Management Discussion
and
First Quarter Report 2005

 

 

 

 

 

 

 

Tri- Continental
Corporation

 

 

 

 

 

 

 

 

an investment you can live with

Tri-Continental Corporation

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

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

What economic and market conditions affected Tri-Continental’s portfolio during the first quarter of 2005?

The first quarter of 2005 was difficult for investors and most major indices posted negative returns. Less-defensive areas of the market, such as technology and telecommunications, suffered the most, while the energy sector, which benefited from higher oil and gas prices, was by far the best performer. Other defensive sectors within the S&P 500, such as utilities, consumer staples, and materials, also posted positive results.

The driving forces behind this generally negative market environment were sharply higher energy prices and rising interest rates. During the first quarter, oil prices soared to over $55 a barrel. At the same time, the US Federal Reserve Board continued to make “measured pace” increases in the federal funds rate, raising this rate twice by 25 basis points during the three-month period. Until this past quarter, longer-term rates had remained stable in spite of the Fed’s moves. However, at the end of the first quarter, longer-term interest rates began to rise as well. The 10-year US Treasury bill began the year at 4.24% and ended the quarter 26 basis points higher, at 4.50% .

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

At the end of the first quarter, Tri-Continental’s largest sector weighting was information technology, and Tri-Continental was overweighted in this area relative to the S&P 500 Index. Technology stocks delivered generally poor results for both Tri-Continental and the S&P 500, and Tri-Continental’s heavy weighting in this sector negatively impacted both absolute and relative returns. While technology stock prices fell during the first quarter, we continue to believe that technology stock price valuations are attractive, and that fundamentals within the technology industry warrant a continued overweighting. Technology companies are showing strong balance sheets and many companies are holding large amounts of cash with very little debt. Some of these companies are putting their cash to work in stockholder-friendly ways, such as by instituting stock repurchase programs and by increasing dividends.

Tri-Continental’s second-largest sector weighting at the end of the quarter was financials. This sector was negatively impacted by rising interest rates, and while Tri-Continental was underweighted in this area, the financial stocks in the portfolio underperformed those in the S&P 500. The financial sector thus had a negative impact on both absolute and relative returns for the quarter.

Not part of first quarter report

1

Tri-Continental Corporation

We did not expect the sharp upward movement of energy commodity prices in the first quarter, which we believe was driven primarily by market speculation and momentum, and not by supply fundamentals. As a consequence, Tri-Continental was underweighted in the energy sector relative to the S&P 500. While the outperformance of the energy sector did contribute positively to performance on an absolute basis, the area negatively impacted returns relative to the S&P 500 due to Tri-Continental’s underweighting and the fact that the energy stocks in the portfolio underperformed the S&P 500’s energy sector as a whole.

Consumer discretionary stocks delivered generally negative returns during the quarter. The sector was impacted by rising energy costs and rising interest rates, both of which could potentially curb consumer spending. Tri-Continental benefited from an underweighting in the group and from favorable stock selection relative to the S&P 500.

During the first quarter, Tri-Continental purchased put options and wrote call options on three energy stocks held by the portfolio. Put options provide the holder (in this case, Tri-Continental) with the right to sell securities at a specified price. Tri-Continental purchased these for downside protection in the event of falling energy prices. Call options obligate the seller (in this case, Tri-Continental) to sell stocks at a specified price.Tri-Continental partially offset the cost of the put options with the income generated by writing the call options. While this limited Tri-Continental’s potential profit (because the portfolio was obligated to sell the stocks at certain price points), it also provided Tri-Continental with downside protection (because the portfolio could sell the stocks at predetermined prices). This two-part strategy (often referred to as a “collar”) enabled the portfolio to maintain exposure to these stocks within a certain price band, while continuing to collect dividends.

What is your outlook?

