Table of Contents

As filed with the Securities and Exchange Commission on September 30, 2016.

Registration Nos. 2-99356

811-04367

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM N-1A

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

  
  Pre-Effective Amendment No.        
  Post-Effective Amendment No. 276   

and/or

 

REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

  
  Amendment No. 280   

(Check Appropriate Box or Boxes)

 

 

COLUMBIA FUNDS SERIES TRUST I

(Exact Name of Registrant as Specified in Charter)

 

 

225 Franklin Street, Boston, Massachusetts 02110

(Address of Principal Executive Officers) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (800) 345-6611

 

 

Christopher O. Petersen, Esq.

c/o Columbia Management Investment Advisers, LLC

225 Franklin Street

Boston, Massachusetts 02110

(Name and Address of Agent for Service)

 

 

Approximate Date of Proposed Public Offering: October 12, 2016

It is proposed that this filing will become effective (check appropriate box)

 

Immediately upon filing pursuant to paragraph (b)
On October 3, 2016 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
On (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
On (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

 

This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

This Post-Effective Amendment relates solely to the Registrant’s Active Portfolios ® Multi-Manager Directional Alternatives Fund series. Information contained in the Registrant’s Registration Statement relating to any other series of the Registrant is neither amended nor superseded hereby.

 

 

 


Table of Contents
Prospectus
October 3, 2016
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
    
Class   Ticker Symbol
Class A Shares   CDAAX
* Class A shares of the Active Portfolio Funds are offered only to certain eligible investors through certain wrap fee programs sponsored and/or managed by Ameriprise Financial, Inc. or its affiliates.
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Table of Contents

3

3

3

4

5

13

13

14

14

14

15

15

15

18

30

34

37

38

39

39

40

40

42

42

43

47

47

48

49

50

50

51

53
2 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund
Investment Objective
Active Portfolios ®   Multi-Manager Directional Alternatives Fund (the Fund) seeks capital appreciation.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
    
Shareholder Fees (fees paid directly from your investment)
  Class A
Maximum sales charge (load) imposed on purchases (as a % of offering price) None
Maximum deferred sales charge (load) imposed on redemptions (as a % of the lower of the original purchase price or current net asset value) None
    
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
  Class A
Management fees 1.60%
Distribution and/or service (12b-1) fees 0.25%
Other expenses (a)  
Dividend expenses and borrowing costs on securities sold short 0.85%
Remainder of other expenses 0.31%
Total annual Fund operating expenses 3.01%
(a) Other expenses are based on estimated amounts for the Fund’s current fiscal year.
Example
The following example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example illustrates the hypothetical expenses that you would incur over the time periods indicated, and assumes that:
you invest $10,000 in the Fund for the periods indicated,
your investment has a 5% return each year, and
the Fund’s total annual operating expenses remain the same as shown in the Annual Fund Operating Expenses table above.
Although your actual costs may be higher or lower, based on the assumptions listed above, your costs (based on estimated Fund expenses) would be:
    
  1 year 3 years
Class A (whether or not shares are redeemed) $304 $930
Portfolio Turnover
The Fund may pay transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. Because the Fund is newly organized, portfolio turnover information is not available as of the date of this prospectus.
Prospectus 2016 3

