UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement.
|_| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6
(e)(2))
|_| Definitive proxy statement.
|X| Definitive additional materials.
|_| Soliciting material under Rule 14a-12.
TRI-CONTINENTAL CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
> JUNE 30, 2008
MID-YEAR REPORT CONTAINED INSIDE
Tri-Continental Corporation
COMMUNITY
A NEWSLETTER FOR THE TRI-CONTINENTAL STOCKHOLDER FAMILY
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Inside this Issue of Community:
> Market Outlook .................................................. Cover
> Investment Recap ................................................ III
> Tri-Continental:
Witness to History .............................................. VI
> Frequently Asked Questions ...................................... VII
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MARKET OUTLOOK
With Your Portfolio Manager Jack Cunningham
More than ever, we are in a stock-picker's market as there are negative stories
on a macro level for most sectors. Energy and Materials stocks have been the
strongest performers through the first half of 2008, but the volatility of the
underlying commodities has fed concerns of a pullback. Within the Financials
sector, fears of another wave of write-downs has weighed on banking stocks.
Within the Consumer sector, the fall in housing prices and consumer spending has
cast a shadow. Within Health Care, the upcoming presidential election is
weighing on the sector. Of course, opportunities remain -- for example,
large-cap pharma stocks within Health Care. In fact, there are company-specific
bright spots within all sectors, and as investors that's what we are focused on.
These include companies with solid earnings growth despite the macro-level
conditions.
In spite of higher gas prices and falling housing prices, which have undermined
consumer spending, growth in the US economy has been more resilient than many
expected. During the quarter, economists began to back away from their most dire
recession forecasts. While consumer confidence is weak and consumer spending is
anemic, the job market appears to be holding relatively steady. The massive
policy response we saw earlier this year (i.e., Fed rate cuts and tax rebates)
has been credited with staving off recession. In its place, many now expect a
prolonged period of stagnation -- further support for a stock-picker's market.
> NOT PART OF MID-YEAR REPORT
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[PHOTO OF JACK CUNNINGHAM]
Jack Cunningham
Portfolio Manager of Tri-Continental Corporation
The views and opinions expressed are those of the Portfolio Manager, are
provided for general information only, and do not constitute specific tax,
legal, or investment advice to, or recommendations for, any person. There can be
no guarantee as to the accuracy of market forecasts. Opinions, estimates, and
forecasts may be changed without notice.
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MARKET OUTLOOK
(continued)
While stocks are significantly off their October highs (the S&P 500 is down 16%
from its record high on Oct. 9, 2007), we continue to believe that the second
half of the year holds promise for equity investors. In the near term, we
believe stocks may remain in a trading range. They may even fall further if oil
continues its dizzying climb or banks undergo another round of significant
balance sheet write downs. That said, low interest rates and tax rebates should
help support the equity market and we expect the second half of the year to be a
more positive environment for investors.
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INVESTMENT RECAP
With Your Portfolio Manager Jack Cunningham
For the six months ended June 30, 2008, Tri-Continental returned -13.6% based on
net asset value, and -15.5% based on market price. Tri-Continental's benchmark,
the S&P 500 Index returned -11.9% for the same period.
Jack, how would you sum up the economic environment and market performance
during the first six months of 2008?
Equities were hard hit during the six months amid weakening investor confidence.
The US equity market, as measured by the S&P 500 Index, returned -11.9% for the
period, with only two of the Index's ten sectors generating positive
performance.
Weak economic data points released in January in manufacturing, employment, and
retail sales fueled fears of global recession and sparked a sharp sell-off in
equities. The credit freeze continued as growth slowed and banks and brokers
reined in capital as the financial system continued to absorb losses related to
subprime debt. The combined crises in housing, the credit market, and the
economy spurred an activist Federal Reserve Board and the Administration to take
unprecedented steps to shore up the economy.
The liquidity crisis reached its peak in March when the Federal Reserve
intervened to facilitate the sale of investment bank Bear Stearns to JPMorgan
Chase. Bear, an 85-year-old financial institution, was highly leveraged and
after losing access to capital, was on the brink of insolvency.
Seeking to contain the damage and shore up the financial system, the Fed stepped
in and engineered the sale of the troubled investment bank. The Administration
and Congress were similarly proactive in addressing the crisis. In addition to
enacting a $160 billion fiscal stimulus program (with checks being mailed in the
second quarter), the cap on mortgages that Fannie Mae and Freddie Mac can
acquire and guarantee was raised in an effort to support home purchases.
The Federal Reserve reacted to the weakening economic outlook with an
inter-meeting federal funds target rate cut in January, followed by three
additional decreases during the period. As the Fed moved, however, concerns of
inflation grew and the dollar weakened. As the dollar weakened, commodities
rallied and stock prices continued to decline.
How was Tri-Continental positioned during this difficult market environment?
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Tri-Continental's Top Ten Equity Holdings as of June 30, 2008
Represents 20.5% of net assets
> ExxonMobil
> Marvell Technology Group
> Comverse Technology
> Microsoft
> Chevron
> AT&T
> Phillip Morris International
> ConocoPhillips
> General Electric
> Wyeth
The Corporation is actively managed, and its holdings are subject to change.
