,
but payments on the Common Stock vary in amount, depending on investment income
received and expenses of operation. Substantially all of any taxable net gain
realized on investments is paid to Common Stockholders at least annually in
accordance with requirements under the Internal Revenue Code of 1986, as
amended, and other applicable statutory and regulatory requirements. The
Corporation has a substantial capital loss carry-forward that is available for
offset against future net capital gains, expiring in various amounts through
2011. Accordingly, no capital gain distributions are expected to be paid to
shareholders until net capital gains have been realized in excess of the
available capital loss carry-forward.
Unless SDC is otherwise instructed by you, dividends on the Common Stock are
paid in cash and capital gain distributions are paid in book shares of Common
Stock which are entered in your Tri-Continental account as "book credits."
Long-term gain distributions ordinarily are paid in shares of Common Stock, or,
at your option, 75% in book shares and 25% in cash, or, in the alternative,
100% in cash. Shares distributed in payment of gain distributions are valued at
market price or at net asset value, whichever is lower, on the valuation date.
Distributions or dividends received by you will have the effect of reducing the
net asset value of the shares of the Corporation by the amount of such
distributions. If the net asset value of shares is reduced below your cost by a
distribution, the distribution will be taxable as described below even though
it is in effect a return of capital.
TAXES: The Corporation intends to continue to qualify and elect to be
treated as a regulated investment company under the Internal Revenue Code. As a
regulated investment company, the Corporation will generally be exempt from
federal income taxes on net ordinary income and capital gains that it
distributes to stockholders, provided that at least 90% of its net ordinary
income and net short-term capital gains are distributed to stockholders each
year.
Qualification does not, of course, involve governmental supervision of
management or investment practices or policies. Investors should consult their
own counsel for a complete understanding of the requirements the Corporation
must meet to qualify for such treatment. The information set forth below
relates solely to the U.S. Federal income taxes on dividends and distributions
by the Corporation and assumes that the Corporation qualifies as a regulated
investment company.
Dividends on Common or Preferred Stock representing net investment income
and distributions from the excess of net short-term capital gains over net
long-term capital losses are taxable to stockholders as ordinary income,
whether received in cash or invested in additional shares. To the extent
designated as derived from the
20
Corporation's dividend income that would be eligible for the dividends received
deduction if the Corporation were not a regulated investment company, they are
eligible, subject to certain restrictions, for the 70% dividends received
deduction for corporations. Distributions of net capital gain (i.e., the excess
of net long-term capital gains over any net short-term capital losses) are
taxable as long-term capital gain, whether received in cash or invested in
additional shares, regardless of how long you have held your shares. The tax
rate on net long-term capital gains for individuals is reduced generally from
20% to 15% (5% for individuals in lower tax brackets) for such gain held for
more than one year and realized before January 1, 2009. Such distributions are
not eligible for the dividends received deduction allowed to corporate
stockholders. If you receive distributions in the form of additional shares
issued by the Corporation, you will be treated for federal income tax purposes
as having received a distribution in an amount equal to the fair market value
on the date of distribution of the shares received.
Dividends declared in October, November or December, payable to stockholders
of record on a specified date in such a month and paid in the following January
will be treated as having been paid by the Corporation and received by each
stockholder in December. Under this rule, therefore, stockholders may be taxed
in one year on dividends or distributions actually received in January of the
following year.
The Corporation is subject to a 4% nondeductible excise tax on the
underdistribution of amounts required to be paid pursuant to a prescribed
formula. The formula requires payment to stockholders during a calendar year of
distributions representing at least 98% of the Corporation's ordinary income
for the calendar year, at least 98% of its capital gain net income realized
during the one-year period ending October 31 during such year, and all ordinary
income and capital gain net income for prior years that was not previously
distributed. The Corporation intends to make sufficient distributions or deemed
distributions of its ordinary income and capital gain net income prior to the
end of each calendar year to avoid liability for the excise tax.
Any gain or loss you realize upon a sale or redemption of Common or
Preferred Stock will generally be treated as a long-term capital gain or loss
if you held your shares for more than one year and as a short-term capital gain
or loss if you held your shares for one year or less. Individual stockholders
will be subject to federal income tax on net capital gains at a maximum rate of
15% in respect of shares held for more than one year and disposed of before
January 1, 2009. Net capital gain of a corporate stockholder is taxed at the
same rate as ordinary income. However, if shares on which a long-term capital
gain distribution has been received are subsequently sold or redeemed and such
shares have been held for six months or less, (after taking into account
certain hedging transactions), any loss you realize will be treated as
long-term capital loss to the extent that it offsets the long-term capital gain
distribution. No loss will be allowed on the sale or other disposition of
shares of the Corporation if, within a period beginning 30 days before the date
of such sale or disposition and ending 30 days after such date, you acquire
(such as through the Automatic Dividend Investment and Cash Purchase Plan), or
enter into a contract or option to acquire, securities that are substantially
identical to the shares of the Corporation.
The tax treatment of the Corporation and of stockholders under the tax laws
of the various states may differ from the federal tax treatment. You are urged
to consult your own tax advisor regarding specific questions as to federal,
state or local taxes, including questions regarding the alternative minimum tax.
THE CORPORATION IS REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A
PORTION OF TAXABLE DIVIDENDS AND OTHER REPORTABLE PAYMENTS PAID ON YOUR ACCOUNT
IF YOU PROVIDE THE CORPORATION WITH EITHER AN INCORRECT TAXPAYER IDENTIFICATION
NUMBER OR NO NUMBER AT ALL OR YOU FAIL TO CERTIFY THAT YOU ARE NOT SUBJECT TO
SUCH WITHHOLDING. YOU SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY
THE INTERNAL
21
REVENUE SERVICE, THE CORPORATION MAY BE FINED ON AN ANNUAL BASIS FOR EACH
ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED.
THE CORPORATION MAY CHARGE YOU A SERVICE FEE EQUAL TO SUCH FINE FOR ACCOUNTS
NOT HAVING A CERTIFIED TAXPAYER IDENTIFICATION NUMBER. CERTIFICATES WILL NOT BE
ISSUED UNLESS AN ACCOUNT IS CERTIFIED.
INVESTMENT PLANS AND OTHER SERVICES
AUTOMATIC DIVIDEND INVESTMENT AND CASH PURCHASE PLAN
The Automatic Dividend Investment and Cash Purchase Plan is available for
any Common stockholder who wishes to purchase additional shares of the
Corporation's Common Stock with dividends or other cash payments on shares
owned, with cash dividends paid by other corporations in which stock is owned
or with cash funds. The tax treatment of dividends and capital gain
distributions is the same whether you take them in cash or reinvest them to buy
additional shares of the Corporation. Details of the services offered under the
Plan are given in the Authorization Form appearing in this Prospectus. Under
the Plan, you appoint the Corporation as your purchase agent to receive or
invest such dividends and cash funds forwarded by you for your accounts in
additional shares of the Corporation's Common Stock (after deducting a service
charge), as described under "Method of Purchase" below. Funds forwarded by you
under the Plan should be made payable to Tri-Continental Corporation and mailed
to Tri-Continental Corporation, P.O. Box 9766, Providence, RI 02940-9766.
Checks for investment must be in U.S. dollars drawn on a domestic bank. Credit
card convenience checks and third party checks, i.e., checks made payable to a
party other than Tri-Continental Corporation, may not be used to purchase
shares under this Plan. You should direct all correspondence concerning the
Plan to Seligman Data Corp., 100 Park Avenue, New York, NY 10017. At present, a
service fee of up to a maximum of $2.00 will be charged for each cash purchase
transaction. There is no charge for Automatic Dividend Investment. As of March
31, 2004, 27,942 stockholders, owning approximately 43,087,606 shares of Common
Stock, were using the Plan. You may choose one or more of the services under
the Plan and you may change your choices (or terminate participation) at any
time by notifying SDC in writing. The Plan may be amended or terminated by
written notice to Planholders.
AUTOMATIC CHECK SERVICE
The Automatic Check Service enables you, if you are an Automatic Dividend
Investment and Cash Purchase Planholder, to authorize checks to be drawn on
your regular checking account at regular intervals for fixed amounts to be
invested in additional shares of Common Stock for your account. An
Authorization Form to be used to start the Automatic Check Service is included
in this Prospectus.
SHARE KEEPING SERVICE
You may send certificates for shares of the Corporation's Common Stock to
SDC to be placed in your account. Certificates should be sent to Seligman Data
Corp., 101 Sabin Street, Pawtucket, RI 02860-1427, with a letter requesting
that they be placed in your account. You should not sign the certificates and
they should be sent by certified or registered mail. Return receipt is
advisable; however, this may increase mailing time. When your certificates are
received by SDC, the shares will be entered in your Tri-Continental account as
"book credits" and shown on the Statement of Account received from SDC. If you
use the Share Keeping Service you should keep in mind that you must have a
stock certificate for delivery to a broker if you wish to sell shares. A
certificate will be
22
issued and sent to you on your written request to SDC, usually within two
business days of the receipt of your request. You should consider the time it
takes for a letter to arrive at SDC and for a certificate to be delivered to
you by mail before you choose to use this service.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Corporation may be purchased for:
--Individual Retirement Accounts (IRAs) (available to current stockholders
only);
--Savings Incentive Match Plans for Employees (SIMPLE IRAs);
--Simplified Employee Pension Plans (SEPs);
--Section 401(k) Plans for corporations and their employees; and
--Money Purchase Pension and Profit Sharing Plans for sole proprietorships,
partnerships and corporations.
These types of plans may be established only upon receipt of a written
application form. The Corporation may register an IRA investment for which an
account application has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017. You may telephone toll-free by dialing
(800) 445-1777 from all United States.
State Street Bank and Trust Company acts as trustee and custodian and
performs other related services with respect to the Plans.
J. & W. SELIGMAN & CO. INCORPORATED MATCHED ACCUMULATION PLAN
The Manager has a Matched Accumulation Plan ("Profit-Sharing Plan") which
provides that, through payroll deductions which may be combined with matching
contributions and through any profit sharing distribution made by the Manager
to the Profit-Sharing Plan, eligible employees of the Manager, Seligman
Advisors, Inc. and Seligman Services, Inc. may designate that the payroll
deductions and contributions made by the Manager and invested by the Plan
trustee, be invested in certain investment companies for which the Manager
serves as investment adviser. One such fund consists of Common Stock of the
Corporation purchased by the trustee as described under "Method of Purchase."