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
Principal Investment Strategies
The Fund pursues its investment objective by allocating the Fund’s assets among different asset managers that collectively use various investment styles and strategies, including, for example, fundamental (bottom-up), macroeconomic (top-down), and/or quantitative methods or models, across different markets. The Fund’s investment manager, Columbia Management Investment Advisers, LLC (Columbia Management or the Investment Manager), and investment subadvisers (Subadvisers) each provide day-to-day portfolio management for a portion of the Fund’s assets, or sleeve of the Fund. The Investment Manager and the Subadvisers employ a variety of alternative investment strategies, involving strategies, techniques and practices that are designed to seek capital appreciation through participation in the broad equity and other markets while hedging overall market exposure relative to traditional long-only equity strategies. Generally, the Fund seeks to provide higher risk-adjusted returns with lower volatility compared to equity markets.
Columbia Management is responsible for providing day-to-day portfolio management of a sleeve and is also responsible for oversight of the Subadvisers. The Fund’s Subadvisers are Boston Partners Global Investors, Inc., dba Boston Partners (“Boston Partners”), AQR Capital Management, LLC (“AQR”) and Analytic Investors, LLC (“Analytic”). Columbia Management, subject to the oversight of the Fund’s Board of Trustees, determines the allocation of the Fund’s assets to each sleeve, and may change these allocations at any time. Columbia Management and the Subadvisers act independently of each other and use their own methodologies for selecting investments.
The Subadvisers’ investment strategies and techniques may involve seeking to exploit disparities or inefficiencies in markets, geographical areas and companies; seeking to take advantage of security mispricings or anticipated price movements; seeking to hedge equity or fixed income market exposure; and/or seeking to benefit from cyclical themes and relationships and/or special situations and events (such as mergers, acquisitions or reorganizations). Such strategies are subject to risks that are relatively unrelated to the broad equity and fixed income markets.
The Fund may invest in foreign and domestic equity securities (including common stock, preferred stock, convertible securities, depositary receipts, limited partnership interests, trust certificates, real estate investment trusts (REITs), equity participations, warrants and rights), and debt instruments (including U.S. government obligations, sovereign and quasi-sovereign debt obligations, corporate bonds, Eurodollar and Yankee dollar instruments, notes and debentures), as well as derivative instruments (including futures, forwards, and swaps), and exchange-traded funds (ETFs) and other investment companies.
The Fund may take both long and short positions in all of its investments. A long position is an ordinary purchase of a currency, security, or other asset. When the Fund takes a short position, it typically sells a currency, security, instrument or other asset that it has borrowed in anticipation of a decline in the price of the asset. To complete the short sale transaction, the Fund buys back the same security or other asset in the market and returns it to the lender. If the price of the security or other asset falls sufficiently, the Fund will make money. If it instead increases in price, the Fund will lose money. Similarly, the Fund may also take long and short positions in a derivative instrument. A long position in a derivative instrument will benefit from an increase in the price of the underlying instrument. A short position in a derivative instrument will benefit from a decrease in price of the underlying instrument and will lose value if the price of the underlying instrument increases. A sleeve may at any time have either a net long exposure or a net short exposure to markets, and neither the sleeves nor the Fund’s portfolio as a whole will be managed to maintain any fixed net long or net short market exposure. Actual long and short exposures will vary over time based on factors such as market movements and assessments of market conditions.
The Fund may invest in early stage companies and initial public offerings. The Fund may invest in companies of any market capitalization and may invest without limitation in foreign securities or instruments and currencies, including investments in emerging market instruments. The Fund may invest in debt instruments of any maturity and does not seek to maintain a particular dollar-weighted average maturity. A bond is issued with a specific maturity date, which is the date when the issuer must pay back the bond’s principal (face value). Bond maturities range from less than 1 year to more than 30 years. Typically, the longer a bond’s maturity, the more price risk the Fund and the Fund’s investors face as interest rates rise, but the Fund could receive a higher yield in return for that longer maturity and higher interest rate risk. The Fund may invest in debt instruments of any credit quality, including investments that are
4 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
rated below investment-grade or, if unrated, deemed by the Investment Manager or applicable Subadviser, as the case may be, to be of comparable quality (commonly referred to as “high yield” instruments or “junk” bonds). The Fund may also engage in repurchase agreements and reverse repurchase agreements.
It is anticipated that the Fund will make substantial use of derivatives, including both exchange-traded and over-the-counter (OTC) instruments. The Fund may invest in forward contracts (including forward foreign currency contracts and forward interest rate agreements), futures (including currency futures, equity futures, index futures, interest rate futures, and other bond futures), options (including options on futures, indexes, currencies, equities and interest rates), swaps (including credit default swaps, interest rate swaps, equity swaps, index swaps, swaps on equity and bond futures, cross-currency swaps, portfolio and total return swaps, and contracts for difference (CFDs)), and options on swaps (commonly known as swaptions). The Fund may use these derivatives in an effort to implement the Fund’s strategy, to produce incremental earnings and enhance total return, to hedge existing positions, to increase market or credit exposure (including using derivatives as a substitute for the purchase or sale of the underlying security or other asset), to manage certain investment risks and/or as a substitute for the purchase or sale of securities or currencies, and/or to change the Fund’s effective duration. One or more of the strategies used by the Fund may result in leveraged exposure in general and to one or more specific asset classes.
The Fund expects to hold a significant amount of cash, U.S. Treasury securities, money market instruments (which may include investments in one or more affiliated or unaffiliated money market funds or similar vehicles), other high-quality or short-term investments, or other liquid assets to meet its segregation obligations as a result of its investment in derivatives.
Each sleeve manager’s investment strategy may involve the frequent trading of portfolio securities.
The Fund is non-diversified, which means that it can invest a greater percentage of its assets in the securities of fewer issuers than can a diversified fund.
Principal Risks
An investment in the Fund involves risks, including those described below. There is no assurance that the Fund will achieve its investment objective and you may lose money . The value of the Fund’s holdings may decline, and the Fund’s net asset value (NAV) and share price may go down. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Active Management Risk. Due to its active management, the Fund could underperform its benchmark index and/or other funds with similar investment objectives and/or strategies.
Allocation Risk. Because the Fund uses an asset allocation strategy in pursuit of its investment objective, there is a risk that the Fund's allocation among asset classes, investments, managers, strategies and/or investment styles will cause the Fund's shares to lose value or cause the Fund to underperform other funds with similar investment objectives and/or strategies, or that the investments themselves will not produce the returns expected.
Alternative Strategies Investment Risk. An investment in alternative investment strategies (Alternative Strategies), whether through direct investment or through one or more underlying funds that use Alternative Strategies, involves risks, which may be significant. Alternative Strategies may include strategies, instruments or other assets, such as derivatives, that seek investment returns uncorrelated with the broad equity and fixed income/debt markets, as well as those providing exposure to other markets (such as commodity markets), including but not limited to absolute (positive) return strategies. Alternative Strategies may fail to achieve their desired performance, market or other exposure, or their returns (or lack thereof) may be more correlated with the broad equity and/or fixed income/debt markets than was anticipated, and the Fund may lose money. Some Alternative Strategies may be considered speculative.
Commodity Futures Trading Commission (CFTC) Regulatory Risk. The Fund does not qualify for an exemption from registration as a “commodity pool” under rules of the Commodity Exchange Act (the CEA). Accordingly, the Fund is a commodity pool under the CEA and the Investment Manager is registered as a “commodity pool operator” under the CEA. The Fund is subject to dual regulation by the SEC and the CFTC. Compliance with the CFTC’s regulatory requirements could increase Fund expenses, adversely affecting the Fund’s total return.
Prospectus 2016 5

