TRI-CONTINENTAL Corp — Interim / Quarterly Report 2000

Sep 5, 2000

MID-YEAR REPORT 2000 TRI-CONTINENTAL CORPORATION AN INVESTMENT YOU CAN LIVE WITH TRI-CONTINENTAL CORPORATION INVESTS TO PRODUCE FUTURE GROWTH OF BOTH CAPITAL AND INCOME, WHILE PROVIDING REASONABLE CURRENT INCOME. TY is Tri-Continental Corporation's symbol for its Common Stock on the New York Stock Exchange. TRI-CONTINENTAL CORPORATION Tri-Continental Corporation's Annual Stockholders' Meeting took place on May 18, 2000, in Pasadena, California. At the meeting, four directors were elected and the selection of Deloitte & Touche LLP as auditors was ratified. For complete results of the vote, please refer to page 23. As many of you know, Tri-Continental Corporation's Annual Meetings are held in different locations each year to give as many Stockholders as possible the opportunity to attend. It also provides us with the opportunity to speak with Stockholders, and to find out how they feel about their investment in the Corporation. Of course, regardless of our efforts to make the Meeting accessible, we can only speak directly with a small percentage of Stockholders. In order to reach a greater number of Stockholders, we have designed a brief Stockholder survey, included with this report, that we hope you will take a few moments to complete. Thank you in advance for taking time to provide us with your responses, which are anonymous. We thank you for your continued support of Tri-Continental Corporation, and look forward to serving your investment needs for many years to come. A discussion with your Portfolio Managers regarding the Corporation's results follows this letter. By order of the Board of Directors, /s/ William C. Morris /s/ Brian T. Zino - --------------------- ----------------- William C. Morris Brian T. Zino Chairman President 2 TRI-CONTINENTAL CORPORATION INTERVIEW WITH YOUR PORTFOLIO MANAGERS [PHOTO OF GROWTH AND INCOME TEAM] GROWTH AND INCOME TEAM: (STANDING FROM LEFT) AMY FUJII, JOHN ROTH, MELANIE RAVENELL (ADMINISTRATIVE ASSISTANT), (SEATED, FROM LEFT) CHARLES SMITH (PORTFOLIO MANAGER), RODNEY COLLINS (CO-PORTFOLIO MANAGER) HOW DID TRI-CONTINENTAL PERFORM DURING THE FIRST SIX MONTHS OF 2000? For the six-month period ended June 30, 2000, Tri-Continental Corporation posted a total return of -0.28% based on net asset value and -6.77% based on market price. This compares to -0.42% for the Standard & Poor's 500 Composite Stock Index (S&P 500) and 1.22% for the average net asset value returns of the Corporation's peers, as measured by the Lipper Closed-End Growth & Income Funds Average. WHAT ECONOMIC AND MARKET FACTORS AFFECTED THE CORPORATION'S RESULTS DURING THE FIRST HALF OF THE FISCAL YEAR? The Federal Reserve Board has been raising interest rates, steadily and somewhat aggressively, for one full year now in an attempt to place a drag on the economy. At first, these actions seemed to have little or no effect -- consumer confidence remained high, which fueled spending; unemployment remained historically low, which nearly created a labor shortage; and price increases in some areas of the economy seemed to be accelerating. Toward the end of the first quarter of 2000, investors began to worry that the Fed's actions thus far had been insufficient, forcing it to continue to raise rates, which could adversely affect stock prices. This growing uncertainty finally toppled the most richly valued stocks -- mostly technology issues -- by the middle of March. The Nasdaq Composite Index (a technology-heavy index) peaked at 5049 on March 10 and reached a low of 3165 on May 23 -- a 37% decline from peak to trough. During this two-month period of steep losses in the technology sector, investors began to focus on companies that could deliver solid earnings, rather than just on those whose prices had been driven by momentum. In June, evidence began to appear that the economy was in fact slowing, and at the June meeting