SELIGMAN DATA CORP. EMPLOYEES' THRIFT PLAN
SDC has an Employees' Thrift Plan ("Thrift Plan") which provides a
systematic means by which savings, through payroll deductions, of eligible
employees of SDC may be combined with matching contributions made by the
company and invested by the Plan trustee, in certain investment companies for
which the Manager serves as investment adviser, as designated by the employee.
One such fund consists of Common Stock of the Corporation purchased by the
trustee as described under "Method of Purchase."
23
METHOD OF PURCHASE
Purchases will be made by the Corporation from time to time on the New York
Stock Exchange or elsewhere to satisfy dividend and cash purchase investments
under the Automatic Dividend Investment and Cash Purchase Plan, tax-deferred
retirement plans, and the investment plans noted above. Purchases will be
suspended on any day when the closing price (or closing bid price if there were
no sales) of the Common Stock on the New York Stock Exchange on the preceding
trading day was higher than the net asset value per share (without adjustment
for the exercise of Warrants remaining outstanding). If on the dividend payable
date or the date shares are issuable to stockholders making Cash Purchase
investments under the Plan (the "Issuance Date"), shares previously purchased
by the Corporation are insufficient to satisfy dividend or Cash Purchase
investments and on the last trading day immediately preceding the dividend
payable date or the Issuance Date the closing sale or bid price of the Common
Stock is lower than or the same as the net asset value per share, the
Corporation will continue to purchase shares until a number of shares
sufficient to cover all investments by stockholders has been purchased or the
closing sale or bid price of the Common Stock becomes higher than the net asset
value, in which case the Corporation will issue the necessary additional
shares. If on the last trading date immediately preceding the dividend payable
date or Issuance Date, the closing sale or bid price of the Common Stock was
higher than the net asset value per share, and if shares of the Common Stock
previously purchased on the New York Stock Exchange or elsewhere are
insufficient to satisfy dividend or Cash Purchase investments, the Corporation
will issue the necessary additional shares from authorized but unissued shares
of the Common Stock.
Shares will be issued on the dividend payable date or the Issuance Date at a
price equal to the lower of (1) the closing sale or bid price, plus commission,
of the Common Stock on the New York Stock Exchange on the ex-dividend date or
Issuance Date or (2) the greater of the net asset value per share of the Common
Stock on such trading day (without adjustment for the exercise of Warrants
remaining outstanding) and 95% of the closing sale or bid price of the Common
Stock on the New York Stock Exchange on such trading day. In the past, the
Common Stock ordinarily has been priced in the market at less than net asset
value per share.
The net proceeds to the Corporation from the sale of any shares of Common
Stock to the Plans will be added to its general funds and will be available for
additional investments and general corporate purposes. The Manager anticipates
that investment of any proceeds, in accordance with the Corporation's
investment objective and policies, will take up to thirty days from their
receipt by the Corporation, depending on market conditions and the availability
of appropriate securities, but in no event will such investment take longer
than six months. Pending such investment in accordance with the Corporation's
objective and policies, the proceeds will be held in U.S. Government Securities
(which term includes obligations of the United States Government, its agencies
or instrumentalities) and other short-term money market instruments.
If you are participating in the Automatic Dividend Investment and Cash
Purchase Plan and your shares are held under the Plan in book credit form, you
may terminate your participation in the Plan and receive a certificate
for all or a part of your shares or have all or a part of your shares sold for
you by the Corporation and retain unsold shares in book credit form or receive
a certificate for any shares not sold. Instructions must be signed by all
registered stockholders and should be sent to Seligman Data Corp., 101 Sabin
Street, Pawtucket, RI 02860-1427. If you elect to have shares sold, you will
receive the proceeds from the sale, less any brokerage commissions. Only
participants whose shares are held in book credit form may elect upon
termination of their participation in the Plan to have shares sold in the above
manner. All other stockholders of the Corporation must sell shares through a
registered broker/dealer. As an additional measure to protect you and the
Corporation, SDC
24
may confirm written instructions by telephone before sending your money when
the value of the shares being sold is $25,000 or more, or when proceeds are
directed to be paid to an address or payee different from that on our records.
This will not affect the date on which your instruction to sell shares is
actually processed. Whenever the value of the shares being sold is $50,000 or
more, or the proceeds are to be paid or mailed to an address or payee different
from that on our records, the signature of all stockholders must be guaranteed
by an eligible financial institution including, but not limited to, the
following: banks, trust companies, credit unions, securities brokers and
dealers, savings and loan associations and participants in the Securities
Transfer Association Medallion Program ("STAMP"), the Stock Exchanges Medallion
Program ("SEMP") and the New York Stock Exchange Medallion Signature Program
("MSP"). Notarization by a notary public is not an acceptable signature
guarantee. The Corporation reserves the right to reject a signature guarantee
where it is believed that the Corporation will be placed at risk by accepting
such guarantee.
SYSTEMATIC WITHDRAWAL PLAN
This Plan is available if you wish to receive fixed payments from your
investment in the Common Stock in any amount at specified regular intervals.
You may start a Systematic Withdrawal Plan if your shares of the Corporation's
Common Stock have a market value of $5,000 or more. Shares must be held in your
account as book credits. SDC will act for you, make payments to you in
specified amounts on either the 1st or 15th day of each month, as designated by
you, and maintain your account. There is a charge by the agent of $1.00 per
withdrawal payment for this service. This charge may be changed from time to
time.
Payments under the Systematic Withdrawal Plan will be made by selling
exactly enough full and fractional shares of Common Stock to cover the amount
of the designated withdrawal. Sales may be made on the New York Stock Exchange,
to the agent or a trustee for one of the other Plans, or elsewhere. Payments
from sales of shares will reduce the amount of capital at work and dividend
earning ability, and ultimately may liquidate the investment. Sales of shares
may result in gain or loss for income tax purposes. Withdrawals under this Plan
or any similar withdrawal plan of any other investment company, concurrent with
purchases of shares of the Common Stock or of shares of any other investment
company, will ordinarily be disadvantageous to the Planholder because of the
payment of duplicative commission or sales loads.
STOCKHOLDER INFORMATION
SDC maintains books and records for all of the Plans, and confirms
transactions to stockholders. To insure prompt delivery of checks, account
statements and other information, you should notify SDC immediately, in
writing, of any address changes. If you close your account during any year it
is important that you notify SDC of any subsequent address changes to ensure
that you receive a year-end statement and tax information for that year. You
will be sent reports quarterly regarding the Corporation. General information
about the Corporation may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or by telephoning the
Corporate Communications/Investor Relations Department toll-free at (800)
221-7844 in the U.S. You may call (212) 850-1864 outside the U.S. Information
about your account (other than a retirement plan account), may be requested by
writing Stockholder Services, Seligman Data Corp., at the same address or by
telephone by dialing toll-free (800) 874-1092 in the U.S. or 212-682-7600
outside the U.S. For information about a retirement account, call Retirement
Plan Services toll-free at (800) 445-1777 or write Retirement Plan Services,
Seligman Data Corp. at the above address. SDC may be telephoned Monday through
Friday (except holidays) between the hours of 8:30 a.m. and 6:00 p.m. Eastern
time. Your call will be answered by a service representative.
25
24-HOUR AUTOMATED TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597
(WITHIN THE UNITED STATES) ON A TOUCHTONE TELEPHONE, WHICH PROVIDES INSTANT
ACCESS TO PRICE, ACCOUNT BALANCE, MOST RECENT TRANSACTION AND OTHER
INFORMATION. IN ADDITION, YOU MAY REQUEST ACCOUNT STATEMENTS AND FORM 1099-DIV.
ISSUANCE OF SHARES IN CONNECTION WITH ACQUISITIONS
The Corporation may issue shares of its Common Stock in exchange for the
assets of another investment company in transactions in which the number of
shares of Common Stock of the Corporation to be delivered will be generally
determined by dividing the current value of the seller's assets by the current
per share net asset value or market price on the New York Stock Exchange of the
Common Stock of the Corporation, or by an intermediate amount. In such
acquisitions, the number of shares of the Corporation's Common Stock to be
issued will not be determined on the basis of the market price of such Common
Stock if such price is lower than its net asset value per share, except
pursuant to an appropriate order of the Securities and Exchange Commission or
approval by stockholders of the Corporation, as required by law. The
Corporation is not presently seeking to acquire the assets of any investment
company, but it may acquire the assets of companies from time to time in the
future.
Some or all of the stock so issued may be sold from time to time by the
recipients or their stockholders through brokers in ordinary transactions on
stock exchanges at current market prices. The Corporation has been advised that
such sellers may be deemed to be underwriters as that term is defined in the
1933 Act.
26
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
The table of contents of the SAI is as follows:
TABLE OF CONTENTS
Additional Investment Policies........................................................... 2
Directors and Officers................................................................... 4
Management of the Corporation............................................................ 11
Holdings of Preferred Stock, Common Stock and Warrants................................... 12
Brokerage Allocation and Other Practices................................................. 13
Financial Statements..................................................................... 13
Custodian, Stockholder Service Agent and Dividend Paying Agent and Experts............... 14
Independent Auditors' Report on Financial Highlights--Senior Securities--$2.50 Cumulative
Preferred Stock........................................................................ 15
27
[LOGO] Tri-Continental Corporation AUTHORIZATION FORM
FOR
To: Seligman Data Corp. AUTOMATIC DIVIDEND
P.O. Box 9759 INVESTMENT
Providence, Rhode Island 02940-9759 AND CASH PURCHASE PLAN
.AUTOMATIC DIVIDEND INVESTMENT
.AUTOMATIC INVESTMENT OF OTHER
CORPORATIONS'DIVIDENDS
.CASH PURCHASE PLAN
.AUTOMATIC CHECK SERVICE
Date.....................
Gentlemen:
I own shares of Tri-Continental Corporation Common Stock registered as shown
below:
ACCOUNT REGISTRATION
-------------------------------------------------------
Stockholder's Name (printor type) Stockholder's Signature*
-------------------------------------------------------
Co-Holder's Name Co-Holder's Signature*
-------------------------------------------------------
Address (street and number) Taxpayer Identification Number
-------------------------------------------------------
City State Zip
Code.. Stockholder Account Number, if known
* If shares are held or to be held in more than one name, all must sign, and
plural pronouns will be implied in the text. In the case of co-holders, a
joint tenancy with right of survivorship will be presumed unless otherwise
specified.