While we believe the recent surge in energy prices is in part the result of market speculation, we are concerned that high oil prices could reduce the spending power of consumers and businesses, placing a drag on the economy. Higher interest rates also have the potential to slow spending. However, we believe that because inflation remains in check, it will not be necessary for the Federal Reserve Board to increase rates dramatically in the near term. On the plus side, corporate balance sheets and profits are strong, and inflation and interest rates remain historically low. We thus believe the market will be able to deliver moderate gains over the remainder of 2005.

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

Not part of first quarter report

2

Tri-Continental Corporation

FIRST QUARTER REPORT 2005

April 29, 2005

To the Stockholders:

     Your first quarter Stockholder report for Tri-Continental Corporation follows this letter. This report contains Tri-Continental's investment results and portfolio of investments.

     For the three months ended March 31, 2005, the Corporation posted a total return of –2.35% based on market price and –3.25% based on net asset value. During the same time period, the S&P 500 returned –2.15% and the Lipper Closed-End Growth & Income Funds Average returned –1.62% .

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


By Order of the Board of Directors,  
   
William C. Morris Brian T. Zino
Chairman President

1

 

Tri-Continental Corporation

Investment Results Per Common Share              
 
TOTAL RETURNS                 
For Periods Ended March 31, 2005 
               
       
Average Annual
   
Three
One
Five
Ten
   
Months*
Year
Years
Years
           Market Price    (2.35 )%    4.92 %    (1.96 )%    8.26 % 
           Net Asset Value    (3.25 )    6.42     (3.53 )    8.10  
           Lipper Closed-End                 
                Growth & Income 
               
                Funds Average** 
  (1.62 )    8.63     1.99     9.33  
           S&P 500**    (2.15 )    6.69     (3.16 )    10.79  
PRICE PER SHARE     
  March 31, 2005  December 31, 2004   
           Market Price 
 
 
           Net Asset Value  $17.80    $18.28   
    21.10   21.87   
DIVIDEND, CAPITAL GAINS AND YIELD INFORMATION     
For the Three Months Ended March 31, 2005             
Capital Gains 
Dividends Paid‡ 
Realized† 
Unrealized†† 
SEC 30-Day YieldØ
 
$0.05 
$0.41 
$1.16 
$1.25 % 
Performance data quoted represents past performance and does not guarantee future investment results. The rates of return will vary and the principal value of an investment will fluctuate. Shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Total returns of the Corporation as of the most recent month-end will be made available at www.seligman.com1 by the seventh business day following that month-end. Returns reflect changes in market price or net asset value, as applicable, and assume reinvestment of distributions. Performance data quoted does not reflect the deduction of taxes that investors may pay on distributions or the sale of shares.

*
   Returns for periods of less than one year are not annualized.
**
   The Lipper Closed-End Growth & Income Funds Average (the “Lipper Average”) and the Standard & Poor’s 500 Composite Stock Index (the “S&P 500”) are unmanaged benchmarks that assume reinvestment of all distributions. The Lipper Average excludes the effect of taxes and any costs associated with the purchase of shares, and the S&P 500 excludes the effect of taxes, fees and sales charges. The Lipper Average measures the performance of closed-end mutual funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The S&P 500 measures the performance of 500 of the largest US companies based on market capitalizations.
  Investors cannot invest directly in an index or an average.
‡
  Preferred Stockholders were paid dividends totaling $0.625 per share.
   
†
   Information does not reflect the effect of capital loss carryforwards that are available to offset these and future capital gains.
   
††
   Represents the per share amount of net unrealized appreciation of portfolio securities as of March 31, 2005.
   
Ø
  Current yield, representing the annualized yield for the 30-day period ended March 31, 2005, has been computed in accordance with SEC regulations and will vary.
1
    
  The reference to Seligman’s website is an inactive textual reference and information contained in or otherwise accessible through Seligman’s website does not form a part of this report or the Corporation’s prospectus.