interest rates were left unchanged -- a confirmation that the Fed was becoming convinced that its previous actions were having the desired effect. This lifted some of the uncertainty from the market, and technology stocks staged a recovery, while value-style stocks lagged for the month. WHAT WAS YOUR INVESTMENT STRATEGY? The weakness in technology stocks during the first half of 2000 provided an opportunity to increase Tri-Continental's weighting in this sector. We had wanted to increase the Corporation's exposure to this important area of the market for some time but valuations, in our opinion, were just too high. We were gratified that we had stood by this conviction when the technology sector corrected dramatically in 3 TRI-CONTINENTAL CORPORATION INTERVIEW WITH YOUR PORTFOLIO MANAGERS (continued) March. As many of these stocks came down in price during this correction, we added several technology names. We will continue to watch for opportunities to further increase the Corporation's weighting in this sector and, if we can find attractively valued stocks, would like to achieve a more significant weighting in technology by year end. However, we will remain mindful of valuations, and will not pursue these companies if we believe their prices are unreasonable. We expect that some weakness in technology will continue through the end of the summer and into the fall, and we'll look for opportunities to take advantage of any such weakness to buy high-quality technology companies for the portfolio. WHAT SECTORS CONTRIBUTED POSITIVELY TO PORTFOLIO PERFORMANCE? Tri-Continental's overweighting in energy and utilities was clearly a benefit during the first half of the year as the increase in oil prices and increased demand for natural gas pushed stocks for these companies higher. We think that energy stocks will continue to do well as the global economy continues to recover. The Corporation remained overweighted in financial stocks. Although these stocks generally do not perform well in a rising-rate environment and, in fact, the group as a whole was flat for the period, the financial stocks in the portfolio delivered strong performances, and this group was a positive contributor to Tri-Continental's returns. WHAT SECTORS DETRACTED FROM PORTFOLIO PERFORMANCE? The worst-performing market sectors during the first half of the year were basic materials, consumer stocks, and telecommunications. Fortunately, the Corporation was underweighted in basic materials and consumer stocks. We were overweighted in telecommunications, which hurt the Fund's performance relative to its benchmarks, but plan to remain overweighted, because we believe that these stocks represent good value for the long term. WHAT IS YOUR OUTLOOK? We believe that the economy and the stock market will continue to moderate, as we began to see during the end of the first half of the year. In such an environment, we believe that investors will once again focus on corporate earnings and stock-price valuations. We have said for some time that the exuberance in the market would necessarily have to abate, and that the market would, at some point, focus on fundamentals. We feel this is beginning to happen and that it should favor Tri-Continental's investment approach of identifying well-managed companies that trade at what we believe are attractive valuations relative to their earnings and cash flows. However, market cycles do not end overnight. We expect that there will be relatively high market volatility through the end of the year, although perhaps not to the extent that we saw in 1999. We also believe that the market will continue to broaden, which should benefit a well-diversified portfolio such as Tri-Continental. 4 TRI-CONTINENTAL CORPORATION - -------------------------------------------------------------------------------- INVESTMENT RESULTS PER COMMON SHARE TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2000