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
Convertible Securities Risk. Convertible securities are subject to the usual risks associated with debt instruments, such as interest rate risk and credit risk. Convertible securities also react to changes in the value of the common stock into which they convert, and are thus subject to market risk. The Fund may also be forced to convert a convertible security at an inopportune time, which may decrease the Fund’s return.
Counterparty Risk. Counterparty risk is the risk that a counterparty to a financial instrument held by the Fund or by a special purpose or structured vehicle invested in by the Fund may become insolvent or otherwise fail to perform its obligations. As a result, the Fund may obtain no or limited recovery of its investment, and any recovery may be significantly delayed.
Credit Risk. Credit risk is the risk that the value of debt instruments may decline if the issuer thereof defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations, such as making payments to the Fund when due. Rating agencies assign credit ratings to certain fixed-income securities to indicate their credit risk. Lower quality or unrated securities held by the Fund may present increased credit risk as compared to higher-rated securities. Non-investment grade fixed-income instruments (commonly called “high-yield” or “junk”) may be subject to greater price fluctuations and are more likely to experience a default than investment grade fixed-income instruments and therefore may expose the Fund to increased credit risk. If the Fund purchases unrated securities, or if the ratings of securities held by the Fund are lowered after purchase, the Fund will depend on analysis of credit risk more heavily than usual.
Depositary Receipts Risk. Depositary receipts are receipts issued by a bank or trust company reflecting ownership of underlying securities issued by foreign companies. Some foreign securities are traded in the form of American Depositary Receipts (ADRs). Depositary receipts involve risks similar to the risks associated with investments in foreign securities, including those associated with investing in the particular country of an issuer, which may be related to the particular political, regulatory, economic, social and other conditions or events, including, for example, military confrontations, war and terrorism, occurring in the country and fluctuations in its currency, as well as market risk tied to the underlying foreign company. In addition, ADR holders may have limited voting rights, may not have the same rights afforded typical company stockholders in the event of a corporate action such as an acquisition, merger or rights offering and may experience difficulty in receiving company stockholder communications.
Derivatives Risk. Derivatives may involve significant risks. Derivatives are financial instruments with a value in relation to, or derived from, the value of an underlying asset(s) or other reference, such as an index, rate or other economic indicator (each an underlying reference). Derivatives may include those that are privately placed or otherwise exempt from SEC registration, including certain Rule 144A eligible securities. Derivatives could result in Fund losses if the underlying reference does not perform as anticipated. Use of derivatives is a highly specialized activity that can involve investment techniques, risks, and tax planning different from those associated with more traditional investment instruments. A Fund’s derivatives strategy may not be successful and use of certain derivatives could result in substantial, potentially unlimited, losses to the Fund regardless of the Fund’s actual investment. A relatively small movement in the price, rate or other economic indicator associated with the underlying reference may result in substantial loss for the Fund. Derivatives may be more volatile than other types of investments. The value of derivatives may be influenced by a variety of factors, including national and international political and economic developments. Potential changes to the regulation of the derivatives markets may make derivatives more costly, may limit the market for derivatives, or may otherwise adversely affect the value or performance of derivatives. Derivatives can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Forward Contracts Risk. A forward contract is an over-the-counter derivative transaction between two parties to buy or sell a specified amount of an underlying reference at a specified price (or rate) on a specified date in the future. Forward contracts are negotiated on an individual basis and are not standardized or traded on exchanges. The market for forward contracts is substantially unregulated and can experience lengthy periods of illiquidity, unusually high trading volume and other negative impacts, such as political intervention, which may result in volatility or disruptions in such markets. A relatively small price movement in a forward contract may result in substantial losses to the Fund, exceeding the amount of the margin paid. Forward contracts can increase the Fund’s
6 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Futures Contracts Risk. A futures contract is an exchange-traded derivative transaction between two parties in which a buyer (holding the “long” position) agrees to pay a fixed price (or rate) at a specified future date for delivery of an underlying reference from a seller (holding the “short” position). The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Certain futures contract markets are highly volatile, and futures contracts may be illiquid. Futures exchanges may limit fluctuations in futures contract prices by imposing a maximum permissible daily price movement. The Fund may be disadvantaged if it is prohibited from executing a trade outside the daily permissible price movement. At or prior to maturity of a futures contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in futures contract prices. The liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the futures market could be reduced. Because of the low margin deposits normally required in futures trading, it is possible that the Fund may employ a high degree of leverage in the portfolio. As a result, a relatively small price movement in a futures contract may result in substantial losses to the Fund, exceeding the amount of the margin paid. For certain types of futures contracts, losses are potentially unlimited. Futures markets are highly volatile and the use of futures may increase the volatility of the Fund’s net asset value. Futures contracts executed (if any) on foreign exchanges may not provide the same protection as U.S. exchanges. Futures contracts can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Options Risk. Options are derivatives that give the purchaser the option to buy (call) or sell (put) an underlying reference from or to a counterparty at a specified price (the strike price) on or before an expiration date. By investing in options, the Fund is exposed to the risk that it may be required to buy or sell the underlying reference at a disadvantageous price on or before the expiration date. Options may involve economic leverage, which could result in greater volatility in price movement. The Fund's losses could be significant, and are potentially unlimited for certain types of options. Options may be traded on a securities exchange or in the over-the-counter market. At or prior to maturity of an options contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in options prices. Options can increase the Fund’s risk exposure to underlying references and their attendant risks such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Swaps Risk. In a typical swap transaction, two parties agree to exchange the return earned on a specified underlying reference for a fixed return or the return from another underlying reference during a specified period of time. Swaps may be difficult to value and may be illiquid. Swaps could result in Fund losses if the underlying asset or reference does not perform as anticipated. Swaps create significant investment leverage such that a relatively small price movement in a swap may result in immediate and substantial losses to the Fund. The Fund may only close out a swap with its particular counterparty, and may only transfer a position with the consent of that counterparty. Certain swaps, such as short swap transactions and total return swaps, have the potential for unlimited losses, regardless of the size of the initial investment. Swaps can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, inflation risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Swaptions Risk. A swaption is an options contract on a swap agreement. These transactions give a party the right (but not the obligation) to enter into new swap agreements or to shorten, extend, cancel or otherwise modify an existing swap agreement at some designated future time on specified terms, in return for payment of the purchase price (the “premium”) of the option. A Fund may write (sell) and purchase put and call
Prospectus 2016 7