2

Tri-Continental Corporation 
 
Largest Portfolio Changes     
January 1, 2005 to March 31, 2005     
 
Largest Purchases    Largest Sales 
Pharmion Corporation*    Carnival Corporation** 
Honeywell International Inc.*    Dell Inc. 
Comcast Corporation Class “A”*    Lear Corp.** 
Intel Corporation    Texas Instruments Incorporated** 
Sprint (FON Group)*    MBNA Corporation** 
Novell, Inc.*    Novartis (ADR) 
Nokia Corp. (ADR)    General Mills, Inc.** 
Medtronic, Inc.*    Verizon Communications Inc. 
Lucent Technologies, Inc.*    Taiwan Semiconductor Manufacturing 
Citizens Communications Company*         Company (ADR)** 
    International Business 
         Machines Corporation 

Largest portfolio changes from the previous period to the current period are based on cost of purchases and proceeds from sales of securities, listed in descending order.
* Position added during the period.
** Position eliminated during the period.
 

10 Largest Equity Holdings
March 31, 2005

Security    Value    Percent of Net Assets 
General Electric Company    $93,714,531    3.9 
Exxon Mobil Corporation    77,952,330    3.3 
Citigroup Inc.    71,042,500    3.0 
Microsoft Corporation    70,877,298    3.0 
Pfizer Inc.    64,964,047    2.6 
Altria Group, Inc.    57,751,140    2.4 
Wal-Mart Stores, Inc.    51,303,620    2.1 
Intel Corporation    46,169,393    1.9 
Tyco International Ltd.    43,299,152    1.8 
Cisco Systems, Inc.    40,432,005    1.7 

3

Tri-Continental Corporation

Portfolio of Investments (unaudited)
March 31, 2005 
   

 
Shares 
Value 
COMMON STOCKS   
   
    AND WARRANTS 97.6% 
 
   
AEROSPACE AND   
   
   DEFENSE 1.7%   
   
General Dynamics Corporation   
135,700 
  $ 14,526,685 
Honeywell International Inc.   
688,900 
  25,633,969 
   
  40,160,654 
AIR FREIGHT   
   
   AND LOGISTICS 0.5%   
   
FedEx Corp.   
115,810 
  10,880,349 
BEVERAGES 2.6%   
   
Coca-Cola Company (The)   
793,300 
  33,056,811 
PepsiCo, Inc.   
553,900 
  29,373,317 
   
  62,430,128 
BIOTECHNOLOGY 1.8%   
   
Amgen Inc.*   
289,100 
  16,816,947 
Gilead Sciences, Inc.*   
185,800 
  6,650,711 
Pharmion Corporation*   
681,300 
  19,747,481 
   
  43,215,139 
BUILDING PRODUCTS 0.5%   
   
Masco Corporation   
333,400 
  11,558,978 
CAPITAL MARKETS 2.5%   
   
Bank of New York   
   
     Company, Inc. (The)   
370,000 
  10,748,500 
Goldman Sachs Group, Inc. (The)   
166,400 
  18,302,336 
Merrill Lynch & Co. Inc.   
313,400 
  17,738,440 
Morgan Stanley   
247,370 
  14,161,932 
   
  60,951,208 
CHEMICALS 1.8%   
   
Dow Chemical Co. (The)   
446,100 
  22,238,085 
Praxair, Inc.   
439,200 
  21,020,112 
   
  43,258,197 
COMMERCIAL BANKS 3.4%   
   
Bank of America Corporation   
630,440 
  27,802,404 
Fifth Third Bancorp   
259,600 
  11,158,906 
Wachovia Corporation   
593,563 
  30,218,292 
Wells Fargo & Company   
209,800 
  12,546,040 
   
  81,725,642 
   
Shares or 
 
   
Warrants 
 
 
COMMERCIAL SERVICES   
 
    AND SUPPLIES 2.3% 
 
 
Cendant Corporation   
728,800 
shs.
   14,969,552 
ServiceMaster Company (The)   
1,379,000 
18,616,500 
Waste Management Inc.   
733,000 
21,147,050 
   