Under penalties of perjury I certify that the number shown on this form is
my correct Taxpayer Identification Number (Social Security Number) and that I
am not subject to backup withholding either because I have not been notified
that I am subject to backup withholding as a result of failure to report all
interest or dividends, or the Internal Revenue Service has notified me that I
am no longer subject to backup withholding. I certify to my legal capacity to
purchase or sell shares of the Corporation for my own Account, or for the
Account of the organization named above. I have received a current Prospectus
of the Corporation and appoint Seligman Data Corp. as my agent to act in
accordance with my instructions herein.
----- -----------------------
Date Stockholder's Signature
I have read the Terms and Conditions of the Automatic Dividend Investment
and Cash Purchase Plan and the current Prospectus, a copy of which I have
received, and I wish to establish a Plan to use the Services checked below:
SERVICE(S) DESIRED
[_] AUTOMATIC INVESTMENT OF TRI-CONTINENTAL DIVIDENDS
I wish to have my quarterly dividends invested in additional shares, and
distributions from gains paid as follows:
[_] Credited to my account in additional full and fractional shares.
[_] Credited 75% to my account in shares and 25% paid to me in cash.
[_] AUTOMATIC INVESTMENT OF OTHER CORPORATION'S DIVIDENDS
I intend to give orders for the payment of cash dividends from other
corporations to be invested in shares of Tri-Continental Common Stock for
my account.
Note: Checks in payment of dividends from other corporations should
indicate your name and Tri-Continental account number. The checks should be
made payable to the order of Tri-Continental Corporation and be mailed to
Seligman Data Corp., P.O. Box 9766, Providence, Rhode Island 02940-9766.
[_] CASH PURCHASES
I intend to send funds from time to time to be invested in shares of
Tri-Continental Common Stock for my account.
Note: Your checks should indicate your name and Tri-Continental account
number. Make all checks payable to Tri-Continental Corporation and mail to
Seligman Data Corp., P.O. Box 9766, Providence, Rhode Island 02940-9766.
[_] AUTOMATIC CHECK SERVICE
I have completed the Authorization Form to have pre-authorized checks drawn
on my regular checking account at regular intervals for investment in
shares of Tri-Continental Common Stock.
5/04
28
[LOGO] Tri-Continental Corporation AUTHORIZATION FORM
FOR
AUTOMATIC CHECK SERVICE
To start your Automatic Check Service, fill out this
form and forward it with an unsigned bank check from
your regular checking account (marked "void") to:
Seligman Data Corp.
P.O. Box 9759
Providence, Rhode Island 02940-9759
Date.................
Gentlemen:
I own shares of Tri-Continental Corporation
Common Stock, registered as shown below, which are
entered in the Automatic Dividend Investment and
Cash Purchase Plan.
1. Stockholder Account Number (if known) ____________
2. AUTOMATIC CHECK SERVICE
Please arrange with my bank to draw pre-authorized
checks on my regular checking account and invest
$__________________ in shares of Tri-Continental
Common Stock every:
[_] month
[_] 3
months
I have completed the "Bank Authorization to Honor
Pre-Authorized Checks" which appears below and
have enclosed one of my bank checks marked "void."
I understand that my checks will be invested on
the fifth day of the month and that I must
remember to deduct the amount of my investment as
it is made from my checking account balance.
BANK AUTHORIZATION TO HONOR PRE-AUTHORIZED CHECKS
To: _________________________________________________
(Name of Bank)
___________________________________________________
(Address of Bank or Branch, Street, City, State
and Zip)
Please honor pre-authorized checks drawn on my
account by Seligman Data Corp., 100 Park Avenue, New
York, NY 10017, to the order of Tri-Continental
Corporation, and charge them to my checking account.
Your authority to do so shall continue until you
receive written notice from me revoking it. You may
terminate your participation in this arrangement at
any time by written notice to me. I agree that your
rights with respect to each pre-authorized check
shall be the same as if it were a check drawn and
signed by me. I further agree that should any such
check be dishonored, with or without cause,
intentionally or inadvertently, you shall be held
under no liability whatsoever.
-------------------------------------------------------------------------------------------------------------------------
Checking Account No.
-------------------------------------------------------------------------------------------------------------------------
Name(s) of Signature(s) of
Depositor(s)--Please Print Depositor(s)--As carried by Bank
-------------------------------------------------------------------------------------------------------------------------
Address (Street) City State Zip Code
5/04
29
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30
TERMS AND CONDITIONS
The Automatic Dividend Investment and Cash Purchase Plan provides
Tri-Continental Common stockholders with four ways to add to their investments:
1) with Tri-Continental dividends and distributions, 2) with cash dividends
from other corporations, 3) with cash payments, in any amount at any time, and
4) with cash provided by pre-authorized checks through the Automatic Check
Service. A Planholder may use any or all of these Services, subject to the
following terms and conditions:
1. Seligman Data Corp. ("SDC"), as Plan service agent, will maintain
accounts and confirm to Planholders, as soon as practicable after each
investment, the number of shares of Common Stock acquired and credited to the
accounts and the cost. Tri-Continental Corporation (the "Corporation"), as
purchase agent, will purchase shares for Planholders. All checks for dividends
payable by other corporations or for cash purchase payments sent by Planholders
for investment in additional shares of Tri-Continental Common Stock should be
drawn to the order of Tri-Continental Corporation and mailed to Seligman Data
Corp., P.O. Box 9766, Providence, Rhode Island 02940-9766.
2. Funds received by the Corporation for a Planholder will be combined with
funds of other Planholders and those funds may be combined with funds available
under the other Plans for the purchase of Tri-Continental Common Stock in order
to minimize brokerage commissions on shares purchased. Shares will be purchased
in accordance with the current Prospectus. Dividends from other corporations
and purchase cash received from Planholders or through the Automatic Check
Service will be invested at least once each 30 days.
3. Shares will be issued under the Plan in accordance with the current
Prospectus.
4. No stock certificates will be delivered for shares acquired unless the
Plan account is terminated or the Planholder requests their delivery by writing
to SDC. The shares acquired will be held in each Planholder's account as book
credits.
5. Certificates held by a Planholder, or subsequently received, may be sent
to SDC for credit to a Plan account. A certificate for any full shares held in
a Plan account will be issued at a Planholder's request. The time required to
obtain a certificate to sell through a broker, or for other purposes, will be
that needed to send a written request to SDC to withdraw the certificate
(normally two business days) and to mail the certificate to the Planholder
through the U.S. Postal Service.
6. A maximum service charge of $2.00 will be deducted before each investment
is made for a Plan account. There is no charge for Automatic Dividend
Investment.
7. Applications for the Automatic Check Service are subject to acceptance by
the Planholder's bank and SDC. SDC will prepare Automatic Check Service checks
with the same magnetic ink numbers that are on a Planholder's check and will
arrange with the Planholder's bank to start the Service in accordance with the
Planholder's instructions. A minimum of 30 days from the date of receipt of an
application by SDC is required to contact the bank and initiate the Service. If
for any reason the bank is unable to honor a pre-authorized check request, the
Planholder will be notified promptly.
Shares with a market value of at least two times the amount of the
authorized checks must be held as book credits for the Planholder's account by
SDC. If any check is dishonored or if the value of shares held by SDC in an
account falls below the required minimum, the Service may be suspended. The
Service may be reinstated upon written request by the Planholder including an
indication that the cause of the interruption has been corrected.
If a Planholder's check is not honored by the Planholder's bank at any time,
SDC is authorized to sell exactly enough full and fractional shares from the
Planholder's account to equal the amount of the dishonored check.
8. A Planholder or SDC may terminate a Plan account at any time upon notice
in writing before the record date of a dividend or distribution by
Tri-Continental. A Plan account will terminate automatically if the Planholder
sells or transfers all of the shares in the Plan account. If a Plan account is
terminated, a certificate for the full shares held may be issued and sent to
the Planholder, and any fractional shares may be liquidated at the Planholder's
request. Terminating Planholders may elect to have all or part of their shares
sold by the Corporation, if their shares are held in book credit form. If a
Plan account is terminated between the record and payment dates of a dividend,
the dividend payment will be made in cash.
9. In acting under this Plan, the Corporation and SDC will be liable only
for willful misfeasance or gross negligence.
10. A Planholder may adopt or suspend one or more of the Plan Services by
sending a revised Authorization Form or notice in writing to SDC.
11. All additional shares registered in a Planholder's name which are
acquired under one or more of the Plan Services or by other means will
participate automatically in each of the Plan services elected.
31
[LOGO] Tri-Continental Corporation
an investment you can live with
100 Park Avenue
New York, New York 10017
INVESTMENT MANAGER
J. & W. Seligman & Co.
Incorporated
100 Park Avenue
New York, New York 10017
STOCKHOLDER
SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, New York 10017
PORTFOLIO SECURITIES
CUSTODIAN
State Street Bank and
Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105
GENERAL COUNSEL
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
---------
Listed on the
New York Stock Exchange
TY
TRI-CONTINENTAL CORPORATION
Statement of Additional Information
May 3, 2004
100 Park Avenue
New York, New York 10017
New York City Telephone: (212) 682-7600
Toll-Free Telephone: (800) 874-1092 all United States
For Retirement Plan Information - Toll-Free Telephone: (800) 445-1777
This Statement of Additional Information ("SAI") is not a prospectus. This SAI
relates to the current Prospectus of Tri-Continental Corporation (the
"Corporation"), dated May 3, 2004 (the "Prospectus"), and should be read in
conjunction therewith. A copy of the Prospectus may be obtained by writing or
calling the Corporation at the above address or telephone numbers.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission ("SEC").
Table of Contents
Additional Investment Policies (See "Investment Objective and
Other Policies and Related Risks" in the Prospectus) ........ 2
Directors and Officers ........................................ 4
Management of the Corporation (See "Management of the
Corporation" in the Prospectus) ............................. 11
Holdings of Preferred Stock, Common Stock and Warrants ........ 12
Brokerage Allocation and Other Practices ...................... 13
Financial Statements .......................................... 14
Custodian, Stockholder Service Agent and
Dividend Paying Agent and Experts ........................... 14
Independent Auditors' Report on Financial Highlights -
-- Senior Securities -- $2.50 Cumulative Preferred Stock .... 15
CETRI1A
ADDITIONAL INVESTMENT POLICIES
The investment objectives and policies of the Corporation are set forth in the
Prospectus. Certain additional investment information is set forth below.
Defined terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Prospectus.