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
swaptions to the same extent it may make use of standard options on securities or other instruments. The writer of the contract receives the premium and bears the risk of unfavorable changes in the market value on the underlying swap agreement. Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars.
Emerging Market Securities Risk. Securities issued by foreign governments or companies in emerging market countries, such as China, Russia and certain countries in Eastern Europe, the Middle East, Asia, Latin America or Africa, are more likely to have greater exposure to the risks of investing in foreign securities that are described in Foreign Securities Risk. In addition, emerging market countries are more likely to experience instability resulting, for example, from rapid changes or developments in social, political, economic or other conditions. Their economies are usually less mature and their securities markets are typically less developed with more limited trading activity (i.e., lower trading volumes and less liquidity) than more developed countries. Emerging market securities tend to be more volatile than securities in more developed markets. Many emerging market countries are heavily dependent on international trade and have fewer trading partners, which makes them more sensitive to world commodity prices and economic downturns in other countries, and some have a higher risk of currency devaluations.
Foreign Currency Risk. The performance of the Fund may be materially affected positively or negatively by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund invests a significant percentage of its assets in foreign securities or other assets denominated in currencies other than the U.S. dollar.
Foreign Securities Risk. Investments in or exposure to foreign securities involve certain risks not associated with investments in or exposure to securities of U.S. companies. Foreign securities subject the Fund to the risks associated with investing in the particular country of an issuer, including the political, regulatory, economic, social, diplomatic and other conditions or events (including, for example, military confrontations, war and terrorism), occurring in the country or region, as well as risks associated with less developed custody and settlement practices. Foreign securities may be more volatile and less liquid than securities of U.S. companies, and are subject to the risks associated with potential imposition of economic and other sanctions against a particular foreign country, its nationals or industries or businesses within the country. In addition, foreign governments may impose withholding or other taxes on the Fund’s income, capital gains or proceeds from the disposition of foreign securities, which could reduce the Fund’s return on such securities.
Frequent Trading Risk.  The portfolio managers may actively and frequently trade investments in the Fund's portfolio to carry out its investment strategies. Frequent trading of investments increases the possibility that the Fund, as relevant, will realize taxable capital gains (including short-term capital gains, which are generally taxable to shareholders at higher rates than long-term capital gains for U.S. federal income tax purposes), which could reduce the Fund's after-tax return. Frequent trading can also mean higher brokerage and other transaction costs, which could reduce the Fund's return. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s performance.
Geographic Focus Risk. The Fund may be particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund.
High-Yield Investments Risk. Securities and other debt instruments held by the Fund that are rated below investment grade (commonly called “high-yield” or “junk” bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk. Interest rate risk is the risk of losses attributable to changes in interest rates. In general, if prevailing interest rates (which are at historic lows) rise, the values of fixed-income instruments tend to fall, and if interest rates fall, the values of fixed-income instruments tend to rise. Changes in the value of a fixed-income instrument usually will not affect the amount of income the Fund receives from it but will generally affect the value of the Fund's shares. In general, the longer the maturity or duration of a fixed-income instrument, the greater its sensitivity to changes in interest rates. Interest rate declines also may increase prepayments of debt obligations,
8 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
which, in turn, would increase prepayment risk. Similarly, a period of rising interest rates may negatively impact the Fund’s performance. Actions by governments and central banking authorities can result in increases in interest rates. Such actions may negatively affect the value of fixed-income instruments held by the Fund, resulting in a negative impact on the Fund's performance and NAV. Any interest rate increases could cause the value of the Fund’s investments in fixed-income instruments to decrease. Rising interest rates may prompt redemptions from the Fund, which may force the Fund to sell investments at a time when it is not advantageous to do so, which could result in losses.
Investing in Other Funds Risk. The Fund’s investment in other funds (affiliated and/or unaffiliated funds, including exchange-traded funds (ETFs)) subjects the Fund to the investment performance (positive or negative) and risks of the underlying funds in direct proportion to the Fund’s investment therein. In addition, investments in ETFs have unique characteristics, including, but not limited to, the expense structure and additional expenses associated with investing in ETFs. The performance of the underlying funds could be adversely affected if other investors in the same underlying funds make relatively large investments or redemptions in such underlying funds. The Fund, and its shareholders, indirectly bear a portion of the expenses of any funds in which the Fund invests. Because the expenses and costs of an underlying fund are shared by its investors, redemptions by other investors in the underlying funds could result in decreased economies of scale and increased operating expenses for such underlying fund. The Investment Manager may have potential conflicts of interest in selecting affiliated underlying funds for investment by the Fund because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds, as well as a potential conflict in selecting affiliated funds over unaffiliated funds. Also, to the extent that the Fund is constrained/restricted from investing (or investing further) in a particular underlying fund for one or more reasons (e.g., underlying fund capacity constraints or regulatory restrictions) or if the Fund chooses to sell its investment in an underlying fund because of poor investment performance or for other reasons, the Fund may have to invest in other underlying funds, including less desirable funds – from a strategy or investment performance standpoint – which could have a negative impact on Fund performance. In addition, Fund performance could be negatively impacted if an appropriate alternate underlying fund does not present itself in a timely manner or at all.
Issuer Risk. An issuer in which the Fund invests or to which it has exposure may perform poorly, and the value of its securities may therefore decline, which would negatively affect the Fund’s performance. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters or other events, conditions or factors.
Leverage Risk. Leverage occurs when the Fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Use of leverage can produce volatility and may exaggerate changes in the net asset value of Fund shares and in the return on the Fund’s portfolio, which may increase the risk that the Fund will lose more than it has invested. If the Fund uses leverage, through the purchase of particular instruments such as derivatives, the Fund may experience capital losses that exceed the net assets of the Fund. Because short sales involve borrowing securities and then selling them, the Fund’s short sales effectively leverage the Fund’s assets. The Fund's assets that are used as collateral to secure the Fund's obligations to return the securities sold short may decrease in value while the short positions are outstanding, which may force the Fund to use its other assets to increase the collateral. Leverage can create an interest expense that may lower the Fund's overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that a leveraging strategy will be successful.
Liquidity Risk. Liquidity risk is the risk associated with any event, circumstance, or characteristic of an investment or market that negatively impacts the Fund’s ability to sell, or realize the proceeds from the sale of, an investment at a desirable time or price. Liquidity risk may arise because of, for example, a lack of marketability of the investment, which means that when seeking to sell its portfolio investments, the Fund could find that selling is more difficult than anticipated, especially during times of high market volatility. Decreases in the number of financial institutions, including banks and broker-dealers, willing to make markets (match up sellers and buyers) in the Fund’s investments or decreases in their capacity or willingness to trade such investments may increase the Fund’s exposure to this risk. The debt market has experienced considerable growth, and financial institutions making markets in instruments
Prospectus 2016 9

