Note 1. Organization
Tri-Continental Corporation (the Fund) is a diversified fund. The Fund is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end management investment company.
The Fund has 1 million authorized shares of preferred capital stock (Preferred Stock) and 159 million authorized shares of common
stock (Common Stock). The issued and outstanding Common Stock trades primarily on the New York Stock Exchange (NYSE) under the symbol TY.
Tri-Continental Corporations Preferred Stock is entitled to two votes and the Common Stock is entitled to one vote per share at all meetings of Stockholders. In the event of a default in payments of
dividends on the Preferred Stock equivalent to six quarterly dividends, the Preferred Stockholders are entitled, voting separately as a class to the exclusion of Common Stockholders, to elect two additional directors, such right to continue until
all arrearages have been paid and current Preferred Stock dividends are provided for. Generally, the vote of Preferred Stockholders is required to approve certain actions adversely affecting their rights.
Note 2. Summary of Significant Accounting Policies
Use of
Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial statements.
Security Valuation
All equity securities are valued at the close of business of the (NYSE). Equity securities are valued at the last quoted sales price on the principal
exchange or market on which they trade, except for securities traded on the NASDAQ Stock Market, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at
the mean of the latest quoted bid and ask prices on such exchanges or markets.
Debt securities generally are valued by pricing services approved by the Board of Directors (the Board)
based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available may also be valued based upon an over-the-counter or exchange bid quotation.
Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If any foreign share prices are
not readily available as a result of limited share activity the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are generally determined at 4:00 p.m. Eastern
(U.S.) time. However, many securities markets and exchanges outside the U.S. close prior to the close of the NYSE; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such
close but before the close of the NYSE. In those situations, foreign securities will be fair valued pursuant to the policy adopted by the Board, including utilizing a third party pricing service to determine these fair values. The third party
pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the
foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. The fair value of a security is likely to be different from the quoted or published price, if
available.
Investments in other open-end investment companies, including money market funds, are valued at net asset value.
Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term
securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par upon reaching 60 days to maturity. Short-term securities maturing in more than 60 days from the valuation date are valued at the
market price or approximate market value based on current interest rates.
Futures and options on futures contracts are valued based upon the
settlement price established each day by the board of trade or exchange on which they are traded.
Investments for which market quotations are
not readily available, or that have quotations which management believes are not reliable, are valued at fair value as determined in good
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Tri-Continental Corporation
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Notes to Financial Statements
(continued)
December 31, 2012
faith under consistently applied procedures established by and under the general supervision of the Board. If a security or class of securities (such as foreign securities) is valued at fair
value, such value is likely to be different from the last quoted market price for the security.
The determination of fair value often requires
significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used to determine fair value.
Foreign Currency Transactions and Translations
The
values of all assets and liabilities denominated in foreign currencies are translated into U.S. dollars at that days exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions and translations include gains
(losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates
on dividends, interest income and foreign withholding taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments
in the Statement of Operations.
Derivative Instruments
The Fund invests in certain derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the
value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of
investments, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate
risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligation under the terms of the contract, the potential for an illiquid secondary market and the potential for market
movements which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities.
The Fund and
any counterparty are required to maintain an agreement that requires the Fund and that counterparty to
monitor (on a daily basis) the net fair value of all derivatives entered into pursuant to the agreement between the Fund and such counterparty. If the net fair value of such derivatives between
the Fund and that counterparty exceeds a certain threshold (as defined in the agreement), the Fund or the counterparty (as the case may be) is required to post cash and/or securities as collateral. Fair values of derivatives presented in the
financial statements are not netted with the fair value of other derivatives or with any collateral amounts posted by the Fund or any counterparty.
Futures Contracts
Futures contracts represent
commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure while keeping sufficient cash to accommodate daily
redemptions. Upon entering into futures contracts, the Fund bears risks which may include interest rates, exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures contract, the Fund pledges cash or securities with the broker in an amount sufficient to meet the initial margin
requirement. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are recorded as variation margin receivable or payable and are
offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of
Assets and Liabilities.