54,733,102 
 
COMMUNICATIONS   
 
   EQUIPMENT 4.9%   
 
Cisco Systems, Inc.*   
2,256,880 
40,432,005 
Lucent Technologies, Inc.*   
5,238,700 
14,406,425 
Lucent Technologies, Inc.*   
36,077 
wts
 24,352 
Nokia Corp. (ADR)   
1,910,100 
shs.
 29,472,843 
Nortel Networks Corporation *   
5,613,300 
15,324,309 
QUALCOMM Inc.   
512,100 
18,760,784 
   
118,420,718 
       
COMPUTERS AND   
 
   PERIPHERALS 3.3%   
 
Dell Inc.*   
241,860 
9,293,471 
EMC Corporation*   
1,756,400 
21,638,848 
Hewlett-Packard Company   
710,130 
15,580,252 
International Business   
 
   Machines Corporation 
 
367,120 
33,547,426 
   
80,059,997 
 
CONSUMER FINANCE 1.0%   
 
American Express Company   
453,830 
23,313,247 
CONTAINERS AND   
 
   PACKAGING 0.7%   
 
Smurfit-Stone   
 
   Container Company* 
 
1,008,900 
15,602,638 
DIVERSIFIED FINANCIAL   
 
   SERVICES 4.2%   
 
CIT Group Inc.   
296,200 
11,255,600 
Citigroup Inc.   
1,580,830 
71,042,500 
J.P. Morgan Chase & Co.   
524,100 
18,133,860 
   
100,431,960 
       
DIVERSIFIED   
 
   TELECOMMUNICATION 
 
 
   SERVICES 2.5%   
 
Citizens Communications   
 
     Company   
1,190,000 
15,398,600 
SBC Communications Inc.   
371,500 
8,800,835 
Sprint (FON Group)   
798,500 
18,165,875 
Verizon Communications Inc.   
487,300 
17,299,150 
   
59,664,460 
See footnotes on page 7.

4

Tri-Continental Corporation 
 
Portfolio of Investments (unaudited)  
March 31, 2005 
 
   
Shares 
  Value 
 
ELECTRIC UTILITIES 0.6%   
   
PPL Corporation   
248,500 
  $ 13,416,515 
 
ELECTRONIC EQUIPMENT   
   
   AND INSTRUMENTS 0.6% 
 
   
Jabil Circuit, Inc.*   
530,040 
  15,116,741 
 
ENERGY EQUIPMENT   
   
   AND SERVICES 0.4% 
 
   
Noble Corporation*   
186,300 
(1)  10,471,923 
FOOD AND STAPLES   
   
   RETAILING 3.3%   
   
Kroger Company (The)*   
1,057,500 
  16,951,725 
Sysco Corporation   
305,000 
  10,919,000 
Wal-Mart Stores, Inc.   
1,023,820 
  51,303,620 
 
   
  79,174,345 
 
FOOD PRODUCTS 0.8%   
   
Dean Foods Company*   
565,100 
  19,382,930 
 
HEALTH CARE EQUIPMENT   
   
   AND SUPPLIES 1.2%   
   
Boston Scientific Corporation*   
401,400 
  11,757,006 
Medtronic, Inc.   
322,400 
  16,426,280 
 
   
  28,183,286 
 
HEALTH CARE PROVIDERS   
   
   AND SERVICES 0.6% 
 
   
WellPoint Inc.*   
107,600 
  13,487,660 
 
HOTELS, RESTAURANTS   
   
   AND LEISURE 1.1%   
   
Applebee’s International, Inc.   
484,900 
  13,351,722 
Marriott International, Inc.   
   