Fundamental Policies
The Corporation's stated fundamental policies, which may not be changed without
a vote of stockholders are listed below; within the limits of these fundamental
policies, the management has reserved freedom of action. The Corporation:
(1) may issue senior securities such as bonds, notes or other evidences of
indebtedness if immediately after issuance the net assets of the
Corporation provide 300% coverage of the aggregate principal amount of all
bonds, notes or other evidences of indebtedness and that amount does not
exceed 150% of the capital and surplus of the Corporation;
(2) may issue senior equity securities on a parity with, but not having
preference or priority over, the Preferred Stock if immediately after
issuance its net assets are equal to at least 200% of the aggregate amount
(exclusive of any dividends accrued or in arrears) to which all shares of
the Preferred Stock, then outstanding, shall be entitled as a preference
over the Common Stock in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(3) may borrow money for substantially the same purposes as it may issue
senior debt securities, subject to the same restrictions and to any
applicable limitations prescribed by law;
(4) may engage in the business of underwriting securities either directly or
through majority-owned subsidiaries subject to any applicable restrictions
and limitations prescribed by law;
(5) does not intend to concentrate its assets in any one industry although it
may from time to time invest up to 25% of the value of its assets, taken
at market value, in a single industry;
(6) may not, with limited exceptions, purchase and sell real estate directly
but may do so through majority-owned subsidiaries, so long as its real
estate investments do not exceed 10% of the value of the Corporation's
total assets;
(7) may not purchase or sell commodities or commodity contracts; and
(8) may make money loans (subject to restrictions imposed by law and by
charter) (a) only to its subsidiaries, (b) as incidents to its business
transactions or (c) for other purposes. It may lend its portfolio
securities to brokers or dealers in corporate or government securities,
banks or other recognized institutional borrowers of securities subject to
any applicable requirements of a national securities exchange or of a
governmental regulatory body against collateral consisting of cash or
direct obligations of the United States, maintained on a current basis, so
long as all such loans do not exceed 10% of the value of total assets, and
it may make loans represented by repurchase agreements, as described in
the Prospectus, so long as such loans do not exceed 10% of the value of
total assets.
During its last three fiscal years, the Corporation did not: (a) issue senior
securities; (b) borrow any money; (c) underwrite securities; (d) concentrate
investments in particular industries or groups of industries; (e) purchase or
sell real estate, commodities, or commodity contracts; or (f) make money loans
or lend portfolio securities.
Other Policies
Leverage. When securities are loaned, the Corporation receives from the borrower
the equivalent of dividends or interest paid by the issuer of securities on loan
and, at the same time, makes short-term investments with the cash collateral and
retains the interest earned, after payment to the borrower or placing broker of
a negotiated portion of such interest, or receives from the borrower an agreed
upon rate of interest in the case of loans collateralized by direct obligations
of the United States. The Corporation does not have the right to vote securities
on loan, but would expect to terminate the loan and regain the right to vote if
that were considered important with respect to the investment.
2
Foreign Securities. In order to take advantage of opportunities that may be
provided by debt instruments of foreign issuers, the Corporation may from time
to time invest up to 3% of its assets in debt securities issued or guaranteed by
a foreign government or any of its political subdivisions, authorities, agencies
or instrumentalities and in related forward contracts. The Manager will
determine the percentage of assets invested in securities of a particular
country or denominated in a particular currency in accordance with its
assessment of the relative yield and appreciation potential of such securities
and the relationship of a country's currency to the US dollar. Currently, the
Corporation will invest in securities denominated in foreign currencies or US
dollars of issuers located in the following countries: Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Hong Kong, Italy, Japan, Malaysia,
Mexico, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, Thailand and the United Kingdom. An issuer of debt securities
purchased by the Corporation may be domiciled in a country other than the
country in whose currency the instrument is denominated.
The Corporation's returns on foreign currency denominated debt instruments can
be adversely affected by changes in the relationship between the US dollar and
foreign currencies. The Corporation may engage in currency exchange transactions
to protect against uncertainty in the level of future exchange rates in
connection with hedging and other non-speculative strategies involving specific
settlement transactions or portfolio positions. The Corporation will conduct its
currency exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency market or through forward contracts.
Rights and Warrants. The Corporation may not invest in rights and warrants if,
at the time of acquisition, the investment in rights and warrants would exceed
5% of the Corporation's net assets, valued at the lower of cost or market. In
addition, no more than 2% of net assets may be invested in warrants not listed
on the New York or American Stock Exchanges. For purposes of this restriction,
warrants acquired by the Corporation in units or attached to securities may be
deemed to have been purchased without cost.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract is an agreement to purchase or sell a specific currency at a future
date and at a price set at the time the contract is entered into. The
Corporation will generally enter into forward foreign currency exchange
contracts to fix the US dollar value of a security it has agreed to buy or sell
for the period between the date the trade was entered into and the date the
security is delivered and paid for, or, to hedge the US dollar value of
securities it owns.
The Corporation may enter into a forward contract to sell or buy the amount of a
foreign currency it believes may experience a substantial movement against the
US dollar. In this case the contract would approximate the value of some or all
of the Corporation's portfolio securities denominated in such foreign currency.
Under normal circumstances, the portfolio manager will limit forward currency
contracts to not greater than 75% of the Corporation's portfolio position in any
one country as of the date the contract is entered into. This limitation will be
measured at the point the hedging transaction is entered into by the
Corporation. Under extraordinary circumstances, the Manager may enter into
forward currency contracts in excess of 75% of the Corporation's portfolio
position in any one country as of the date the contract is entered into. The
precise matching of the forward contract amounts and the value of securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
involvement in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. Under certain circumstances,
the Corporation may commit up to the entire value of its assets which are
denominated in foreign currencies to the consummation of these contracts. The
Manager will consider the effect a substantial commitment of its assets to
forward contracts would have on the investment program of the Corporation and
its ability to purchase additional securities.
Except as set forth above and immediately below, the Corporation will also not
enter into such forward contracts or maintain a net exposure to such contracts
where the consummation of the contracts would oblige the Corporation to deliver
an amount of foreign currency in excess of the value of the Corporation's
portfolio securities or other assets denominated in that currency. The
Corporation, in order to avoid excess transactions and transaction costs, may
nonetheless maintain a net exposure to forward contracts in excess of the value
of the Corporation's portfolio securities or other assets denominated in that
currency provided the excess amount is "covered" by cash or liquid, high-grade
debt securities, denominated in any currency, at least equal at all times to the
amount of such excess. Under normal circumstances, consideration of the prospect
for currency parties will be incorporated into the longer-term investment
decisions made with regard to overall diversification strategies. However, the
Manager believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the Corporation
will be served.
3
At the maturity of a forward contract, the Corporation may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the forward contract.
Accordingly, it may be necessary for the Corporation to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency the
Corporation is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Corporation is obligated to deliver. However, the
Corporation may use liquid, high-grade debt securities, denominated in any
currency, to cover the amount by which the value of a forward contract exceeds
the value of the securities to which it relates.
If the Corporation retains the portfolio security and engages in offsetting
transactions, the Corporation will incur a gain or a loss (as described below)
to the extent that there has been movement in forward contract prices. If the
Corporation engages in an offsetting transaction, it may subsequently enter into
a new forward contract to sell the foreign currency. Should forward prices
decline during the period between the Corporation's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Corporation
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Corporation will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The Corporation's dealing in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, the Corporation is not
required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Manager. It also should be realized that this method of hedging against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at
a future date. Additionally, although such contracts tend to minimize the risk
of loss due to a decline in the value of a hedged currency, at the same time,
they tend to limit any potential gain which might result from an increase in the
value of that currency.
Stockholders should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Corporation at one rate, while offering a lesser rate of
exchange should the Corporation desire to resell that currency to the dealer.
Investment income received by the Corporation from sources within foreign
countries may be subject to foreign income taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Corporation to a reduced rate of such taxes or exemption from taxes
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amounts of the Corporation's assets to be invested within
various countries is not known.
Portfolio Turnover
The Corporation's portfolio turnover rate for the years ended December 31, 2003
and 2002 were 138.65% and 152.79%, respectively.
DIRECTORS AND OFFICERS
Board of Directors
The Board of Directors provides broad supervision over the affairs of the
Corporation.
Management Information
Information with respect to Directors and officers of the Corporation and their
business experience for the past five years is shown below. Unless otherwise
noted, their addresses are 100 Park Avenue, New York, NY 10017.
4
Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
---------------- ------- --------------------- --------
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
Robert B. Catell (67) 2003-2006; Chairman, Chief Executive Officer and Director, KeySpan Corporation, 60
Director 2003 to Date diversified energy, gas and electric company; Director or Trustee of each
of the investment companies of the Seligman Group of Funds** (with the
exception of Seligman Cash Management Fund, Inc.); Director or Trustee,
Alberta Northeast Gas, Ltd., Boundary Gas Inc. The Houston Exploration
Company, oil and gas exploration, development and production companies;
Edison Electric Institute, New York State Energy Research and Development
Authority, Independence Community Bank, Business Council of New York
State, Inc., New York City Partnership and the Long Island Association,
business and civic organizations.
John R. Galvin (74) 2003-2006; Dean Emeritus, Fletcher School of Law and Diplomacy at Tufts University; 61
Director 1995 to Date Director or Trustee of each of the investment companies of the Seligman
Group of Funds**; and Chairman Emeritus, American Council on Germany.
Formerly, Director, USLIFE Corporation, life insurance; and Raytheon Co.,
defense and commercial electronics; Governor of the Center for Creative
Leadership. From June 1987 to June 1992, he was the Supreme Allied
Commander, Europe and the Commander-in-Chief, United States European
Command.
Alice S. Ilchman (69) 2004-2007; President Emerita, Sarah Lawrence College; Director or Trustee of each of 61
Director 1990 to Date the investment companies of the Seligman Group of Funds**; Director,
Jeannette K. Watson Summer Fellowship, summer internships for college
students; Trustee, Save the Children, non-profit child-assistance
organization, and the Committee for Economic Development; Governor, Court
of Governors, London School of Economics; and Director, Public
Broadcasting Service (PBS). Formerly, Chairman, The Rockefeller
Foundation, charitable foundation; and Director, New York Telephone
Company.