Effects of Derivative Transactions in the Financial Statements
The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and
the location of those fair values in the Statement of Assets and Liabilities; and the impact of derivative transactions on the Funds operations over the period including realized gains or losses and unrealized gains or losses. The derivative
schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
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Tri-Continental Corporation
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Notes to Financial Statements
(continued)
December 31, 2012
The following table is a summary of the fair value of derivative instruments at December 31, 2012:
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Asset Derivatives
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Risk Exposure
Category
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Statement of Assets and Liabilities Location
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Fair Value ($)
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Equity contracts
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Net assets unrealized appreciation on futures contracts
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19,798
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*
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*
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Includes cumulative appreciation (depreciation) of futures contracts as reported in the Futures Contracts Outstanding table following the Portfolio of Investments. Only the
current days variation margin is reported in receivables or payables in the Statement of Assets and Liabilities.
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The
effect of derivative instruments in the Statement of Operations for the year ended December 31, 2012:
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Amount of Realized Gain (Loss) on Derivatives Recognized in Income
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Risk Exposure
Category
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Futures Contracts ($)
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Equity contracts
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540,774
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Change in Unrealized Appreciation (Depreciation) on Derivatives
Recognized in Income
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Risk Exposure
Category
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Futures Contracts ($)
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Equity contracts
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(49,189
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)
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The following table is a summary of the volume of derivative instruments for the year ended December 31, 2012:
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Derivative Instrument
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Contracts Opened
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Futures contracts
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152
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Security Transactions
Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax
purposes.
Income Recognition
Corporate
actions and dividend income are recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
Interest income is recorded on an accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted,
respectively, over the expected life of the security on all debt securities, unless otherwise noted.
Federal Income Tax Status
The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal
Revenue Code, as amended, and will distribute substantially all of its taxable income (including net short-term capital gains), if any, for its tax year, and as such will not be subject to
federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax.
Therefore, no federal income or excise tax provision is recorded.
Foreign Taxes
The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable,
based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Realized gains in certain
countries may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on net realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The amount, if any, is
disclosed as a liability on the Statement of Assets and Liabilities.
Dividends to Stockholders
The Fund has an earned distribution policy. Under this policy, the Fund intends to make quarterly distributions to holders of Common Stock that are
approximately equal to net investment income, less dividends payable on the Funds Preferred Stock. Capital gains, when available, are distributed to Common Stockholders along with the last income distribution of the calendar year.
Dividends and other distributions to Stockholders are recorded on ex-dividend dates.
Guarantees and Indemnifications
Under the Funds organizational documents and, in some cases,
by contract, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Funds contracts with its service providers contain general
indemnification clauses. The Funds maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the
likelihood of any such claims.
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Tri-Continental Corporation
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Notes to Financial Statements
(continued)
December 31, 2012
Recent Accounting Pronouncement
Disclosures about Offsetting Assets and Liabilities
In December 2011, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11
, Disclosures about Offsetting Assets and Liabilities.
The objective of the FASB is to enhance current disclosure requirements on offsetting of
certain assets and liabilities and to enable financial statement users to compare financial statements prepared under GAAP and International Financial Reporting Standards.
Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar
agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after
January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
Note 3. Fees and Compensation Paid to Affiliates
Investment Management Fees
Under an Investment
Management Services Agreement, Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), determines which securities will be purchased, held or sold. The
investment management fee is an annual fee that is equal to 0.355% of the Funds average daily net assets.
Administration Fees
Under an Administrative Services Agreement, the Investment Manager also serves as the Fund Administrator. The Fund pays the Fund Administrator an annual
fee for administration and accounting services equal to a percentage of the Funds average daily net assets that declines from 0.06% to 0.03% as the Funds net assets increase. The effective administration fee rate for the year ended
December 31, 2012 was 0.06% of the Funds average daily net assets.
Other Expenses
Other expenses are for, among other things, certain expenses of the Fund or the Board, including: Fund boardroom and office expense, employee
compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company
providing limited administrative services to the Fund and the Board. For the year ended December 31, 2012, other expenses paid to this company were $1,381.