     Class “A”   
211,400 
  14,134,204 
 
   
  27,485,926 
 
HOUSEHOLD PRODUCTS 1.7%     
Colgate-Palmolive Company   
385,200 
  20,095,884 
Procter & Gamble   
   
     Company (The)   
374,612 
  19,854,436 
 
   
  39,950,320 
 
INDEX DERIVATIVES 0.8%   
   
iShares DJ Select Dividend   
   
     Index Fund   
306,400 
  18,331,912 
 
INDUSTRIAL   
   
    CONGLOMERATES 5.7% 
 
   
General Electric Company   
2,598,850 
  93,714,531 
Tyco International Ltd.   
1,281,040 
  43,299,152 
 
   
  137,013,683 
 
INSURANCE 3.7%         
American International         
     Group, Inc.    704,700      39,047,427
Hartford Financial Services         
     Group, Inc.    156,300    10,715,928 
PartnerRe Ltd.    156,500    10,109,900 
Prudential Financial, Inc.    508,500    29,187,900 
        89,061,155 
INTERNET AND         
    CATALOG RETAIL 0.6% 
       
eBay Inc.*    377,320    14,057,057 
INTERNET SOFTWARE         
   AND SERVICES 1.1%         
Ask Jeeves, Inc.*    454,900    12,764,494 
Yahoo!, Inc.*    382,500    12,987,788 
        25,752,282 
MACHINERY 1.7%         
Deere & Company    192,100    12,895,673 
Illinois Tool Works Inc.    318,980    28,558,279 
        41,453,952 
MEDIA 5.4%         
Clear Channel         
     Communications, Inc.    788,900    27,193,383 
Comcast Corporation Class “A”*    571,600    19,274,352 
News Corp. (Class A)    740,300    12,525,876 
Time Warner Inc.*    2,151,000    37,750,050 
Tribune Company    347,700    13,862,799 
Univision Communications         
     Inc. Class “A”*    674,500    18,676,905 
        129,283,365 
METALS AND MINING 1.8%         
Alcoa Inc.    944,900    28,715,511 
Freeport-McMoRan Copper         
     & Gold, Inc. Class “B” 
  381,600    15,115,176 
        43,830,687 
MULTI-LINE RETAIL 0.7%         
May Department         
     Stores Company    484,800    17,947,296 
MULTI-UTILITIES AND         
   UNREGULATED POWER 0.5%     
Duke Energy Corporation    450,200    12,610,102 

See footnotes on page 7.

5

Tri-Continental Corporation

Portfolio of Investments (unaudited)      
March 31, 2005 
         
    Shares   Value 
 
OIL AND GAS 4.2%       
BP p.l.c. (ADR)    219,800   $ 13,715,520 
Chevron Texaco Corporation    166,300 (1)  9,696,953 
Exxon Mobil Corporation    1,307,925 (2)  77,952,330 
      101,364,803 
PAPER AND FOREST       
   PRODUCTS 0.5%       
Weyerhaeuser Company    189,020   12,947,870 
PERSONAL PRODUCTS 0.4%       
Gillette Company    206,200   10,408,976 
PHARMACEUTICALS 9.3%       
Andrx Corp.*    1,082,700   24,555,636 
Forest Laboratories, Inc.*    488,200   18,038,990 
Johnson & Johnson    541,263   36,351,223 
Lilly Eli & Company    369,200   19,235,320 
Merck & Co. Inc.    498,400   16,133,208 
Novartis (ADR)    506,300   23,684,714 
Pfizer Inc.    2,358,738   61,964,047 
Wyeth    532,300   22,452,414 
      222,415,552 
SEMICONDUCTORS AND       
   SEMICONDUCTOR       
   EQUIPMENT 2.9%       
Applied Materials, Inc.    743,300   12,082,341 
Broadcom Corporation       
     Class “A”*    398,500   11,953,008 
Intel Corporation    1,987,490   46,169,393 
      70,204,742 
SOFTWARE 6.2%       
Check Point Software       
     Technologies Ltd.*    499,700   10,855,982 
Computer Associates       
     International, Inc.    808,500   21,910,350 
Microsoft Corp.    2,933,056   70,877,298 
Novell, Inc.*    3,023,500   18,004,943 
Oracle Corporation*    561,100   6,999,722 
Symantec Corporation*    935,800   19,988,688 
      148,636,983 
SPECIALTY RETAIL 1.8%       
Advance Auto Parts, Inc.*    247,700   12,496,465 
The Gap, Inc.    702,100   15,333,864 
Michaels Stores, Inc.    419,100   15,213,330 
      43,043,659 
 