Frank A. McPherson (71) 2004-2007; Retired Chairman of the Board and Chief Executive Officer of Kerr-McGee 61
Director 1995 to Date Corporation, diversified energy and chemical company; Director or Trustee
of each of the investment companies of the Seligman Group of Funds**;
Director, ConocoPhillips, integrated international oil corporation,
Integris Health, owner of various hospitals, BOK Financial, bank holding
company, Oklahoma Chapter of the Nature Conservancy, Oklahoma Medical
Research Foundation, Boys and Girls Clubs of Oklahoma, Oklahoma City
Public Schools Foundation and Oklahoma Foundation for Excellence in
Education. Formerly, Director, Kimberly-Clark Corporation, consumer
products and the Federal Reserve System's Kansas City Reserve Bank.
John E. Merow (74) 2002-2005; Retired Chairman and Senior Partner, Sullivan & Cromwell LLP, law firm; 61
Director 1991 to Date Director or Trustee of each of the investment companies of the Seligman
Group of Funds**; Director, Commonwealth Industries, Inc., manufacturers
of aluminum sheet products, Director Emeritus, the Municipal Art Society
of New York, Executive Committee Member and Secretary, the U.S.
Council for International Business and Trustee, the New York-Presbyterian
Hospital; Trustee and Vice Chairman, New York-Presbyterian Healthcare
System, Inc.; and Member of the American Law Institute and the Council on
Foreign Relations.
Betsy S. Michel (61) 2002-2005; Attorney; Director or Trustee of each of the investment companies of the 61
Director 1985 to Date Seligman Group of Funds**; Trustee, The Geraldine R. Dodge Foundation,
charitable foundation, and World Learning, Inc., international educational
training. Formerly, Chairman of the Board of Trustees of St. George's
School (Newport, RI).
5
Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
---------------- ------- --------------------- --------
Leroy C. Richie (62) 2004-2007; Chairman and Chief Executive Officer, Q Standards Worldwide, Inc., library 60
Director 2000 to Date of technical standards; Director or Trustee of each of the investment
companies of the Seligman Group of Funds** (with the exception of Seligman
Cash Management Fund, Inc.); Director, Kerr-McGee Corporation, diversified
energy, gas and electric company, and Infinity, Inc., oil and gas services
and exploration; Director and Chairman, Highland Park Michigan Economic
Development Corp. Formerly, Trustee, New York University Law Center
Foundation; Vice Chairman, Detroit Medical Center and Detroit Economic
Growth Corp.; Chairman and Chief Executive Officer, Capital Coating
Technologies, Inc., applied coating technologies; and Vice President and
General Counsel, Automotive Legal Affairs, Chrysler Corporation.
Robert L. Shafer (71) 2003-2006; Retired Vice President, Pfizer Inc., pharmaceuticals; Director or Trustee 61
Director 1991 to Date of each of the investment companies of the Seligman Group of Funds**.
Formerly, Director, USLIFE Corporation, life insurance.
James N. Whitson (69) 2002-2005; Retired Executive Vice President and Chief Operating Officer, Sammons 1
Director 1993 to Date Enterprises, Inc., a diversified holding company; Director or Trustee of
each of the investment companies of the Seligman Group of Funds**;
Director, CommScope, Inc., manufacturer of coaxial cable. Formerly,
Director and Consultant, Sammons Enterprises, Inc. and Director, C-SPAN.
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS AND PRINCIPAL OFFICERS
------------------------------------------------------------------------------------------------------------------------------------
William C. Morris*** (66) 2003-2006; Chairman, J. & W. Seligman & Co. Incorporated, Chairman of the Board 61
Director and Chairman of 1988 to Date and Director or Trustee of each of the investment companies of the Seligman
the Board Group of Funds**; Chairman, Seligman Advisors, Inc., Seligman Services,
Inc. and Carbo Ceramics Inc., manufacturer of ceramic proppants for oil
and gas industry; Director, Seligman Data Corp and President and Chief
Executive Officer, The Metropolitan Opera Association. Formerly, Director,
Kerr-McGee Corporation, diversified energy and chemical company and Chief
Executive Officer of each of the investment companies of the Seligman
Group of Funds.
Brian T. Zino*** (51) 2004-2007; Director and President, J. & W. Seligman & Co. Incorporated; President, 61
Director, President and Dir.: 1993 Chief Executive Officer and Director or Trustee of each of the investment
Chief Executive Officer to Date companies of the Seligman Group of Funds**; Director, Seligman Advisors,
Pres.: 1995 to Inc. and Seligman Services, Inc.; Chairman, Seligman Data Corp.; Member
Date of the Board of Governors of the Investment Company Institute; and
CEO.: Nov. Chairman, ICI Mutual Insurance Company.
2002 to Date
Richard R. Schmaltz (63) 2003 to Date Managing Director and Chief Investment Officer, J. & W. Seligman & Co. N/A
Vice President and Incorporated and Vice President and Portfolio Manager, Seligman Common
Portfolio Manager Stock Fund, Inc. and Vice President and Co-Portfolio Manager of Seligman
Income and Growth Fund, Inc, as well as Vice President of Seligman
Portfolios, Inc. and Portfolio Manager of its Seligman Common Stock
Portfolio and Co-Portfolio Manager of its Seligman Income and Growth
Fund, Inc. Prior to his early retirement in 2001, he was a Managing
Director and Director of Investments of J. & W. Seligman & Co.
Incorporated.
Thomas G. Rose (46) 2000 to Date Senior Vice President, Finance, J. & W. Seligman & Co. Incorporated, N/A
Vice President Seligman Advisors, Inc. and Seligman Data Corp.; Vice President of each of
the investment companies of the Seligman Group of Funds** and of
Seligman Services, Inc. and Seligman International, Inc. Formerly,
Treasurer of each of the investment companies of the Seligman Group of
Funds and of Seligman Data Corp.
6
Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
---------------- ------- --------------------- --------
Lawrence P. Vogel (47) V.P.: 1992 to Senior Vice President and Treasurer, Investment Companies, J. & W. N/A
Vice President Date Seligman & Co. Incorporated; Vice President and Treasurer of each of the
and Treasurer Treas.: 2000 investment companies of the Seligman Group of Funds** and of Seligman
to Date Data Corp. Formerly, Senior Vice President, Finance, J. & W. Seligman &
Co. Incorporated, Seligman Advisors, Inc., Seligman International, Inc. and
Seligman Data Corp.; Vice President, Seligman Services, Inc.; and
Treasurer, Seligman International, Inc. and Seligman Henderson Co.
Frank J. Nasta (39) 1994 to Date Managing Director, General Counsel and Corporate Secretary, J. & W. N/A
Secretary Seligman & Co. Incorporated; Secretary, of each of the investment
companies of the Seligman Group of Funds**; and Corporate Secretary,
Seligman Advisors, Inc., Seligman Services, Inc., Seligman International,
Inc. and Seligman Data Corp. Formerly, Corporate Secretary, Seligman
Henderson Co. and Senior Vice President, Law and Regulation, J. & W.
Seligman & Co. Incorporated.
----------
* All officers are elected annually by the Board and serve until their
successors are elected and qualified or their earlier resignation.
** The Seligman Group of Funds currently consists of twenty-three registered
investment companies.
*** Mr. Morris and Mr. Zino are considered "interested persons" of the
Corporation, as defined in the 1940 Act, by virtue of their positions with
J. & W. Seligman & Co. Incorporated and its affiliates.
The standing committees of the Board include the Board Operations Committee,
Audit Committee and Director Nominating Committee. These Committees are
comprised solely of Directors who are not "interested" persons of the
Corporation as that term is defined in the Investment Company Act of 1940, as
amended ("1940 Act"). The duties of these Committees are described below.
Board Operations Committee. This Committee has authority generally to direct the
operations of the Board, including the nomination of members of other Board
Committees and the selection of legal counsel for the Corporation. The Committee
met six times during the year ended December 31, 2003. Members of the Committee
are Messrs. McPherson (Chairman), Catell, Galvin, Merow, Richie, Shafer and
Whitson, and Dr. Ilchman and Ms. Michel.
Audit Committee. This Committee recommends the independent public accountants
for selection as auditors by the Board annually. In addition, the Committee
assists the Board in its oversight of the Fund's financial reporting process and
operates pursuant to a written charter. The Committee met three times during the
year ended December 31, 2003. Members of the Committee are Messrs. Whitson
(Chairman), Galvin, Merow and Richie, and Ms. Michel.
Director Nominating Committee. This Committee selects and nominates persons for
election as Directors by the Board. In addition, if a shareholder meeting is
held where Directors are to be elected, the Committee will select and nominate
persons for election as Directors at such shareholder meeting. The Committee
will consider suggestions from shareholders submitted in writing to the
Secretary of the Fund. The Committee met once during the year ended December 31,
2003. Members of the Committee are Messrs. Shafer (Chairman), Catell and
McPherson, and Dr. Ilchman.
Beneficial Ownership of Shares
As of December 31, 2003, the Directors beneficially owned shares in the
Corporation and the Seligman Group of Funds as follows:
7
Aggregate Dollar Range of Shares
Dollar Range of Fund Shares Owned Owned by Director in the Seligman
Name By Director Group of Funds
-------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
-------------------------------------------------------------------------------------------------------
Robert B. Catell $10,001-$50,000 $50,001-$100,000
John R. Galvin $10,001-$50,000 $50,001-$100,000
Alice S. Ilchman Over-$100,000 Over $100,000
Frank A. McPherson Over $100,000 Over $100,000
John E. Merow Over $100,000 Over $100,000
Betsy S. Michel $10,001-$50,000 Over $100,000
Leroy C. Richie $10,001-$50,000 $10,001-$50,000
Robert L. Shafer $50,001-$100,000 Over $100,000
James N. Whitson Over $100,000 Over $100,000
-------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
-------------------------------------------------------------------------------------------------------
William C. Morris Over $100,000 Over $100,000
Brian T. Zino Over $100,000 Over $100,000
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Corporation and
Compensation Accrued as part of Fund Complex Paid
Name and Position with Corporation from Corporation (1) Corporation Expenses to Directors (1)(2)
---------------------------------- -------------------- -------------------- -------------------
Robert B. Catell, Director(3) $17,492 N/A $ 59,913
John R. Galvin, Director 31,858 N/A 102,000
Alice S. Ilchman, Director 30,637 N/A 99,000
Frank A. McPherson, Director 30,367 N/A 100,500
John E. Merow, Director 33,086 N/A 105,000
Betsy S. Michel, Director 30.631 N/A 100,500
Leroy C. Richie, Director 33,086 N/A 105,000
James Q. Riordan, Director(4) 11,993 N/A 36,000
Robert L. Shafer, Director 29,430 N/A 96,000
James N. Whitson, Director 33,086 N/A 105,000
------------
(1) Based on remuneration received by the Directors of the Corporation for the
year ended December 31, 2003.