DIVIDEND AND CAPITAL GAIN INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 2000

• -------------------------------------------------------------------------------- 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. Past performance is not indicative of future investment results. * Returns for periods of less than one year are not annualized. ** These rates of return reflect changes in market price or net asset value, as applicable, and assume that all distributions within the period are taken in additional shares. *** The Lipper Closed-End Growth & Income Funds Average and the S&P 500 are unmanaged benchmarks that assume investment of dividends. The Lipper Closed-End Growth & Income Funds Average excludes the effect of any costs associated with the purchase of shares, and the S&P 500 excludes the effect of fees and sales charges. Investors cannot invest directly in an index or an average. + Preferred Stockholders were paid dividends totaling $1.25 per share. ++ Represents realized capital gains from 1999, which were paid on June 22, 2000. +++ Represents the per share amount of net unrealized appreciation of portfolio securities as of June 30, 2000. - -------------------------------------------------------------------------------- 5 TRI-CONTINENTAL CORPORATION STOCKHOLDER SURVEY Tri-Continental is conducting a survey in an effort to find out more about the Corporation's Stockholders, particularly how they feel about their investment. Please take a few moments to complete this survey. It is a self mailer that can be folded, sealed, and mailed. Postage has already been paid, and your responses are anonymous. TRI-CONTINENTAL'S DISCOUNT Closed-end funds, like Tri-Continental, usually trade at either a premium or at a discount; in other words, their market price may be higher or lower than net asset value. During the first six months of 2000, Tri-Continental's discount widened from 15.07% on December 31, 1999, to 20.60% on June 30, 2000. This resulted in a significant disparity between Tri-Continental's net asset value return of -0.28% and its market price return of -6.77% during this time. We were disappointed with this disparity and believe that the market is currently undervaluing Tri-Continental's stock. In fact, many market professionals believe that a discount represents a buying opportunity to acquire a professionally managed portfolio, with a competitive long-term performance history, at an attractive price. Of the six analysts who follow Tri-Continental (Morgan Stanley Dean Witter, Merrill Lynch, PaineWebber, Salomon Smith Barney, AG Edwards, and Everen Securities), all recommend the stock. Tri-Continental's manager, J. & W. Seligman & Co. Incorporated, has taken steps to reduce the discount including proactive contact with the sell-side analyst community, increasing market awareness through www.tri-continental.com, and maintaining an ongoing investor relations program, "Introduce Tri-Continental to a Friend." Also, in November 1999, Tri-Continental renewed its share buyback program for up to 7.5% of shares outstanding as long as the discount remains wider than 10%. While this program was not designed specifically to narrow the discount, it may be a secondary effect. Our studies show that closed-end funds with higher share count growth tend to have wider discounts, and this program will reduce Tri-Continental's share count growth by the number of shares repurchased. WWW.TRI-CONTINENTAL.COM Up-to-date information about Tri-Continental--including daily net asset values, monthly fact sheets, portfolio manager commentary, recent reports, and more--are now available at www.tri-continental.com. This website was developed for the convenience of current Stockholders and to publicize Tri-Continental. STOCK REPURCHASE PROGRAM In November 1998, the Board of Directors authorized a share repurchase program for up to 7.5% of the Corporation's shares over a 12-month period. This program was reauthorized in November 1999. The Board's decision benefits all Stockholders, allowing them to continue to enjoy the advantages of Tri-Continental's closed-end structure, while reducing the number of shares outstanding and increasing the net asset value of the remaining shares. As of June 30, 2000, the Corporation had repurchased 3,241,927 shares, representing approximately 2.8% of the shares outstanding on November 19, 1999, the date the program was reauthorized. During this time, the Corporation purchased as many shares in the open market as was legally permissible. Under federal regulations, corporations are effectively restricted regarding the amount of their own stock they can repurchase in the open market. Among other restrictions, corporations are not permitted to repurchase in the open market during any one day more than 25% of the average daily trading volume of the previous four weeks. The repurchase of additional shares is expected to take place through November 2000, as long as the discount remains wider than 10%. The Board of Directors will then consider continuing the program. 6 TRI-CONTINENTAL CORPORATION HIGHLIGHTS OF THE FIRST HALF JUNE 30, DECEMBER 31, ASSETS: 2000 1999 -------------- ------------- Total assets ............................. $4,067,115,012 $4,152,589,054 Amounts owed ............................. 44,790,120 5,088,570 -------------- -------------- NET INVESTMENT ASSETS .................... $4,022,324,892 $4,147,500,484 Preferred Stock, at par value ............ 37,637,000 37,637,000 -------------- -------------- Net Assets for Common Stock .............. $3,984,687,892 $4,109,863,484 ============== ============== Common shares outstanding ................ 125,295,930 125,234,203 NET ASSETS BEHIND EACH COMMON SHARE ...... $31.80 $32.82 SIX MONTHS ENDED JUNE 30, --------------------------------- 2000 1999 -------------- -------------- TAXABLE GAIN: Net capital gain realized ................ $92,321,555 $245,285,567 Per Common share ......................... $0.74 $2.09 Unrealized capital gains, end of period .......................... $1,004,270,869 $1,363,204,585 Per Common share, end of period .......... $8.02 $11.61 DISTRIBUTION OF GAIN: Per Common share ......................... $0.56 $0.67 INCOME: Total income earned ...................... $31,270,745 $43,071,946 Expenses ................................. 10,796,891 11,629,941 Preferred Stock dividends ................ 940,925 940,925 -------------- -------------- Income for Common Stock .................. $19,532,929 $30,501,080 ============== ============== Expenses to average net investment assets .................. 0.54% 0.57% Expenses to average net assets for Common Stock ....................... 0.55% 0.58% DIVIDENDS PER COMMON SHARE ............... $0.17 $0.24 With December 1999 gain distribution taken in shares ........................ $0.19 -- - ---------- * Annualized. 7 TRI-CONTINENTAL CORPORATION DIVERSIFICATION OF NET INVESTMENT ASSETS The diversification of portfolio holdings by industry on June 30, 2000, was as follows. Individual securities owned are listed on pages 10 to 13.