     
   
Shares, Shares 
   
   
Subject to Put or 
   
   
Partnership Interest
 
Value
 
THRIFTS AND MORTGAGE     
   FINANCE 2.1%         
Fannie Mae   
408,200 
shs. $ 22,226,490 
Freddie Mac   
223,700 
  14,137,840 
Radian Group Inc.   
285,800 
  13,644,092 
   
  50,008,422 
TOBACCO 2.4%   
   
Altria Group, Inc.   
883,180 
  57,751,140 
WIRELESS   
   
    TELECOMMUNICATION 
 
   
   SERVICES 1.8%   
   
American Tower Corporation   
   
     Class “A”*   
689,600 
  12,571,408 
Crown Castle   
   
     International Corp.* 
 
1,967,400 
  31,596,444 
   
  44,167,852 
 
 
TOTAL COMMON STOCKS         
     AND WARRANTS         
    (Cost $2,210,903,658) 
      2,343,367,553 
 
 
TRI-CONTINENTAL         
    FINANCIAL DIVISION 0.1% 
   
WCAS Capital         
     Partners II, L.P.†    $4,673,677    2,168,259 
Whitney Subordinated         
     Debt Fund, L.P.†    2,207,549    920,833 
 
TOTAL TRI-CONTINENTAL         
    FINANCIAL DIVISION 
       
     (Cost $6,881,226)        3,089,092 
 
 
PUT OPTIONS* 0.1%         
ENERGY EQUIPMENT         
    AND SERVICES 0.0% 
       
Noble Corporation,         
      expiring June 2005 at $55 
 
186,300  
shs. 526,297 

See footnotes on page 7. 

6

Tri-Continental Corporation

 

    
 
Portfolio of Investments (unaudited)
March 31, 2005
   
Shares Subject
 
to Put/Call or
 
Principal Amount
Value  
 
 
 
OIL AND GAS 0.1% 
 
 
ChevronTexaco Corporation, 
 
 
     expiring June 2005 at $55 
 
83,200
  shs.
$ 108,160  
ChevronTexaco Corporation, 
 
 
     expiring June 2005 at $60 
 
83,100
290,850  
Exxon Mobil Corporation, 
 
 
     expiring July 2005 at $55 
 
327,000
359,700  
Exxon Mobil Corporation, 
 
 
     expiring July 2005 at $60 
 
327,000
981,000  
 
1,739,710  
TOTAL PUT OPTIONS 
 
2,266,007  
     (Cost $1,699,716) 
     
 
 
FIXED TIME DEPOSITS 2.0% 
 
 
BNP Paribas, Grand Cayman 
 
 
     2.86%, 4/1/2005 
 
 
     (Cost $48,709,000) 
 
48,709,000
48,709,000  
TOTAL INVESTMENTS 
 
 
(Cost $2,268,193,600**) 99.8%   
2,397,431,652
  
   
CALL OPTIONS WRITTEN
 
ChevronTexaco Corporation, 
 
 
     expiring June 2005 at $65 
 
 
     (Premium received $202,879) 
 
(166,300
)  shs.
(91,465
)
Exxon Mobil Corporation, 
 
 
     expiring July 2005 at $65 
 
 
     (Premium received $676,867) 
 
(327,000
) 
(376,050 ) 
Exxon Mobil Corporation, 
 
 
     expiring July 2005 at $70 
 
 
     (Premium received $238,702) 
 