(2) At December 31, 2003, the Seligman Group of Funds consisted of
twenty-three investment companies.
(3) Mr. Catell became a member of the Board of Directors effective May 15,
2003.
(4) Mr. Riordan retired from the Board of Directors effective March 20, 2003.
No compensation is paid by the Corporation to Directors or officers of the
Corporation who are employees of the Manager.
The Corporation has adopted a deferred compensation plan under which independent
directors may elect to defer receiving their fees. A director who has elected
deferral of his or her fees may choose a rate of return equal to either (1) the
interest rate on short-term Treasury Bills, or (2) the rate of return on the
shares of certain of the investment companies advised by the Manager, as
designated by the director. The annual cost of such fees and interest is
included in the director's fees and expenses and the accumulated balance thereof
is included in "Liabilities" in the Corporation's financial statements.
Messrs. Merow and Whitson no longer defer their current compensation; however,
they have accrued deferred compensation (including earnings/losses) in respect
of the Corporation in the amounts of $42,810 and $215,268, respectively, as of
December 31, 2003.
Directors and officers of the Corporation are also directors, trustees and
officers of some or all of the other investment companies in the Seligman Group
of Funds.
Code of Ethics
The Manager, Seligman Advisors, Inc. ("Seligman Advisors"), their subsidiaries
and affiliates, and the Seligman Group of Funds have adopted a Code of Ethics
that sets forth the circumstances under which officers, directors and employees
(collectively, "Employees") are permitted to engage in personal securities
transactions. The Code of Ethics proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Director of
8
Compliance, and sets forth a procedure of identifying, for disciplinary action,
those individuals who violate the Code of Ethics. The Code of Ethics prohibits
Employees (including all investment team members) from purchasing or selling any
security or an equivalent security that is being purchased or sold by any
client, or where the Employee intends, or knows of another's intention, to
purchase or sell a security on behalf of a client. The Code also prohibits all
Employees from acquiring securities in a private placement or in an initial or
secondary public offering unless an exemption has been obtained from the
Manager's Director of Compliance.
The Code of Ethics prohibits (1) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days either before or after the purchase or sale of the security by a client's
account (including investment company accounts) that the portfolio manager or
investment team manages; (2) each Employee from profiting from short-term
trading (a profitable purchase and sale or vice-versa within 60 days); and (3)
each member of an investment team from profiting from short sales of a security
if, at that time, any client managed by that team has a long position in that
security. Any profit realized pursuant to any of these prohibitions must be
disgorged to charitable organizations.
Employees are required, except under very limited circumstances, to engage in
personal securities transactions through the Manager's order desk, or through an
authorized dealer or investment advisor designated by the Manager. All Employee
personal securities transactions must be pre-cleared through the Manager's
compliance department. The compliance department and the order desk maintain a
list of securities that may not be purchased due to a possible conflict with
clients. All Employees are also required to disclose all securities beneficially
owned by them upon commencement of employment and at the end of each calendar
year.
A copy of the Code of Ethics is on public file with the SEC and can be reviewed
and copied at the SEC's Public Reference Room in Washington, DC, and that
information on the operation of the SEC's Public Reference Room may be obtained
by calling the SEC at 1-202-942-8090. A copy of the Code of Ethics is also
available on the EDGAR Database on the SEC's Internet site at www.sec.gov,
copies of which may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: publicinfo@sec.gov, or by writing the
SEC's Public Reference Section, Washington, DC 20549-0102.
Proxy Voting Policies
J. & W. Seligman & Co. Incorporated (the "Manager"), as the Corporation's
investment manager, will vote the proxies relating to the Corporation's
portfolio holdings.
Introduction. On behalf of the Corporation, the Manager votes the proxies of the
securities held in the Corporation's portfolios in accordance with the Manager's
determination of what is in the best interests of the Corporation's
stockholders.
The financial interest of the stockholders of the Corporation is the primary
consideration in determining how proxies should be voted. The Manager has a
responsibility to analyze proxy issues and vote in a way consistent with those
financial interests. In the case of social and political responsibility issues
which do not involve financial considerations, it is not possible to fairly
represent the diverse views of the Corporation's stockholders, and thus, the
Manager abstains from voting on these issues. Notwithstanding the above,
proposals seeking disclosure of certain matters relating to social and political
issues may be supported if such disclosure is not deemed to be unduly
burdensome.
The Proxy Voting Process. Proxies for securities held in the portfolios of the
Corporation will be received, processed and voted by the Manager pursuant to the
guidelines (the "Guidelines") established by the Manager's Proxy Voting
Committee (the "Committee").
The Committee has been established to set policy and guidelines, to review on a
periodic basis new corporate governance issues as they arise, to assist in
determining how the Manager will respond to such issues and to provide oversight
of the proxy voting process. The Committee is chaired by the Manager's Chief
Investment Officer and includes the Manager's Vice Chairman and the Manager's
General Counsel.
The Manager subscribes to a service offered by an independent third party which
provides a summary and analysis of the proposals to be acted upon at shareholder
meetings of most of the companies for which securities are held. The Manager
also subscribes to a separate service to assist in the tracking and
recordkeeping of proxies. Neither service offers voting recommendations.
9
Conflicts of Interests. The Manager's Director of Compliance maintains a Proxy
Watch List, which contains the names of those companies that may present the
potential for conflict in the voting process with the Manager, Seligman Advisors
or any affiliate thereof. For example, the Proxy Watch List will include those
portfolio companies for which the Manager separately manages assets in private
accounts or which are significant distributors of the Manager' s products and
services. As described below, proxy voting for these companies will be subject
to a higher level of consideration.
Deviations from Guidelines and Special Situations. The Manager recognizes that
it may not always be in the best interest of the stockholders of the Corporation
to vote in accordance with the Guidelines on a particular issue and in such
circumstances may deviate from the Guidelines. Any deviation from the Guidelines
must be approved by a member of the Committee. Furthermore, any deviation of the
Guidelines for a company which is included on the Proxy Watch List must be
approved by a majority of the Committee's members.
Similarly, for those proposals which are of a unique nature that they must be
analyzed on a case-by-case basis, one member of the Committee must approve the
voting decision. Where such a proposal is for a company included on the Proxy
Watch List, the voting decision must be approved by a majority of the
Committee's members. In analyzing potential deviations from the Guidelines and
proposals evaluated on a case-by-case basis, the Manager may consider the views
of the management of a portfolio company, as well as the view of the Manager's
investment professionals.
Guidelines Summary. The Guidelines are briefly described as follows:
1. The Manager votes with the recommendations of a company's board of
directors on general corporate governance issues such as changing the
company's name, ratifying the appointment of auditors and procedural
matters relating to shareholder meetings.
2. The Manager opposes, and supports the elimination of, anti-takeover
proposals, including those relating to classified Boards, supermajority
votes, poison pills, issuance of blank check preferred and establishment
of classes with disparate voting rights.
3. The Manager abstains from voting on issues relating to social and/or
political responsibility, except for matters relating to disclosure issues
if not deemed unduly burdensome for the company (e.g., political
contributions).
4. The Manager votes for stock option plans or to increase the number of
shares under existing stock option plans provided that the overall
dilution of all active stock option plans and stock purchase plans does
not exceed 10% on a fully diluted basis and are otherwise considered to
align the interest of the company with those of shareholders, e.g., all
such plans must specifically prohibit repricing.
5. The Manager generally votes with the recommendations of a company's board
of directors on other matters relating to executive compensation, unless
considered excessive.
6. The Manager will withhold voting for the entire board of directors if: (a)
less than 75% of the board is independent; (b) the board has a nominating
or compensation committee of which less than 75% of its members are
independent; (c) the board has recommended shareholders vote for an
anti-takeover device which the Manager votes against; or (d) the board has
recommended a matter relating to a stock option plan or stock purchase
plan which the Manager votes against.
7. The Manager will vote for proposals relating to the authorization of
additional common stock up to 5 times that currently outstanding.
8. The Manager will vote for proposals to effect stock splits.
9. The Manager will vote for proposals authorizing share repurchase programs.
10. The Manager will vote against authorization to transact unidentified
business at the meeting.
11. Acquisitions, mergers, reorganizations, reincorporations and other similar
transactions will be voted on a case-by-case basis.
10
12. Proposals to amend a company's charter or by-laws (other than as
identified above) will be voted on a case-by-case basis.
13. The Manager will vote against all proposals where the company did not
provide adequate information to make a decision.
14. The Manager abstains from voting shares which have recently been sold or
for which information was not received on a timely basis.
MANAGEMENT OF THE CORPORATION
The Manager
The Manager, subject to the control of the Corporation's Board of Directors,
manages the investments of the assets of the Corporation and administers its
business and other affairs pursuant to a management agreement (the "Management
Agreement"). The Manager also serves as investment manager to twenty-two other
US registered investment companies which, together with the Corporation, make up
the "Seligman Group of Funds." There are no other management-related service
contracts under which services are provided to the Corporation. No person or
persons, other than the Directors, officers or employees of the Manager and the
Corporation regularly advise the Corporation with respect to its investments.
The Manager is a successor firm to an investment banking business founded in
1864 which has provided investment services to individuals, families,
institutions and corporations. Mr. William C. Morris, Chairman of the Manager
and Chairman of the Board of Directors and Chairman of the Corporation, owns a
majority of the outstanding voting securities of the Manager and is a
controlling person of the Manager.
The Corporation pays the Manager a management fee for its services, calculated
daily and payable monthly, equal to a percentage of the daily net assets of the
Corporation. The method for determining this percentage, referred to as the
management fee rate, is set forth in the Prospectus. For the years ended
December 31, 2003, 2002 and 2001, the management fee amounted to $8,651,000,
$9,895,235 and $12,508,900, respectively, which was equivalent to an annual rate
of 0.41%, 0.41% and 0.40%, respectively, of the average daily net assets of the
Corporation.
As part of its services to the Corporation, the Manager provides the Corporation
with such office space, administrative and other services and executive and
other personnel as are necessary for the operations of the Corporation. The
Manager also provides senior management for Seligman Data Corp., a wholly-owned
subsidiary of the Corporation and certain of the other investment companies in
the Seligman Group of Funds. The Manager pays all of the compensation of the
Directors of the Corporation who are employees or consultants of the Manager and
its affiliates, of the officers and employees of the Corporation and of certain
executive officers of Seligman Data Corp.