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
purchased and sold by the Fund (e.g., bond dealers) have been subject to increased regulation. The impact of that growth and regulation on the ability and willingness of financial institutions to engage in trading or “making a market” in such instruments remains unsettled. Certain types of investments, such as lower-rated securities or those that are purchased and sold in over-the-counter markets, may be especially subject to liquidity risk. Securities or other assets in which the Fund invests may be traded in the over-the-counter market rather than on an exchange and therefore may be more difficult to purchase or sell at a fair price, which may have a negative impact on the Fund’s performance. Market participants attempting to sell the same or a similar instrument at the same time as the Fund could exacerbate the Fund’s exposure to liquidity risk. The Fund may have to accept a lower selling price for the holding, sell other, liquid or more liquid, investments that it might otherwise prefer to hold (thereby increasing the proportion of the Fund’s investments in less liquid or illiquid securities), or forego another more appealing investment opportunity. Certain investments that were liquid when purchased by the Fund may later become illiquid, particularly in times of overall economic distress. Changing regulatory, market or other conditions or environments (for example, the interest rate or credit environments) may also adversely affect the liquidity and the price of the Fund's investments. Judgment plays a larger role in valuing illiquid or less liquid investments as compared to valuing liquid or more liquid investments. Price volatility may be higher for illiquid or less liquid investments as a result of, for example, the relatively less frequent pricing of such securities (as compared to liquid or more liquid investments). Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. Overall market liquidity and other factors can lead to an increase in Fund redemptions, which may negatively impact Fund performance and NAV, including, for example, if the Fund is forced to sell investments in a down market.
Market Risk. Market risk refers to the possibility that the market values of securities or other investments that the Fund holds will fall, sometimes rapidly or unpredictably, or fail to rise. An investment in the Fund could lose money over short or long periods.
Money Market Fund Investment Risk. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. If the liquidity of a money market fund’s portfolio deteriorates below certain levels, the money market fund may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up to 2% on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Investment Manager would otherwise redeem shares. In addition to the fees and expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests, including affiliated money market funds. The Fund will also be exposed to the investment risks of the money market fund. To the extent the Fund invests in instruments such as derivatives, the Fund may hold investments, which may be significant, in money market fund shares to cover its obligations resulting from its investments in derivatives. Money market funds and the securities they invest in are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money market funds.
Mortgage- and Other Asset-Backed Securities Risk.  The value of any mortgage-backed and other asset-backed securities held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements; or the market's assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than obligations guaranteed by the U.S.
10 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
Government. Mortgage- and other asset-backed securities are subject to prepayment risk, which is the possibility that the underlying mortgage or other asset may be refinanced or prepaid prior to maturity during periods of declining or low interest rates, causing the Fund to have to reinvest the money received in securities that have lower yields. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more sensitive to changes in interest rates.
Multi-Adviser Risk. The Fund has multiple advisory firms that each manage a portion of the Fund’s net assets on a daily basis. Each adviser makes investment decisions independently from the other adviser(s). It is possible that the security selection process of one adviser will not complement or may conflict or even contradict that of the other adviser(s), including making off-setting trades that have no net effect to the Fund, but which may increase Fund expenses. As a result, the Fund's exposure to a given security, industry, sector or market capitalization could be smaller or larger than if the Fund were managed by a single adviser, which could adversely affect the Fund's performance.
New Fund Risk. Investors in newly formed funds bear the risk that the fund may not be successful in implementing its investment strategy, and may not employ a successful investment strategy, either of which could result in the fund being liquidated at any time without shareholder approval and/or at a time that may not be favorable for certain shareholders. Such a liquidation could have negative tax consequences for shareholders.
Non-Diversified Fund Risk.  The Fund is non-diversified, which generally means that it will invest a greater percentage of its total assets in the securities of fewer issuers than a “diversified” fund. This increases the risk that a change in the value of any one investment held by the Fund could affect the overall value of the Fund more than it would affect that of a diversified fund holding a greater number of investments. Accordingly, the Fund's value will likely be more volatile than the value of a more diversified fund.
Preferred Stock Risk. Preferred stock is a type of stock that generally pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. The most significant risks associated with investments in preferred stock include issuer risk, market risk and interest rate risk ( i.e. , the risk of losses attributable to changes in interest rates).
Quantitative Model Risk. Investments selected using quantitative methods may perform differently from the market as a whole. There can be no assurance that these methodologies will enable the Fund to achieve its objective.
Real Estate-Related Investment Risk. Investments in real estate investment trusts (REITs) and in securities of other companies (wherever organized) principally engaged in the real estate industry subject the Fund to, among other things, risks similar to those of direct investments in real estate and the real estate industry in general. These include risks related to general and local economic conditions, possible lack of availability of financing and changes in interest rates or property values. REITs are entities that either own properties or make construction or mortgage loans, and also may include operating or finance companies. The value of interests in a REIT may be affected by, among other factors, changes in the value of the underlying properties owned by the REIT, changes in the prospect for earnings and/or cash flow growth of the REIT itself, defaults by borrowers or tenants, market saturation, decreases in market rates for rents, and other economic, political, or regulatory matters affecting the real estate industry, including REITs. REITs and similar non-U.S. entities depend upon specialized management skills, may have limited financial resources, may have less trading volume in their securities, and may be subject to more abrupt or erratic price movements than the overall securities markets. REITs are also subject to the risk of failing to qualify for favorable tax treatment under the Internal Revenue Code of 1986, as amended. Some REITs (especially mortgage REITs) are affected by risks similar to those associated with investments in debt securities including changes in interest rates and the quality of credit extended.
Regulatory Risk — Alternative Investments. Legal, tax, and regulatory developments may adversely affect the Fund and its investments. The regulatory environment for the Fund and certain of its investments is evolving, and changes in the regulation of investment funds, their managers, and their trading activities and capital markets, or a regulator’s disagreement with the Fund’s or others’ interpretation of the application of certain regulations, may adversely affect the ability of the Fund to pursue its investment strategy, its ability to obtain leverage and financing, and the value of
Prospectus 2016 11