(327,000
) 
(147,150 ) 
Noble Corporation, 
 
 
     expiring June 2005 at $60 
 
 
     (Premium received $276,795) 
 
(93,200
) 
(191,060 ) 
       
                                                                                  
Shares
   
   
Subject to Call 
  Value  
 
 
Noble Corporation,         
     expiring June 2005 at $65         
     (Premium received $122,888)  
(93,100
 )   (86,117 ) 
 
 
TOTAL CALL OPTIONS         
   WRITTEN         
   (Premium received $1,518,131)        (891,842 ) 
 
 
OTHER ASSETS LESS         
   OTHER LIABILITIES 0.2%        4,912,414  
 
 
NET ASSETS 100.0%        2,401,452,224  
       
*
   Non-income producing security.
**
The cost of investments for federal income tax purposes was $2,269,787,301. The tax basis gross unrealized appreciation and depreciation of portfolio securities were $249,311,879 and $121,667,528, respectively.
†
 Restricted security.
(1)
   All shares subject to call. 
(2)
   654,000 shares subject to call. 
ADR - American Depositary Receipt. 
Security Valuation - Securities (including options) traded on an exchange are valued at the last sales price on the primary exchange or market on which they are traded. Securities not listed on an exchange or security market, or securities for which there is no last sales price, are valued at the mean of the most recent bid and asked prices or are valued by J. & W. Seligman & Co. Incorporated (the “Manager”) based on quotations provided by primary market makers in such securities. Securities for which market quotations are not readily available or are otherwise no longer valid or reliable are valued at fair value determined in accordance with procedures approved by the Board of Directors. This can occur in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts, and extreme market volatility. Short-term holdings that mature in more than 60 days are valued at current market quotations. Short-term holdings maturing in 60 days or less are valued at amortized cost.

7

Tri-Continental Corporation
Stockholder Services

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

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

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

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

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

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

8

Tri-Continental Corporation
Stockholder Services (continued)

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

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

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

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

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

     Between November 18, 2004 and March 31, 2005, 2.0 million shares were repurchased. This is approximately 1.7% of the shares outstanding at the beginning of the period. The repurchase of additional shares is expected to continue through December 31, 2005, as long as the discount remains above 10%.

9

Tri-Continental Corporation

Board of Directors

 

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

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

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

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

John E. Merow* (1,3)
Retired Chairman and Senior Partner,
     Sullivan & Cromwell LLP
Director, Aleris International, Inc.
Trustee, New York-Presbyterian Hospital

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

  

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

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

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

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

Brian T. Zino
Director and President,
     J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICI Mutual Insurance Company
Member of the Board of Governors,
Investment Company Institute
     
   
    *  Will retire on May 19, 2005.
    Member: (1)   Audit Committee
      (2)  Director Nominating Committee
      (3)  Board Operations Committee
       

10

Tri-Continental Corporation     
 
Executive Officers     
 
William C. Morris    Charles W. Kadlec 
Chairman    Vice President 
     
Brian T. Zino    Michael F. McGarry 
President and Chief Executive Officer    Vice President 
     
John B. Cunningham    Thomas G. Rose 
Vice President    Vice President 
     
Eleanor T. Hoagland    Lawrence P. Vogel 
Vice President and Chief Compliance Officer    Vice President and Treasurer 
     
    Frank J. Nasta 
    Secretary 

11

Tri-Continental Corporation 

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

12

J. & W. SELIGMAN & CO.
INCORPORATED
INVESTMENT MANAGERS AND ADVISORS
ESTABLISHED 1864

100 Park Avenue, New York, NY 10017

This report is intended only for the information of Stockholders who have received the current prospectus covering shares of Common Stock of Tri-Continental Corporation, which contains information about investment objectives, risks, management fees and other costs. The prospectus should be read carefully before investing and may be obtained by calling Stockholder Services at 800-TRI-1092.

CETRI3a 3/05