There can be no assurance that the securities listed above have remained or will
remain in the Fund's portfolio. Portfolio holdings information is available at
www.seligman.com.
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NOT PART OF MID-YEAR REPORT | III
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Total Return for the S&P 500 Index and its Ten Sectors
1/1/08 - 6/30/08
S&P 500 Index -11.9%
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Energy 8.1%
Materials 0.2%
Utilities -4.3%
Consumer Staples -8.5%
Industrials -14.6%
Consumer Discretionary -13.9%
Information Technology -13.4%
Health Care -13.5%
Industrials -14.6%
Telecommunications Services -18.9%
Financials -30.9%
Source: Standard & Poor's. Returns do not reflect the investment performance of
Tri-Continental.
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INVESTMENT RECAP
(continued)
Information technology continued as Tri-Continental's largest sector weighting
during the six months and continued to be the Corporation's largest overweight,
relative to its benchmark, the S&P 500 Index. The area, as most of the sectors
in the benchmark, was down during the six-month period. Stock selection,
however, enabled Tri-Continental to outperform the benchmark. Standouts Marvell
Technology and Visa contributed to investment results while SAVVIS ended the six
months as a top detractor. Information technology had the largest overall
positive contribution to Tri-Continental's relative investment results during
the period.
Marvell Technology, a global semiconductor provider, reported higher than
expected earnings during the period. The company also announced a new Chief
Financial Officer, which was well received by investors. These events were
reflected in the company's stock price, and Tri-Continental benefited nicely
from its top-ten position in Marvell (which was not a constituent of the
benchmark during the period). Tri-Continental continued to hold Marvell
Technology in its portfolio at the close of the reporting period.
Tri-Continental saw significant results from its participation in Visa's
successful initial public offering (IPO) in mid-March. The stock rose over 45%
(up 28% on its first day of trading) before the position was closed. Visa was
not owned by the benchmark, so the company's strong performance aided
Tri-Continental's relative outperformance within the sector during the period.
SAVVIS is a data outsourcing service provider for small- to mid-sized companies.
SAVVIS' stock price suffered during the period as the company reported
lower-than-expected results and lowered its 2008 profits forecast.
Tri-Continental held a reasonable position in the company (which was not a
constituent of the benchmark) and the resultant impact on investment results was
disappointing. We find significant growth potential in the data outsourcing
segment and believe the company's fundamentals remain attractive. SAVVIS
continued to be a component of Tri-Continental's portfolio at the close of the
reporting period.
Tri-Continental garnered positive investment results within the energy sector,
one of the two positive-performing sectors in the benchmark during the six
months. The Corporation was underweight compared to the benchmark, which hurt
relative investment results from an allocation perspective, but positions in El
Paso Energy and Halliburton aided absolute returns. Natural gas prices rose
dramatically during the period, benefitting El Paso, which operates
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INVESTMENT RECAP
(continued)
natural gas pipelines as well as conducting natural gas exploration and
production. Halliburton, which is engaged in energy services for exploration and
production companies, also benefitted from the uptick in natural gas prices, as
well as the continued surge in oil prices.
The area that had the largest negative impact on Tri-Continental's investment
results, as compared to the benchmark, was the materials sector. Along with the
energy sector, the materials sector was the only other area of the benchmark to
deliver positive performance during the six months. Stock selection, however, in
particular Smurfit-Stone Container, resulted in a considerable underperformance
for Tri-Continental within the sector. The company manufactures containerboard
and corrugated containers. Despite increased costs resulting from higher energy
prices, we find the industry's fundamentals to be attractive, with increasing
consolidation and the ability to pass through higher prices at a faster pace
than expected. Smurfit-Stone is a small-cap company with a reasonable amount of
debt on its books. In a flight-to-quality market environment such as this,
investors tend to veer toward less economically sensitive companies. While it
may have been beaten up in the short-term, we still believe this company holds
attractive longer-term potential and it remains in Tri-Continental's portfolio.
Another company that suffered during the period was Rite Aid, another example of
a small-cap company with a reasonable amount of debt that investors turned
against in this challenging market environment. Industry fundamentals have
weakened as a result of a pullback in consumer spending and Rite Aid continued
to struggle with integration issues related to its acquisition of Brooks/Eckerd.
Tri-Continental continued to hold Rite Aid in its portfolio at the close of the
reporting period.
Insurance giant AIG also suffered during the period, along with financial stocks
in general -- the financial sector was the worst performing sector of the
benchmark during the period, down nearly 30%. AIG released expectations that
were worse than expected, and the stock was pressured further downward, fueled
by concerns regarding the company's exposure to subprime debt. AIG continues to
remain in the portfolio.
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The listing of securities herein should not be construed as a recommendation to
buy or sell any security, an indication that any security is suitable for a
particular investor, or that any of the securities listed were or will be
profitable.