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
investments held by the Fund. There has been an increase in governmental, as well as self-regulatory, scrutiny of the investment industry in general and the alternative investment industry in particular. It is impossible to predict what, if any, changes in regulations may occur, but any regulation that restricts the ability of the Fund or any underlying funds or other investments to trade in securities or other instruments or the ability of the Fund or underlying funds to employ, or brokers and other counterparties to extend, credit in their trading (as well as other regulatory changes that result) could have a material adverse impact on the Fund’s performance.
Repurchase Agreements  Risk. Repurchase agreements are agreements in which the seller of a security to the Fund agrees to repurchase that security from the Fund at a mutually agreed upon price and time. Repurchase agreements carry the risk that the counterparty may not fulfill its obligations under the agreement. This could cause the Fund's income and the value of your investment in the Fund to decline.
Reverse Repurchase Agreements Risk. Reverse repurchase agreements are agreements in which a Fund sells a security to a counterparty, such as a bank or broker-dealer, in return for cash and agrees to repurchase that security at a mutually agreed upon price and time. Reverse repurchase agreements carry the risk that the market value of the security sold by the Fund may decline below the price at which the Fund must repurchase the security. Reverse repurchase agreements also may be viewed as a form of borrowing, and borrowed assets used for investment creates leverage risk. Leverage can create an interest expense that may lower the Fund's overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that this strategy will be successful.
Sector Risk. At times, the Fund may have a significant portion of its assets invested in securities of companies conducting business in a related group of industries within an economic sector. Companies in the same economic sector may be similarly affected by economic, regulatory, political or market events or conditions, which may make the Fund more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly. Generally, the more broadly the Fund invests, the more it spreads risk and potentially reduces the risks of loss and volatility.
Short Positions Risk. The Fund may establish short positions which introduce more risk to the Fund than long positions (where the Fund owns the instrument or other asset) because the maximum sustainable loss on an instrument or other asset purchased (held long) is limited to the amount paid for the instrument or other asset plus the transaction costs, whereas there is no maximum price of the shorted instrument or other asset when purchased in the open market. Therefore, in theory, short positions have unlimited risk. The Fund’s use of short positions in effect “leverages” the Fund. Leverage potentially exposes the Fund to greater risks of loss due to unanticipated market movements, which may magnify losses and increase the volatility of returns. To the extent the Fund takes a short position in a derivative instrument or other asset, this involves the risk of a potentially unlimited increase in the value of the underlying instrument or other asset.
Small- and Mid-Cap Company Securities Risk. Investments in small- and mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid and more volatile than the securities of larger companies.
Sovereign Debt Risk. A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.
Special Situations Risk. Securities of companies that are involved in an initial public offering or a major corporate event, such as a business consolidation or restructuring, may be exposed to heightened risk because of the high degree of uncertainty that can be associated with such events. Securities issued in initial public offerings often are issued by companies that are in the early stages of development, have a history of little or no revenues and may operate at a loss following the offering. It is possible that there will be no active trading market for the securities
12 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
after the offering, and that the market price of the securities may be subject to significant and unpredictable fluctuations. Certain “special situation” investments are investments in securities or other instruments that are determined to be illiquid or lacking a readily ascertainable fair value. Certain special situation investments prevent ownership interests therein from being withdrawn until the special situation investment, or a portion thereof, is realized or deemed realized, which may negatively impact Fund performance. Investing in special situations may have a magnified effect on the performance of funds with small amounts of assets.
U.S. Government Obligations Risk. While U.S. Treasury obligations are backed by the “full faith and credit” of the U.S. Government, such securities are nonetheless subject to credit risk (i.e., the risk that the U.S. Government may be, or be perceived to be, unable or unwilling to honor its financial obligations, such as making payments). Securities issued or guaranteed by federal agencies or authorities and U.S. Government-sponsored instrumentalities or enterprises may or may not be backed by the full faith and credit of the U.S. Government.
Value Securities Risk. Value securities are securities of companies that may have experienced, for example, adverse business, industry or other developments or may be subject to special risks that have caused the securities to be out of favor and, in turn, potentially undervalued. The market value of a portfolio security may not meet the portfolio manager's perceived value assessment of that security, or may decline in price, even though the portfolio manager(s) believe(s) the securities are already undervalued. There is also a risk that it may take longer than expected for the value of these investments to rise to the portfolio manager’s perceived value. In addition, value securities, at times, may not perform as well as growth securities or the stock market in general, and may be out of favor with investors for varying periods of time.
Volatility Risk. The Fund may have investments that appreciate or decrease significantly in value over short periods of time. This may cause the Fund’s NAV per share to experience significant increases or declines in value over short periods of time, however, all investments long- or short-term are subject to risk of loss.
Warrants and Rights Risk. Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants are subject to the risks associated with the security underlying the warrant, including market risk. Warrants may expire unexercised and are subject to liquidity risk which may result in Fund losses. Rights are available to existing shareholders of an issuer to enable them to maintain proportionate ownership in the issuer by being able to buy newly issued shares. Rights allow shareholders to buy the shares below the current market price. Holders can exercise the rights and purchase the stock, sell the rights or let them expire. Their value, and their risk of investment loss, is a function of that of the underlying security.
Performance Information
The Fund is new as of the date of this prospectus and therefore performance information is not available.
When available, the Fund intends to compare its performance to the performance of the HFRX Equity Hedge Index, the performance of the Wilshire Liquid Alternative Equity Hedge Index and the performance of the MSCI World Index (Net).
When available, updated performance information can be obtained by calling toll-free 800.345.6611 or visiting columbiathreadneedle.com/us.
Fund Management
Investment Manager: Columbia Management Investment Advisers, LLC
Subadviser: Boston Partners
    
