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TRI-CONTINENAL CORPORATION
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
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Tri-Continental Corporation
an investment you can live with
August 24, 2006
Re: Special Meeting of Stockholders to be held September 28, 2006
Dear Valued Stockholder:
As Chairman of Tri-Continental Corporation and as a fellow stockholder, I wish
to call your attention to a number of misrepresentations and misleading
statements by hedge fund manager Arthur Lipson in his letters of August 9 and
August 22.
You may recall that Mr. Lipson failed in his attempt to elect himself and two
other dissident nominees to Tri-Continental's Board this past spring. His stated
objective was to open-end or liquidate Tri-Continental. Other than the votes of
his Western Investment hedge fund group, Mr. Lipson's slate of dissidents
attracted only 18% of outstanding shares. It is instructive to note that Mr.
Lipson also failed in two prior attempts to open-end or liquidate other
closed-end funds.
o Mr. Lipson's willingness to attack me personally in his letters says
a great deal more about his character than mine. But some of our
stockholders may be concerned with what he wrote, so please permit
me to set the record straight. The mutual fund investigation that
Mr. Lipson referred to does not in any way relate to
Tri-Continental, and was fully disclosed to you by letter nearly
three years ago and in the 2003 Annual Report to Stockholders.
Contrary to what Mr. Lipson's letters may insinuate, there are no
regulatory lawsuits pending against Tri-Continental, Seligman, or me
personally.
o Mr. Lipson also implies that I have no investment experience outside
of J. & W. Seligman & Co. Incorporated, where I have been Chairman
for 17 years. Sadly, he knowingly ignores the additional 17 years I
spent at Lehman Brothers as head of investment banking and a member
of the Executive Committee that ran that diversified investment
firm. Mr. Lipson himself was an associate at Lehman Brothers during
my tenure there, a fact discussed at the 2006 Tri-Continental Annual
Meeting.
o Mr. Lipson represents himself and his hedge fund group as
Tri-Continental stockholders since 1999. In truth, he and his hedge
funds owned only a single share as late as September 2002. Prior to
that time, they repeatedly bought and sold Tri-Continental solely
for short-term trading purposes. Although they have been sometime
stockholders, you should not consider them long-term investors.
o Mr. Lipson contends that his "interests are aligned" with
Tri-Continental stockholders. However, he fails to disclose in
either his recent letters or SEC proxy filings that his hedge funds
have hedged their position in the Corporation using sophisticated
derivative strategies to minimize the market risk of his holdings.
In effect, the actual investment results of the Corporation are of
little consequence to him. Our knowledge of this comes from Mr.
Lipson himself, who personally told officers of the Corporation
about his hedging practices.
o Mr. Lipson claims he does not seek to open-end or liquidate
Tri-Continental. You should find it difficult to reconcile this
assertion with the statements made in his previous proxy. Earlier
this year, Mr. Lipson urged Directors to immediately "convert
Tri-Continental to an open-ended mutual fund" or "adopt a plan of
dissolution and liquidation..." Considering his history of waging or
joining campaigns to open-end other closed-end funds, you and I as
Tri-Continental stockholders have a right to be skeptical about his
ultimate intentions.
o Should Mr. Lipson and his candidates be elected to the Board, they
will owe allegiance both to Tri-Continental and to the Western
Investment hedge funds. Because of the short-term importance to Mr.
Lipson's hedge funds of its Tri-Continental holdings, it strains
credulity that they will make decisions that favor all
Tri-Continental stockholders at the expense of his hedge funds.
Every member of Mr. Lipson's slate is an investor in one of his
hedge funds. We should not elect "independent" directors with such
conflicting loyalties.
o Not surprisingly, Mr. Lipson's letters ignore Tri-Continental's more
recent investment performance; it continues to improve under the
leadership of portfolio manager John B. Cunningham. Last week,
Tri-Continental's net asset value (NAV) and market price reached
near five-year highs. You will see in the chart below that
Tri-Continental's year-to-date performance is ahead of the S&P 500
Index.
Return Average Annual Returns Cumulative Return
Year-to-Date 1 year 3 years 3 years
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Market Price 10.5% 12.6% 12.4% 42.2%
NAV 6.2 8.6 11.5 38.5
S&P 500 5.6 8.9 11.2 37.5
All data as of August 18, 2006.
I urge you to support Tri-Continental's slate of experienced, accomplished
directors by completing, signing, and dating our enclosed WHITE Proxy Card and
mailing it in the enclosed, postage-paid envelope. Please do not return or send
any proxy card sent to you by Mr. Lipson's Western Investment hedge fund group
(or Innisfree M&A Inc., its solicitation firm).
If you have already returned a Gold Proxy Card from the Western Investment hedge
fund group and wish to vote in favor of the recommendation of Tri-Continental's
Board of Directors, please return a currently dated WHITE Proxy Card with your
signature.
Tri-Continental has a distinguished 77-year history. Let us keep it safe for
long-term investors.
Sincerely,
/s/ William C. Morris
William C. Morris
Chairman