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NOT PART OF MID-YEAR REPORT | V
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For nearly eight decades, Tri-Continental has seen history-making changes in the
economy, stock market, and world. By focusing on the long term and holding a
steady course through variable markets, Tri-Continental has persevered. While no
one knows what the future holds, there is a comfort in knowing that while times
do change, Tri-Continental's values endure.
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TRI-CONTINENTAL: A WITNESS TO HISTORY
Stability, tradition, and consistent professional service have been the tenets
by which Tri-Continental has adhered throughout its long-tenured history. Much
has changed since Tri-Continental made its first offering on January 12, 1929:
1920s
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> October 29, 1929: Black Friday
> US securities lose $26 billion in value
1930s
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> US Securities Act passed
> US unemployment hits 23.6%
> Social Security Act passed
> Nylon created by du Pont
> Baseball game is first televised in US
1940s
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> US declares war on Japan, Italy, and Germany [GRAPHIC]
> Manhattan Project established to develop atomic bomb
> Roosevelt freezes wages, salaries, and prices
> Cost of living in US rises almost 30%
> Cold War begins
> The "Red Scare"
1950s
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> Color television is introduced
> Sputnik launched by USSR
> Alaska and Hawaii become 49th and 50th states
1960s
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> Cuban missile crisis [GRAPHIC]
> JFK is assassinated
> Civil Rights Act passed
> Tet Offensive launched in Vietnam
> Neil Armstrong walks on the moon
1970s
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> Watergate [GRAPHIC]
> Energy Crisis: oil embargo begins; gasoline shortages in US
> Alaska Pipeline is completed
> Three-Mile Island accident
1980s
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> OPEC lowers oil prices for the first time in history
> Space Shuttle Challenger explodes
> Oil hits low of $10.77 a barrel
> Berlin wall comes down
> Cold War ends
1990s
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> Iraq invades Kuwait
> USSR breaks up
> World Trade Center and Oklahoma City Bombings
> Hong Kong reverts to Chinese sovereignty
2000s
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> September 11 terrorist attacks [GRAPHIC]
> Rollout of euro in 12 European Union countries
> War in Iraq
> US population hits 300 million
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FREQUENTLY ASKED QUESTIONS
Why did Tri-Continental enter into an agreement with a stockholder group that
will result in two tender offers for Tri-Continental Common Stock?
With the purchase of J. & W. Seligman & Co. Incorporated, Tri-Continental's
manager, by RiverSource Investments, LLC, a wholly-owned subsidiary of
Ameriprise Financial, Inc., the current management agreement will automatically
terminate. Stockholders are being asked to approve a new advisory agreement
between Tri-Continental and RiverSource. Tri-Continental's Board of Directors
approved the new advisory agreement as being in the best interests of
Tri-Continental, and recommended it to stockholders for their approval, after
careful consideration.
A group of Tri-Continental stockholders (the "Group") declared its intent to
vote against the approval of the new advisory agreement between Tri-Continental
and RiverSource. Given the holdings by the Group and their voting patterns in
previous proxy contests, the Board of Tri-Continental believed it would be very
difficult for Tri-Continental to obtain approval of the new advisory agreement
with RiverSource, absent a settlement agreement with the Group.
On August 19, 2008, Tri Continental announced a settlement agreement with the
Group. This agreement between Tri-Continental and the Group meets a number of
important goals: First, in recognition of the strong preference of many
long-term stockholders, Tri-Continental would continue to operate as a
closed-end fund, as it has since 1929; Second, Tri Continental's investment
objective would remain unchanged; and Third, the Group and other stockholders
would be provided with an opportunity to reduce or eliminate their holdings at a
small discount to net asset value, although the first tender offer will not be
attractive to most individual stockholders for the reasons discussed in the
proxy statement.
Am I required to participate in the tender offers?
No. There will be no obligation to participate in either tender offer.
I have owned Tri-Continental for many years. Will Tri-Continental continue to
operate?
Yes, Tri-Continental will continue to operate as a closed-end fund.
Tri-Continental was formed nearly 80 years ago and it is not our intention to do
anything that will jeopardize its future. We are taking these steps to provide a
smooth transition in management and to help maintain Tri-Continental's structure
and function.
Will Tri-Continental continue to pay distributions?
Tri-Continental will continue its current distribution policy through at least
December 31, 2008.
What if I do nothing? What will happen to my account?
If you take no action with respect to the tender offers, the number of shares
you own of Tri-Continental will remain unchanged.
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Contact Us
Questions? Comments?
E-mail us at tricontinental@jwseligman.com
or call us at 800-TRI-1092.
Visit Us at www.tricontinental.com
> Daily NAV and market price
> Monthly fact sheets
> Recent reports
> Press releases
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NOT PART OF MID-YEAR REPORT | VII
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Tri-Continental Corporation
Managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
Investment Managers and Advisors
ESTABLISHED 1864
This material is authorized for use only in the case of concurrent or prior
delivery of the offering prospectus of Tri-Continental Corporation. You should
consider the investment objectives, risks, charges, and expenses of the
Corporation carefully before investing. The prospectus, which contains
information about these factors and other information about the Corporation,
should be read carefully before investing.
> NOT PART OF MID-YEAR REPORT
CETRI3b-0608
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