At the November 20, 2003 Board of Directors meeting, the Board unanimously
approved the continuance of the Management Agreement. In preparation for the
meeting, the Board requested and reviewed a wide variety of materials from the
Manager, including extensive performance and expense information for other
investment companies compiled by third parties, and the Independent Directors
conferred with their counsel at the meeting prior to voting. In their
determinations with respect to continuance of the Management Agreement, the
Board considered many factors, including, but not limited to: (1) comparative
performance information versus other similar investment companies and indices;
(2) the nature and quality of investment services and administrative services
rendered by the Manager; (3) payments received by the Manager from all sources
involving both the Corporation and all other Seligman investment companies; (4)
the costs borne by, and profitability of, the Manager and its affiliates in
providing services of all types to the Corporation and to all other Seligman
investment companies; (5) comparative fee and expense data versus other similar
investment companies; (6) the Manager's policies and practices regarding
allocation of portfolio transactions and soft dollars; (7) portfolio turnover of
the Corporation compared to other similar investment companies; (8) the
Manager's willingness to consider and, when desirable, implement organizational
and operational changes designed to improve investment results; and (9) fall-out
benefits which the Manager and its affiliates receive from managing the
Corporation. In its deliberations, the Board did not identify any particular
information that was all-important or controlling. Rather, the Board evaluated
all information available to it and determined that the overall arrangements
between the Corporation and the Manager, as reflected under the Management
Agreement, were fair and reasonable in light of the services performed, expenses
incurred and such other matters as the Board (and each Director) considered
relevant in the exercise of its (or such Director's) reasonable judgment.
11
Certain of the factors addressed by the Board in reaching its determination are
discussed in more detail below.
Portfolio Performance. The Board of Directors considered the performance of the
Corporation as compared to the performance of other comparable closed-end funds
and as compared to appropriate securities indices. Directors also considered the
nature and quality of the investment advice rendered by the Manager. In addition
to the information received by the Directors in connection with the November 20,
2003 Board of Directors meeting, the Board receives detailed information related
to performance of the Corporation at each Board meeting during the year.
Expenses of the Corporation. The Board also considered the management fee rate
paid by the Corporation to the Manager and the other expenses of the
Corporation, in comparison to both the quality of services provided and the fees
and expenses of funds with similar characteristics.
Costs of Providing Service and Profitability. The Directors reviewed information
concerning profitability of the Manager's investment advisory and investment
company activities and its financial condition based on results for 2002 and
2003 (through September 30) and estimates for full-year 2003. The information
considered by the Board of Directors included operating profit margin
information for the Manager's investment company business alone (i.e., excluding
results of its affiliates) and on a consolidated basis. The Board of Directors
also reviewed profitability data and estimated profitability data for each of
the Seligman investment companies. The Board of Directors reviewed certain
assumptions and methods of allocation used by the Manager in preparing
fund-specific profitability data. While the Manager believes that the methods of
allocation used were reasonable, there are limitations inherent in allocating
costs to multiple individual advisory products served by an organization such as
the Manager's where each of the advisory products draws on, and benefits from,
the pooled research of the organization.
HOLDINGS OF PREFERRED STOCK, COMMON STOCK AND WARRANTS
As of March 31, 2004, holders of record of Preferred Stock totaled 373; holders
of record of Common Stock totaled 34,325; and holders of record of Warrants
totaled 101.
Control Persons
As of March 23, 2004, there was no person or persons who controlled the
Corporation, either through a significant ownership of shares or any other means
of control.
Principal Holders
As of March 23, 2004, the principal holders of 5% or more of the outstanding
equity securities of the Corporation, are as follows:
Percentage
of
Name and Address Security Shares Held
---------------- -------- -----------
Cede & Co., Depository Trust/Central Delivery, 55 Water Street, Common Stock 41.23%
New York, NY 10041
Tri-Continental Corporation - Investment Plan UBS Warburg Common Stock 8.82%
Repurchase Program, Attn: Treasurers Dept., 100 Park Avenue,
New York, NY 10017
Tri-Continental Corporation - Investment Plan Account, Attn: Common Stock 8.25%
Treasurers Dept., 100 Park Avenue, New York, NY 10017
Cede & Co., Depository Trust/Central Delivery, 55 Water Street, Preferred Stock 83.81%
New York, NY 10041
Cede & Co., Depository Trust/Central Delivery, 55 Water Street, Warrants 52.62%
New York, NY 10041
Dwight Goldthrope, PO Box 2778, Palm Beach, FL 33480 Warrants 11.67%
Gerald William Ashfield, Wilmhurst Fletching, Fletching NR Warrants 5.83%
Uckfiled, East Sussex TN22 3YB United Kingdom
12
Management Ownership
As of March 23, 2004, all Directors and officers of the Corporation, as a group,
owned less than 1% of the Corporation's Common Stock. As of the same date, no
Directors or officers owned any of the Corporation's Preferred Stock or
Warrants.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokerage Selection and Brokerage Transactions
The Manager selects broker-dealers with the goal of obtaining "best execution".
The Manager will consider a full range and quality of a broker-dealer's
services, such as price, market familiarity, reliability, integrity, commission
rates, execution and settlement capabilities, ability to handle large orders,
financial condition, technological infrastructure and operational capabilities,
willingness to commit capital and the brokerage and research services provided
or made available by the broker-dealer. These brokerage and research services,
including supplemental investment research, analysis, and reports concerning
issuers, industries, and securities, may be useful to the Manager in connection
with its services to clients other than the Corporation. The relative weighting
given to any of the criteria mentioned above depends on a variety of factors
including the nature of the transaction, the market on which a particular trade
is being executed and the number of broker-dealers making a market in the
security to be traded.
Although sales of investment company shares will not be considered in selecting
broker-dealers to effect securities transactions, the Manager offers its
services primarily through the broker-dealer selling networks and expects that
nearly all broker-dealers that effect securities transactions for the Seligman
Funds will have a relationship with the Manager or its affiliates to distribute
shares of the investment companies or other investment products offered by the
Manager. The Manager ranks broker-dealers through an internal voting process
which considers the services provided by broker-dealers excluding investment
company or product sales by that broker-dealer.
In connection with any agency trades, the Manager determines the reasonableness
of the commissions to be paid to a broker-dealer based upon the quality of the
brokerage and research services provided, or arranged for, and as a result, may
select a broker-dealer whose commission costs may be higher than another would
have charged.
The Manager monitors and evaluates the performance and execution capabilities of
broker-dealers through which it places orders and periodically reviews its
policy with regard to negotiating commissions or mark-ups for the Seligman Funds
in light of current market conditions, statistical studies and other available
information.
In over-the-counter markets, the Corporation deals with primary market makers
unless a more favorable execution or price is believed to be obtainable. The
Corporation may buy securities from or sell securities to dealers acting as
principal, except dealers with which its directors and/or officers are
affiliated.
When two or more of the investment companies of the Seligman Group of Funds or
other investment advisory clients of the Manager desire to buy or sell the same
security at the same time, the securities purchased or sold are allocated by the
Manager in a manner believed to be equitable. There may be possible advantages
or disadvantages of such transactions with respect to price or the size of
positions readily obtainable or saleable.
Commission
Total brokerage commissions (not including any spreads on principal transactions
on a net basis) paid by the Corporation during the years ended December 31,
2003, 2002 and 2001, were $8,763,817, $8,675,607 and $8,798,853, respectively.
Regular Broker-Dealers
During the year ended December 31, 2003, the Corporation acquired securities of
its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
of their parents. The Corporation held securities of Citigroup, Inc., the parent
company of Salomon Smith Barney, with an aggregate value of $82,723,324; held
securities of Morgan Stanley Dean Witter, with an aggregate value of
$23,794,408; held securities of Merrill Lynch & Co. Incorporated, the parent
company of Merrill Lynch, Pierce Fenner & Smith, Incorporated, with an aggregate
value of $44,708,895; held securities of Goldman Sachs Group, with an aggregate
value of $40,370,697; and held securities of Bank of America Corporation, with
an aggregate value of $16,771,264 as of December 31, 2003.
13
FINANCIAL STATEMENTS
The Corporation's financial statements for the year ended December 31, 2003 are
incorporated into this SAI by reference to the 2003 Annual Report to
Stockholders of the Corporation, filed with the SEC pursuant to Section 30(b) of
the 1940 Act and the rules and regulations thereunder. The 2003 Annual Report
contains schedules of the Corporation's portfolio investments as of December 31,
2003 and certain other financial information as of this date. The Corporation
will furnish, without charge, a copy of such Annual Report to any person who
requests a copy of the SAI.
The financial information of the Corporation included in the Prospectus under
the caption "Financial Highlights" and the financial statements that are
incorporated by reference in this SAI have been so included or incorporated by
reference in reliance on the reports of Deloitte & Touche LLP given upon their
authority as experts in auditing and accounting.
CUSTODIAN, STOCKHOLDER SERVICE AGENT AND DIVIDEND PAYING AGENT AND EXPERTS
Custodian. State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas
City, Missouri 64105, serves as custodian for the Corporation. It also
maintains, under the general supervision of the Manager, the accounting records
and determines the net asset value for the Corporation.
Stockholder Service Agent and Dividend Paying Agent. Seligman Data Corp., a
wholly-owned subsidiary of the Corporation, and certain other investment
companies of the Seligman Group of Funds, acts as the stockholder service agent
and dividend paying agent and performs, at cost, certain recordkeeping functions
for the Corporation, maintains the records of stockholder accounts and furnishes
dividend paying, redemption and related services.
Independent Auditors. Deloitte & Touche LLP, Two World Financial Center, New
York, New York 10281, serves as the independent auditors for the Corporation and
in such capacity audits the Corporation's annual financial statements and
financial highlights.
14
INDEPENDENT AUDITORS' REPORT ON FINANCIAL HIGHLIGHTS -- SENIOR SECURITIES --
$2.50 CUMULATIVE PREFERRED STOCK
To the Board of Directors and Security Holders of
Tri-Continental Corporation:
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the statements of assets and
liabilities, including the portfolios of investments, and the statements of
capital stock and surplus of Tri-Continental Corporation as of December 31 for
each of the ten years in the period ended December 31, 2003 and the related
statements of operations and of changes in net investment assets, and the
financial highlights for each of the years then ended (none of which are
presented herein); and we expressed unqualified opinions on those financial
statements.