8 TRI-CONTINENTAL CORPORATION LARGEST PORTFOLIO CHANGES APRIL 1 TO JUNE 30, 2000 SHARES ------------------------ HOLDINGS ADDITIONS INCREASE 6/30/00 - --------- -------- -------- COMMON STOCKS Agilent Technologies, Inc. 600,000 731,850(1) Costco Wholesale Corporation 480,000 480,000 General Electric Company 126,700 3,261,600(2) Guidant Corporation 866,100 866,100 Hewlett-Packard Company 345,700 345,700 International Business Machines Corporation 169,650 588,950 Microsoft Corporation 310,000 1,905,300 Pitney Bowes Incorporated 412,000 2,021,000 Sprint Corporation 750,000 750,000 Sun Microsystems, Inc. 328,400 328,400 SHARES ------------------------ HOLDINGS REDUCTIONS DECREASE 6/30/00 - --------- -------- -------- COMMON STOCKS Bestfoods 1,818,600 -- Bristol-Myers Squibb Company 92,750 619,050 Clorox Company (The) 600,000 -- Coastal Corporation (The) 520,200 1,040,000 DaimlerChrysler Corporation 585,100 -- Gillette Company (The) 1,402,800 645,000 May Department Stores Company 204,300 1,002,400 Mellon Financial Corporation 1,516,300 -- Largest portfolio changes from the previous period to the current period are based on cost of purchases and proceeds from sales of securities. - -------------------------------------------------------------------------------- (1) Includes 131,850 shares received as a result of a spinoff from Hewlett-Packard. (2) Includes 2,174,400 shares received as a result of a 3-for-1 stock split. 10 LARGEST HOLDINGS JUNE 30, 2000 PERCENT OF SECURITY VALUE NET INVESTMENT ASSETS - ---------- ------------ --------------------- General Electric Company $172,864,800 4.3 Microsoft Corporation 152,364,459 3.8 Intel Corporation 136,850,634 3.4 Applied Materials Inc. 126,411,075 3.1 Cisco Systems, Inc. 122,043,531 3.0 United Technologies Corporation 111,379,725 2.8 Wal-Mart Stores, Inc. 103,673,137 2.6 Bank of New York Company, Inc. 101,569,950 2.5 Chubb Corporation (The) 94,451,700 2.3 American International Group, Inc. 93,953,000 2.3 9 TRI-CONTINENTAL CORPORATION PORTFOLIO OF INVESTMENTS

• ---------- See footnotes on page 13. 10 TRI-CONTINENTAL CORPORATION PORTFOLIO OF INVESTMENTS (continued)

• ---------- See footnotes on page 13. 11 TRI-CONTINENTAL CORPORATION PORTFOLIO OF INVESTMENTS (continued)

• ---------- See footnotes on page 13. 12 TRI-CONTINENTAL CORPORATION PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 2000 VALUE -------------- TOTAL COMMON STOCKS (COST: $2,847,707,909) $3,851,844,139 -------------- TRI-CONTINENTAL FINANCIAL DIVISION+ - 0.3% (COST: $13,197,906) $ 13,332,545 -------------- SHORT-TERM HOLDINGS - 4.7% (COST: $190,900,000) $ 190,900,000 -------------- TOTAL INVESTMENTS - 100.8% (COST: $3,051,805,815) $4,056,076,684 OTHER ASSETS LESS LIABILITIES - (0.8)% (33,751,792) ------------- NET INVESTMENT ASSETS - 100.0% $4,022,324,892 ============== - ---------- * Non-income producing security. + Restricted security. Descriptions of companies have not been audited by Deloitte & Touche LLP. See Notes to Financial Statements. 13 TRI-CONTINENTAL CORPORATION STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2000

• ---------- See Notes to Financial Statements. 14 TRI-CONTINENTAL CORPORATION STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000