Portfolio Manager   Title   Role with Fund   Managed Fund Since
Joseph Feeney, Jr., CFA   Co-Chief Executive Officer and Chief Investment Officer of Boston Partners   Co-manager   October 2016
Eric Connerly, CFA   Director of Quantitative Research of Boston Partners   Co-manager   October 2016
Prospectus 2016 13

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Summary of the Fund (continued)
Subadviser: AQR Capital Management, LLC (AQR)
    
Portfolio Manager   Title   Role with Fund   Managed Fund Since
Michelle Aghassi, Ph.D.   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Andrea Frazzini, Ph.D., M.S.   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Jacques Friedman, M.S.   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Hoon Kim, Ph.D.,M.B.A., CFA   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Subadviser: Analytic
    
Portfolio Manager   Title   Role with Fund   Managed Fund Since
Harindra de Silva, CFA   President/Portfolio Manager of Analytic   Co-manager   October 2016
Dennis Bein, CFA   Chief Investment Officer /Portfolio Manager of Analytic   Co-manager   October 2016
David Krider, CFA   Portfolio Manager of Analytic   Co-manager   October 2016
Purchase and Sale of Fund Shares
Class A shares of the Fund are available only to certain eligible investors through certain wrap fee programs sponsored and/or managed by Ameriprise Financial, Inc. or its affiliates. Fund shares are sold in accordance with the terms of the account through which you invested in the Fund and redeemed in accordance with the terms of the Fund’s prospectus. There is a $500 minimum initial investment and no minimum additional investment.
Tax Information
The Fund intends to distribute net investment income and net realized capital gains, if any, to shareholders. These distributions are generally taxable to you as ordinary income, qualified dividend income or capital gains, unless you are investing through a tax-advantaged account, such as a 401(k) plan or an IRA. If you are investing through a tax-advantaged account, you may be taxed upon withdrawals from that account.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies — including Columbia Management Investment Advisers, LLC (the Investment Manager), Columbia Management Investment Distributors, Inc. (the Distributor) and Columbia Management Investment Services Corp. (the Transfer Agent) — may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your financial advisor to recommend the Fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
14 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund
Investment Objective
Active Portfolios ®   Multi-Manager Directional Alternatives Fund (the Fund) seeks capital appreciation. The Fund’s investment objective is not a fundamental policy and may be changed by the Fund’s Board of Trustees without shareholder approval. Because any investment involves risk, there is no assurance the Fund’s objective will be achieved.
Principal Investment Strategies
The Fund pursues its investment objective by allocating the Fund’s assets among different asset managers that collectively use various investment styles and strategies, including, for example, fundamental (bottom-up), macroeconomic (top-down), and/or quantitative methods or models, across different markets. The Fund’s investment manager, Columbia Management Investment Advisers, LLC (Columbia Management or the Investment Manager), and investment subadvisers (Subadvisers) each provide day-to-day portfolio management for a portion of the Fund’s assets, or sleeve of the Fund. The Investment Manager and the Subadvisers employ a variety of alternative investment strategies, involving strategies, techniques and practices that are designed to seek capital appreciation through participation in the broad equity and other markets while hedging overall market exposure relative to traditional long-only equity strategies. Generally, the Fund seeks to provide higher risk-adjusted returns with lower volatility compared to equity markets.
Columbia Management is responsible for providing day-to-day portfolio management of a sleeve and is also responsible for oversight of the Subadvisers. The Fund’s Subadvisers are Boston Partners Global Investors, Inc., dba Boston Partners (“Boston Partners”), AQR Capital Management, LLC (“AQR”) and Analytic Investors, LLC (“Analytic”). Columbia Management, subject to the oversight of the Fund’s Board of Trustees, determines the allocation of the Fund’s assets to each sleeve, and may change these allocations at any time. Columbia Management and the Subadvisers act independently of each other and use their own methodologies for selecting investments.
The Subadvisers’ investment strategies and techniques may involve seeking to exploit disparities or inefficiencies in markets, geographical areas and companies; seeking to take advantage of security mispricings or anticipated price movements; seeking to hedge equity or fixed income market exposure; and/or seeking to benefit from cyclical themes and relationships and/or special situations and events (such as mergers, acquisitions or reorganizations). Such strategies are subject to risks that are relatively unrelated to the broad equity and fixed income markets.