In our opinion, the information appearing on page 8 of the Prospectus, under the
caption "Senior Securities-$2.50 Cumulative Preferred Stock", for each of the
ten years in the period ended December 31, 2003 is fairly stated, in all
material respects, in relation to the financial statements from which it has
been derived.
DELOITTE & TOUCHE LLP
New York, New York
February 18, 2004
15
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements.
Part A. Financial Highlights for the ten years ended December 31, 2003;
Table for the ten years ended December 31, 2003 under the caption "Senior
Securities - $2.50 Cumulative Preferred Stock."
Part B. The required financial statements are included in the
Corporation's 2003 Annual Report, which is incorporated by reference into the
Statement of Additional Information. These statements include: Portfolio of
Investments at December 31, 2003; Statement of Assets and Liabilities at
December 31, 2003; Statement of Capital Stock and Surplus at December 31, 2003;
Statement of Operations for the year ended December 31, 2003; Statements of
Changes in Net Investment Assets for the years ended December 31, 2003 and 2002;
Notes to Financial Statements; Financial Highlights for the five years ended
December 31, 2003; Report of Independent Auditors.
2. Exhibits. All Exhibits listed below are incorporated herein by
reference, except those Exhibits marked with an asterisk (*) which were filed
with the original filing on April 22, 2003 and (ii) marked with a double
asterisk (**) which are filed herewith.
(a) Amended and Restated Charter of the Registrant. (Incorporated
by reference to Registrant's Amendment No. 27 to the
Registration Statement on Form N-2 filed on April 16, 1998.)
(b) By-laws of the Registrant. (Incorporated by reference to
Registrant's Amendment No. 33 to the Registration Statement on
Form N-2 filed on April 22, 2003.)
(c) Not Applicable.
(d)(1) Specimen certificates of Common Stock. (Incorporated by
reference to Registrant's Amendment No. 1 to the Registration
Statement on Form N-2 filed on March 6, 1981.)
(d)(2) Specimen certificates of $2.50 Cumulative Preferred Stock.
(Incorporated by reference to Registrant's Amendment No. 1 to
the Registration Statement on Form N-2 filed on March 6,
1981.)
(d)(3) Specimen of Warrant of the Registrant. (Incorporated by
reference to Registrant's Amendment No. 1 to the Registration
Statement on Form N-2 filed on March 6, 1981.)
(d)(4) Form of Subscription Certificate - Subscription Right for
shares of Common Stock. (Incorporated by reference to
Registrant's Registration Statement on Form N-2 filed on
September 17, 1992.)
(d)(5) The Registrant's Charter is the constituent instrument
defining the rights of the $2.50 Cumulative Preferred Stock,
par value $50, and the Common Stock of the Registrant.
(Incorporated by reference to Registrant's Amendment No. 27 to
the Registration Statement on Form N-2 filed on April 16,
1998.)
(e) Registrant's Automatic Dividend Investment and Cash Purchase
Plan is set forth in Registrant's Prospectus which is filed as
Part A of this Registration Statement.
(f) Not Applicable.
(g)(1) Amended Management Agreement between Registrant and J. & W.
Seligman & Co. Incorporated. (Incorporated by reference to
Registrant's Amendment No. 24 to the Registration Statement on
Form N-2 filed April 13, 1995.)
(h) Not Applicable.
C-1
PART C. OTHER INFORMATION (continued)
(i)(1) Matched Accumulation Plan of J. & W. Seligman & Co.
Incorporated. (Incorporated by reference to Exhibit 7 of
Post-Effective Amendment No. 21 to the Registration Statement
on Form N-1A of Seligman Frontier Fund, Inc. (File No.
2-92487) filed on January 28, 1997.)
(i)(2) Deferred Compensation Plan for Directors. (Incorporated by
reference to Exhibit (f) of Post-Effective Amendment No. 1 of
the Registration Statement on Form N-1A of Seligman LaSalle
Real Estate Fund Series, Inc. (File No. 811-21365) filed on
July 9, 2003.)
(j) Form of Custodian Agreement between Registrant and Investors
Fiduciary Trust Company. (Incorporated by reference to
Registrant's Amendment No. 26 to the Registration Statement on
Form N-2 filed on April 24, 1997.)
(k) Not Applicable.
(l) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Amendment No. 33 to the Registration Statement on
Form N-2 filed on April 22, 2003.)
(m) Not Applicable.
(n) *Consent of Independent Auditors.
(o) Not Applicable.
(p) Not Applicable.
(q)(1) The Seligman Roth/Traditional IRA Information Kit.
(Incorporated by reference to Registrant's Amendment No. 27 to
the Registration Statement on Form N-2 filed on April 16,
1998.)
(q)(2) The Seligman Simple IRA Plan documents for employers
(Incorporated by reference to Exhibit 14 of Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-1A of
Seligman Value Fund Series, Inc. (File No. 333-20621) filed on
April 17, 1997.)
(q)(3) The Seligman Simple IRA Plan Agreement and Disclosure
Statement for participants. (Incorporated by reference to
Exhibit 14 of Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A of Seligman Value Fund
Series, Inc. (File No. 333-20621) filed on April 17, 1997.)
(q)(4) Qualified Plan and Trust Basic Plan Document. (Incorporated by
reference to Registrant's Amendment No. 27 to the Registration
Statement on Form N-2 filed on April 16, 1998.)
(q)(5) Flexible Standardized 401(k) Profit Sharing Plan Adoption
Agreement. (Incorporated by reference to Registrant's
Amendment No. 27 to the Registration Statement on Form N-2
filed on April 16, 1998.)
(q)(6) Flexible Nonstandardized Safe Harbor 401(k) Profit Sharing
Plan Adoption Agreement. (Incorporated by reference to
Registrant's Amendment No. 27 to the Registration Statement on
Form N-2 filed on April 16, 1998.)
(r) *Code of Ethics of Registrant and J. & W. Seligman & Co.
Incorporated, Seligman Advisors and affiliates. (Incorporated
by reference to Exhibit (p)(1) of Post-Effective Amendment No.
1 to the Registration Statement on Form N-1A of Seligman
LaSalle Real Estate Fund Series, Inc. (File No. 811-21365)
filed on July 9, 2003.)
C-2
PART C. OTHER INFORMATION (continued)
(Other Exhibits) *(a) Power of Attorney for Robert B. Catell.
(b) Power of Attorney for Leroy C. Richie. (Incorporated by
reference to Registrant's Amendment No. 31 to the Registration
Statement on Form N-2 filed on April 19, 2001.)
Item 25. Marketing Arrangements. Not Applicable.
Item 26. Other Expenses of Issuance and Distribution.
Registration fees $-0-
NYSE listing fees -0-
Registrar fees -0-
Legal fees -0-
Accounting fees -0-
Miscellaneous (mailing, etc.) -0-
Item 27. Persons Controlled by or Under Common Control with Registrant. Seligman
Data Corp., a New York Corporation, is owned by the Registrant and
certain associated investment companies. The Registrant's investment in
Seligman Data Corp. is recorded at a cost of $43,681.
Item 28. Number of Holders of Securities.
As of March 31, 2004:
Title of Class Number of Recordholders
-------------- -----------------------
$2.50 Cumulative Preferred 373
Common Stock 34,325
Warrants 101
Item 29. Indemnification. Reference is made to the provisions of Article
Eleventh of Registrant's Amended and Restated Charter filed as an
exhibit to Registrant's Registration Statement on Form N-2 filed on
April 16, 1998 and Article II, Section 14 of Registrant's Amended
By-laws to the Restated By-laws filed as an exhibit to the Registration
Statement on Form N-2 filed on April 22, 2003.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised by the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser. J. & W.
Seligman & Co. Incorporated, a Delaware corporation (the "Manager"), is
the Registrant's investment manager and is an investment manager
registered under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The list required by this Item 30 of officers and
directors of the Manager, together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A, C and D of Form ADV, filed by
the Manager with the Securities and Exchange Commission, pursuant to
the Advisers Act (SEC File No. 801-15798) which was filed on March 29,
2004.
C-3
PART C. OTHER INFORMATION (continued)
Item 31. Location of Accounts and Records. The accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the Rules 17 CFR
270.31(a)(1)-31(a)(3) promulgated thereunder, are maintained by J. & W.
Seligman & Co. Incorporated, 100 Park Avenue, New York, NY 10017, and
at the following locations: (1) Custodian: State Street Bank and Trust
Company, 801 Pennsylvania, Kansas City, Missouri 64105 and (2) Transfer
Agent, Redemption and Other Shareholder Account Services: Seligman Data
Corp., 100 Park Avenue, New York, NY 10017.
Item 32. Management Services. Not Applicable.
Item 33. Undertakings.
I. Registrant undertakes: to suspend the offering of shares until the
prospectus is amended if (1) subsequent to the effective date of its
registration statement, the net asset value declines more than 10% from
its net asset value as of the effective date of the registration
statement.
II. Registrant undertakes:
(a) to file, during any period in which offers or sales are being made,
a post-effective amendment to the registration statement: (1) to
include any prospectus required by Section 10(a)(3) of the 1933 Act;
(2) to reflect in the prospectus any facts or events after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and (3) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(b) and that, for the purpose of determining any liability under the
1933 Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein,
and the offering of those securities at that time shall be deemed to be
the initial bona fide offering thereof.
III. The Registrant undertakes: to send by first class mail or other
means designed to ensure equally prompt delivery within two business
days of receipt of a written or oral request, the Registrant's
Statement of Additional Information.
C-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 8th day of April, 2004.
TRI-CONTINENTAL CORPORATION
By: /s/ Brian T. Zino
----------------------------------
Brian T. Zino, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on April 8, 2004.
Signature Title
--------- -----
/s/ Brian T. Zino Director, President and Chief Executive Officer
------------------------------- (Principal Executive Officer)
Brian T. Zino
/s/ William C. Morris Chairman of the Board and Director
-------------------------------
William C. Morris
/s/ Lawrence P. Vogel Treasurer (Principal Financial and Accounting
------------------------------- Officer)
Lawrence P. Vogel
Robert B. Catell, Director )
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director )
Betsy S. Michel, Director ) /s/ Brian T. Zino
Leroy C. Richie, Director ) -----------------------------------
Robert L. Shafer, Director ) Brian T. Zino, Attorney-in-Fact
James N. Whitson, Director )
TRI-CONTINENTAL CORPORATION
FORM N-2
EXHIBIT INDEX
Form N-2 Item No. Description
----------------- -----------
Item 24(2)(n) Consent of Independent Auditors.
(Other Exhibits) Power of Attorney for Robert B. Catell.