Compensation of Board Members
Board members are
compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the Plan), the Board members who are not interested persons of the Fund, as defined under the 1940 Act, may elect
to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of certain funds managed by the Investment Manager. The Funds liability for these amounts is
adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan.
Stockholder Servicing Fees
Under a Stockholder Service Agent Agreement, Columbia Management Investment Services Corp. (the Stockholder Servicing Agent), an affiliate of the
Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, maintains Fund Stockholder accounts and records and provides Fund Stockholder services. Under the Agreement, the Fund pays the Stockholder Servicing Agent a fee equal to 0.10%
of the average daily net assets of the Funds shares of Common Stock. Effective July 1, 2012, under an amended Agreement, the Fund pays the Stockholder Servicing Agent a $21 fee per common stock open account.
The Fund and certain other associated investment companies (together, the Guarantors) have severally, but not jointly, guaranteed the performance and
observance of all the terms and conditions of a lease entered into by Seligman Data Corp. (SDC), including the payment of rent by SDC (the Guaranty). The lease and the Guaranty expire in January 2019. At December 31, 2012, the Funds total
potential future obligation over the life of the Guaranty is $812,872. The liability remaining at December 31, 2012 for non-recurring charges associated with the lease amounted to $442,526 and is included within payable for other expenses in
the Statement of Assets and Liabilities. SDC is owned by six associated investment companies, including the Fund. The Funds ownership interest in SDC at December 31, 2012 is included within other assets in the Statement of Assets and
Liabilities at a cost of $43,681.
Note 4. Federal Tax Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax
differences.
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Tri-Continental Corporation
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Notes to Financial Statements
(continued)
December 31, 2012
At December 31, 2012, these differences are primarily due to differing treatment for capital loss
carryforwards, deferral/reversal of wash sales losses, Trustees deferred compensation, post-October capital losses, re-characterization of distributions from investments, derivative investments and adjustments on certain convertible preferred
securities. To the extent these differences are permanent, reclassifications are made among the components of the Funds net assets in the Statement of Assets and Liabilities. Temporary differences do not require reclassifications. In the
Statement of Assets and Liabilities the following reclassifications were made:
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Undistributed net investment income
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$(21,952
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)
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Accumulated net realized loss
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145,184
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Paid-in capital
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(123,232
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)
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Net investment income and net realized gains (losses), as disclosed in the Statement of Operations, and net assets were
not affected by this reclassification.
The tax character of distributions paid during the years indicated was as follows:
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Year Ended December 31,
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2012
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2011
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Ordinary income
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$39,877,602
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$19,808,961
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Short-term capital gain distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2012, the components of distributable earnings on a tax basis were as follows:
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Undistributed ordinary income
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$2,571,350
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Accumulated realized loss
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(605,964,658
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)
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Unrealized appreciation
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110,936,263
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At December 31, 2012, the cost of investments for federal income tax purposes was $1,105,347,345 and the aggregate
gross unrealized appreciation and depreciation based on that cost was:
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Unrealized appreciation
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$134,069,668
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Unrealized depreciation
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(23,133,405
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)
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Net unrealized appreciation
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110,936,263
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The following capital loss carryforward, determined at December 31, 2012, may be available to reduce taxable income
arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
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Year of Expiration
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Amount ($)
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2016
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(49,455,851
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)
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2017
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(556,508,807
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)
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Total
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(605,964,658
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)
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Unlimited capital loss carryforwards are required to be utilized prior to any capital losses which carry an
expiration date. As a result of this ordering rule, capital loss carryforwards which carry an expiration date may be more likely to expire unused.
For the year ended December 31, 2012, $54,627,404 of capital loss carryforward was utilized.
Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
However, managements conclusion may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions).
Generally, the Funds federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note
5. Portfolio Information
The cost of purchases and proceeds from sales of securities, excluding short-term obligations, aggregated to
$801,892,323 and $816,589,577, respectively, for the year ended December 31, 2012.