• ---------- *Net investment income available for Common Stock is $19,532,929, which is net of Preferred Stock dividends of $940,925. See Notes to Financial Statements. 15 TRI-CONTINENTAL CORPORATION STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS

• ---------- See Notes to Financial Statements. 16 TRI-CONTINENTAL CORPORATION NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the Corporation: a. SECURITY VALUATION -- Investments in stocks, limited partnership interests, and short-term holdings maturing in more than 60 days are valued at current market values or, in their absence, fair value determined in accordance with procedures approved by the Board of Directors. Securities traded on an exchange are valued at last sales prices or, in their absence and in the case of over-the-counter securities, at the mean of bid and asked prices. Short-term holdings maturing in 60 days or less are valued at amortized cost. b. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Corporation are maintained in US dollars. The market value of investment securities, other assets and liabilities denominated in foreign currencies are translated into US dollars at the daily rate of exchange as reported by a pricing service. Purchases and sales of investment securities, income, and expenses are translated into US dollars at the rate of exchange prevailing on the respective dates of such transactions. The Corporation separates that portion of the results of operations resulting from changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held in the portfolio. Similarly, the Corporation separates the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the period. c. FEDERAL TAXES -- There is no provision for federal income tax. The Corporation has elected to be taxed as a regulated investment company and intends to distribute substantially all taxable net income and net gain realized. d. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial statements and federal income tax purposes. Dividends receivable and payable are recorded on ex-dividend dates, except that certain dividends from foreign securities where the ex-dividend dates may have passed are recorded as soon as the Corporation is informed of the dividend. Interest income is recorded on the accrual basis. e. DISTRIBUTIONS TO STOCKHOLDERS -- The treatment for financial statement purposes of distributions made during the year from net investment income or net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or capital gain, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net investment assets based on their ultimate characterization for federal income tax purposes. Any such reclassification will have no effect on net assets, results of operations, or net asset value per share of the Corporation. 2. CAPITAL STOCK TRANSACTIONS -- Under the Corporation's Charter, dividends on the Common Stock cannot be declared unless net assets, after such dividends and dividends on Preferred Stock, equal at least $100 per share of Preferred Stock outstanding. The Preferred Stock is subject to redemption at the Corporation's option at any time on 30 days' notice at $55 per share (or a total of $41,400,700 for the shares outstanding) plus accrued dividends, and entitled in liquidation to $50 per share plus accrued dividends. 17 TRI-CONTINENTAL CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) The Corporation, in connection with its Automatic Dividend Investment and Cash Purchase Plan and other Stockholder plans, acquires and issues shares of its own Common Stock, as needed, to satisfy Plan requirements. For the six months ended June 30, 2000, 1,137,255 shares were purchased from Plan participants at a cost of $28,706,913, which represented a weighted average discount of 20.44% from the net asset value of those acquired shares. A total of 943,654 shares were issued to Plan participants during the six months ended June 30, 2000, for proceeds of $23,692,015, at a discount of 20.26% from the net asset value of those shares. The Corporation may make additional purchases of its Common Stock in the open market and elsewhere at such prices in such amounts as the Board of Directors may deem advisable. For the six months ended June 30, 2000, the Corporation purchased 1,691,800 shares of its Common Stock in the open market at an aggregate cost of $42,644,103, which represented a weighted average discount of 20.36% from the net asset value of those acquired shares. At June 30, 2000, 269,506 shares of Common Stock were reserved for issuance upon exercise of 13,543 Warrants, each of which entitled the holder to purchase 19.90 shares of Common Stock at $1.13 per share. Assuming the exercise of all Warrants outstanding at June 30, 2000, net investment assets would have increased by $304,541 and the net asset value of the Common Stock would have been $31.74 per share. The number of Warrants exercised during the six months ended June 30, 2000 and the year ended December 31, 1999, was -0- and 268, respectively. 3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio securities, excluding USGovernment obligations and short-term investments, amounted to $754,197,149 and $882,302,351, respectively. At June 30, 2000, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes, and the tax basis gross unrealized appreciation and depreciation of portfolio securities amounted to $1,136,138,537 and $131,867,668, respectively. 4. SHORT-TERM INVESTMENTS -- At June 30, 2000, the Corporation owned short-term investments which matured in less than seven days. 5. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W. Seligman & Co. Incorporated (the "Manager") manages the affairs of the Corporation and provides for the necessary personnel and facilities. Compensation of all officers of the Corporation, all directors of the Corporation who are employees or consultants of the Manager, and all personnel of the Corporation and the Manager is paid by the Manager. The Manager receives a fee, calculated daily and payable monthly, equal to a percentage of the Corporation's daily net assets at the close of business on the previous business day. The management fee rate is calculated on a sliding scale of 0.45% to 0.375%, based on average daily net assets of all the investment companies managed by the Manager. The management fee for the six months ended June 30, 2000, was equivalent to an annual rate of 0.40% of the average daily net assets of the Corporation. Seligman Data Corp., owned by the Corporation and certain associated investment companies, charged the Corporation at cost $1,853,981 for stockholder account services. The Corporation's investment in Seligman Data Corp. is recorded at a cost of $43,681. Certain officers and directors of the Corporation are officers or directors of the Manager and/or Seligman Data Corp. The Corporation has a compensation arrangement under which directors who receive fees may elect to defer receiving such fees. Directors may elect to have their deferred fees accrue interest or earn a return based on the performance of the Corporation or other funds in the Seligman Group of Investment Companies. The cost of such fees and earnings accrued thereon is included in directors' fees and expenses, and the accumulated balance thereof at June 30, 2000, of $413,972 is included in other liabilities. Deferred fees and related accrued earnings are not deductible for federal income tax purposes until such amounts are paid. 18 TRI-CONTINENTAL CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) 6. RESTRICTED SECURITIES -- At June 30, 2000, the Tri-Continental Financial Division of the Corporation was comprised of two investments that were purchased through private offerings and cannot be sold without prior registration under the Securities Act of 1933 or pursuant to an exemption therefrom. These investments are valued at fair value as determined in accordance with procedures approved by the Board of Directors of the Corporation. The acquisition dates of investments in the limited partnerships, along with their cost and values at June 30, 2000, are as follows:

19 TRI-CONTINENTAL CORPORATION FINANCIAL HIGHLIGHTS The Corporation's financial highlights are presented below. "Per share operating performance" data is designed to allow investors 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 investors can understand what effect the individual items have on their investment, assuming it was held throughout the period. Generally, the per share amounts are derived by converting the actual dollar amounts incurred for each item, as disclosed in the financial statements, to their equivalent per Common share amounts, using average shares outstanding. "Total investment return" measures the Corporation's performance assuming that investors purchased shares of the Corporation at the market value or net asset value as of the beginning of the period, invested dividends and capital gains paid, as provided for in the Corporation's Prospectus and Automatic Dividend Investment and Cash Purchase Plan, and then sold their shares at the closing market value or net asset value per share on the last day of the period. The computations do not reflect any sales commissions investors may incur in purchasing or selling shares of the Corporation. The total investment returns for periods of less than one year are not annualized. The ratios of expenses and net investment income to average net investment assets and to average net assets for Common Stock, for the periods presented do not reflect the effect of dividends paid to Preferred Stockholders.

• ---------- See footnotes on page 21. 20 TRI-CONTINENTAL CORPORATION FINANCIAL HIGHLIGHTS (continued)

• ---------- * Assumes the exercise of outstanding warrants. + Annualized. See Notes to Financial Statements. 21 TRI-CONTINENTAL CORPORATION REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND SECURITY HOLDERS, Tri-Continental Corporation: We have audited the accompanying statements of assets and liabilities of Tri-Continental Corporation, including the portfolio of investments as of June 30, 2000, of capital stock and surplus of Tri-Continental Corporation as of June 30, 2000, and the related statements of operations for the six months then ended, and of changes in net investment assets for the six months then ended and for the year ended December 31, 1999, and the financial highlights for the six months then ended and for each of the years in the five-year period ended December 31, 1999. These financial statements and financial highlights are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2000, by correspondence with the Corporation's custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Tri-Continental Corporation as of June 30, 2000, and the results of its operations for the six months then ended, and the changes in its net investment assets and the financial highlights for all the respective stated periods in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP New York, New York August 11, 2000 22 TRI-CONTINENTAL CORPORATION PROXY RESULTS Tri-Continental Corporation Stockholders voted on the following proposals at the Annual Meeting of Stockholders on May 18, 2000, in Pasadena, California. The description of each proposal and the voting results are stated below. Each nominee for Director was elected and the selection of