Note 6. Capital Stock Transactions
Under the Funds Charter, dividends on Common Stock cannot be declared unless net assets, after deducting the amount of such dividends and all unpaid
dividends declared on Preferred Stock, equal at least $100 per share of Preferred Stock outstanding. The Preferred Stock is subject to redemption at the Funds 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 dividends accrued or in arrears, as the case may be.
Automatic Dividend and Cash Purchase Plan
The Fund, in connection with its Automatic Dividend
Investment and Cash Purchase Plan (the Plan) and other Stockholder plans, acquires and issues shares of its own Common Stock, as needed, to satisfy Plan requirements. A total of 344,461 shares were issued to Plan participants during the period for
proceeds of $5,377,332, a weighted average discount of 14.2% from the net asset value of those shares. In addition, a total of 747,244 shares were issued at market price in distributions during the period for proceeds of 11,809,653, a weighted
average discount of 14.4% from the net asset value of those shares.
For Stockholder accounts established after June 1, 2007, unless the
Stockholder Servicing Agent is otherwise instructed
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Tri-Continental Corporation
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Notes to Financial Statements
(continued)
December 31, 2012
by the Stockholder, distributions on the Common Stock are paid in book shares of Common Stock which are entered in the Stockholders account as book credits. Each Stockholder may
also elect to receive distributions 75% in shares and 25% in cash, 50% in shares and 50% in cash, or 100% in cash. Any such election must be received by the Stockholder Servicing Agent by the record date for a distribution. If the Stockholder holds
shares of Common Stock through a financial intermediary (such as a broker), the Stockholder should contact the financial intermediary to discuss reinvestment and distribution options. Elections received after a record date for a distribution will be
effective in respect of the next distribution. Shares issued to the Stockholder in respect of distributions will be at a price equal to the lower of: (i) the closing sale price of the Common Stock on the NYSE on the ex-dividend date or
(ii) the greater of net asset value per share of Common Stock and 95% of the closing price of the Common Stock on the NYSE on the ex-dividend date. The issuance of Common Stock at less than net asset value per share will dilute the net asset
value of all Common Stock outstanding at that time.
For the year ended December 31, 2012, the Fund purchased 806,299 shares of its Common
Stock in the open market at an aggregate cost of $12,683,718, which represented a weighted average discount of 14.2% from the net asset value of those acquired shares. For the year ended December 31, 2012, the Fund purchased 1,549,971 shares of
its Common Stock from Plan participants at a cost of $24,265,282, which represented a weighted average discount of 14.5% from the net asset value of those acquired shares. Shares of Common Stock repurchased to satisfy Plan requirements or in the
open market are retired and no longer outstanding.
Under the Funds stock repurchase program for 2012, the amount of the Funds
outstanding Common Stock that the Fund may repurchase from Stockholders and in the open market is 5%, provided that, with respect to shares purchased in the open market, the discount must be greater than 10%. The intent of the stock repurchase
program is, among other things, to moderate the growth in the number of shares outstanding, increase the NAV of the Funds outstanding shares, reduce the dilutive impact on stockholders who do not take capital gain distributions in additional
shares and increase the liquidity of the Funds Common Stock in the marketplace.
Warrants
At December 31, 2012, the Fund reserved 197,100 shares of Common Stock for issuance upon exercise of 8,148 Warrants, each of which entitled the
holder to purchase 24.19 shares of Common Stock at $0.93 per share.
Assuming the exercise of all Warrants outstanding at December 31, 2012, net assets would have
increased by $183,303 and the net asset value of the Common Stock would have been $18.71 per share. The number of Warrants exercised during the years ended December 31, 2012 and 2011was 1,343 and 0, respectively.
Note 7. Lending of Portfolio Securities
Effective
December 31, 2012, the Fund no longer participates in securities lending activity. Prior to that date, the Fund had entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, N.A. (JPMorgan). The Agreement
authorized JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned were secured by cash or securities that either were issued
or guaranteed as to principal and interest by the U.S. government, its agencies, authorities or instrumentalities with value equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those
levels due to market fluctuations of the loaned securities was requested to be delivered the following business day. Cash collateral received was invested by the lending agent on behalf of the Fund into authorized investments pursuant to the
Agreement.
Pursuant to the Agreement, the Fund received income for lending its securities either in the form of fees or by earning interest on
invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income earned from securities lending for the year ended December 31,
2012 is disclosed in the Statement of Operations. The Fund continued to earn and accrue interest and dividends on the securities loaned. At December 31, 2012, the Fund did not have any securities on loan.
Note 8. Affiliated Money Market Fund
The Fund
invests its daily cash balances in Columbia Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds. The income earned by the Fund from such investments is included as
Dividends affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of Columbia Short-Term Cash Fund.
Note 9. Lehman Brothers Holdings Inc. Equity-Linked Notes
The Fund holds investments in two equity-linked notes (notes) for which Lehman Brothers Holdings Inc. (Lehman Brothers)
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Tri-Continental Corporation
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Notes to Financial Statements
(continued)
December 31, 2012
is the counterparty. The notes (with an aggregate principal amount of $29.7 million) defaulted as of their respective maturity dates, September 14, 2008 and October 2, 2008. Lehman
Brothers filed a Chapter 11 bankruptcy petition on September 15, 2008, and as such, it is likely that the Fund will receive less than the maturity value of the notes, pending the outcome of the bankruptcy proceedings. Based on the bankruptcy
proceedings, the Fund recorded receivables aggregating $2.9 million based on the estimated amounts recoverable for the notes and recognized realized losses of $26.8 million. The estimates of the amounts recoverable for the notes are based on the
current information regarding the claim provided by the bankruptcy court and any amounts received as payments for the claim, which provide an indication of amounts recoverable through the bankruptcy proceedings. To date, the Fund has received $3.0
million on this claim. Any changes to the receivable balances resulting from such adjustments are recorded as a change in unrealized appreciation or depreciation in the Statement of Operations. At December 31, 2012, the value of the receivable
balances was approximately $3.4 million, which represented 0.28% of the Funds net assets.
Note 10. Significant Risks
Large-Capitalization Risk
To the extent that the
Fund invests a substantial percentage of its assets in an industry, the Funds performance may be negatively affected if that industry falls out of favor. Stocks of large-capitalization companies have at times experienced periods of volatility
and negative performance. During such periods, the value of the stocks may decline and the Funds performance may be negatively affected.
Note
11. Subsequent Events
Management has evaluated the events and transactions that have occurred through the date the financial statements
were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 12. Information Regarding Pending and
Settled Legal Proceedings
In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC,
which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)) entered into settlement agreements with the Securities and Exchange Commission (SEC) and
Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent
distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and
its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the funds Boards of Directors.
Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and
governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its
affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the
Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may
be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity associated
with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability
of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome
in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
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Tri-Continental Corporation
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Tri-Continental Corporation
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements
of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Tri-Continental Corporation (the Fund) at December 31, 2012, the results of its operations,
the changes in its net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred
to as financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, transfer agent and brokers, provides a reasonable basis for our opinion.
The statement of changes in net assets and the financial highlights of the Fund for the periods ended December 31, 2011 and prior were audited by another independent registered public accounting firm whose report dated February 22, 2012
expressed an unqualified opinion on those statements and highlights.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 21, 2013
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Tri-Continental Corporation
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Federal Income Tax Information
(Unaudited)
The Fund hereby
designates the following tax attributes for in the fiscal year ended December 31, 2012.
Tax Designations
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Qualified Dividend Income
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54.60
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%
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Dividends Received Deduction
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53.05
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%
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Qualified Dividend Income.
For taxable, non-corporate shareholders, the percentage of ordinary income dividends
paid during the fiscal year that represents qualified dividend income subject to reduced tax rates under the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Dividend Received Deduction.
The percentage of ordinary income dividends paid during the fiscal year that qualifies for the corporate dividend received deduction.
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Tri-Continental Corporation
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