Deloitte & Touche LLP as auditors for 2000 was ratified. For Withheld ---------- ---------- Election of Directors: John R. Galvin 98,081,576 3,184,983 William C. Morris 98,712,893 2,553,666 James Q. Riordan 98,558,518 2,708,041 Robert L. Shafer 98,660,183 2,606,376 For Against Abstain ----------- --------- --------- Ratification of Deloitte & Touche LLP as auditors 98,833,761 1,342,797 1,090,001 23 TRI-CONTINENTAL CORPORATION BOARD OF DIRECTORS JOHN R. GALVIN (2,4) DIRECTOR, Raytheon Company DEAN EMERITUS, Fletcher School of Law and Diplomacy at Tufts University ALICE S. ILCHMAN (3,4) TRUSTEE, Committee for Economic Development CHAIRMAN, The Rockefeller Foundation FRANK A. MCPHERSON (2,4) DIRECTOR, Kimberly-Clark Corporation DIRECTOR, Baptist Medical Center DIRECTOR, Conoco Inc. JOHN E. MEROW (2,4) DIRECTOR, Commonwealth Industries, Inc. TRUSTEE, New York-Presbyterian Hospital RETIRED CHAIRMAN AND SENIOR PARTNER, Sullivan & Cromwell, Law Firm BETSY S. MICHEL (2,4) TRUSTEE, The Geraldine R. Dodge Foundation WILLIAM C. MORRIS (1) CHAIRMAN CHAIRMAN OF THE BOARD, J. & W. Seligman & Co. Incorporated CHAIRMAN, Carbo Ceramics Inc. DIRECTOR, Kerr-McGee Corporation JAMES C. PITNEY (3,4) RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm JAMES Q. RIORDAN (3,4) DIRECTOR, KeySpan Energy Corporation TRUSTEE, Committee for Economic Development RICHARD R.SCHMALTZ (1) MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS, J. & W. Seligman & Co. Incorporated TRUSTEE EMERITUS,Colby College ROBERT L. SHAFER (3,4) RETIRED VICE PRESIDENT, Pfizer Inc. JAMES N. WHITSON (2,4) DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc. DIRECTOR, C-SPAN DIRECTOR, CommScope, Inc. BRIAN T. ZINO (1) PRESIDENT PRESIDENT, J. & W. Seligman & Co. Incorporated CHAIRMAN, Seligman Data Corp. DIRECTOR, ICI Mutual Insurance Company MEMBER OF THE BOARD OF GOVERNORS, Investment Company Institute DIRECTOR EMERITUS FRED E. BROWN DIRECTOR AND CONSULTANT, J. & W. Seligman & Co. Incorporated - -------------------- Member: (1) Executive Committee (2) Audit Committee (3) Director Nominating Committee (4) Board Operations Committee 24 TRI-CONTINENTAL CORPORATION EXECUTIVE OFFICERS WILLIAM C. MORRIS CHAIRMAN BRIAN T. ZINO PRESIDENT CHARLES W. KADLEC VICE PRESIDENT CHARLES C. SMITH, JR. VICE PRESIDENT LAWRENCE P. VOGEL VICE PRESIDENT AND TREASURER FRANK J. NASTA SECRETARY - -------------------------------------------------------------------------------- FOR MORE INFORMATION MANAGER J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017 STOCKHOLDER SERVICE AGENT Seligman Data Corp. 100 Park Avenue New York, NY 10017 IMPORTANT TELEPHONE NUMBERS (800) TRI-1092 Stockholder Services (800) 445-1777 Retirement Plan Services (212) 682-7600 Outside the United States (800) 622-4597 24-Hour Automated Telephone Access Service 25 TRI-CONTINENTAL CORPORATION MANAGED BY J. & W. SELIGMAN & CO. INCORPORATED INVESTMENT MANAGERS AND ADVISORS ESTABLISHED 1864 100 PARK AVENUE, NEW YORK, NY 10017 www.tri-continental.com This report is intended only for the information of stockholders or those who have received the current prospectus covering shares of Common Stock of Tri-Continental Corporation, which contains information about management fees and other costs. CETR13 6/00