The Fund may invest in foreign and domestic equity securities (including common stock, preferred stock, convertible securities, depositary receipts, limited partnership interests, trust certificates, real estate investment trusts (REITs), equity participations, warrants and rights), and debt instruments (including U.S. government obligations, sovereign and quasi-sovereign debt obligations, corporate bonds, asset-backed securities, mortgage-backed securities, Eurodollar and Yankee dollar instruments, notes and debentures), as well as derivative instruments (including futures, forwards, and swaps), and exchange-traded funds (ETFs) and other investment companies.
The Fund may take both long and short positions in all of its investments. A long position is an ordinary purchase of a currency, security, or other asset. When the Fund takes a short position, it typically sells a currency, security, instrument or other asset that it has borrowed in anticipation of a decline in the price of the asset. To complete the short sale transaction, the Fund buys back the same security or other asset in the market and returns it to the lender. If the price of the security or other asset falls sufficiently, the Fund will make money. If it instead increases in price, the Fund will lose money. Similarly, the Fund may also take long and short positions in a derivative instrument. A long position in a derivative instrument will benefit from an increase in the price of the underlying instrument. A short position in a derivative instrument will benefit from a decrease in price of the underlying instrument and will lose value if the price of the underlying instrument increases. A sleeve may at any time have either a net long exposure or a net short exposure to markets, and neither the sleeves nor the Fund’s portfolio as a whole will be managed to maintain any fixed net long or net short market exposure. Actual long and short exposures will vary over time based on factors such as market movements and assessments of market conditions.
The Fund may invest in early stage companies and initial public offerings. The Fund may invest in companies of any market capitalization and may invest without limitation in foreign securities or instruments and currencies, including investments in emerging market instruments. The Fund may invest in debt instruments of any maturity and does not
Prospectus 2016 15

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
seek to maintain a particular dollar-weighted average maturity. A bond is issued with a specific maturity date, which is the date when the issuer must pay back the bond’s principal (face value). Bond maturities range from less than 1 year to more than 30 years. Typically, the longer a bond’s maturity, the more price risk the Fund and the Fund’s investors face as interest rates rise, but the Fund could receive a higher yield in return for that longer maturity and higher interest rate risk. The Fund may invest in debt instruments of any credit quality, including investments that are rated below investment-grade or, if unrated, deemed by the Investment Manager or applicable Subadviser, as the case may be, to be of comparable quality (commonly referred to as “high yield” instruments or “junk” bonds). The Fund may also engage in repurchase agreements and reverse repurchase agreements.
It is anticipated that the Fund will make substantial use of derivatives, including both exchange-traded and over-the-counter (OTC) instruments. The Fund may invest in forward contracts (including forward foreign currency contracts and forward interest rate agreements), futures (including currency futures, equity futures, index futures, interest rate futures, and other bond futures), options (including options on futures, indexes, currencies, equities and interest rates), swaps (including credit default swaps, interest rate swaps, equity swaps, index swaps, swaps on equity and bond futures, cross-currency swaps, portfolio and total return swaps, and contracts for difference (CFDs)), and options on swaps (commonly known as swaptions). The Fund may use these derivatives in an effort to implement the Fund’s strategy, to produce incremental earnings and enhance total return, to hedge existing positions, to increase market or credit exposure (including using derivatives as a substitute for the purchase or sale of the underlying security or other asset), to manage certain investment risks and/or as a substitute for the purchase or sale of securities or currencies, and/or to change the Fund’s effective duration. One or more of the strategies used by the Fund may result in leveraged exposure in general and to one or more specific asset classes.
The Fund expects to hold a significant amount of cash, U.S. Treasury securities, money market instruments (which may include investments in one or more affiliated or unaffiliated money market funds or similar vehicles), other high-quality or short-term investments, or other liquid assets to meet its segregation obligations as a result of its investment in derivatives.
Each sleeve manager’s investment strategy may involve the frequent trading of portfolio securities.
The Fund is non-diversified, which means that it can invest a greater percentage of its assets in the securities of fewer issuers than can a diversified fund.
Boston Partners - Subadviser Sleeve
Boston Partners uses a hedged strategy. Boston Partners actively invests in long positions in stocks identified by Boston Partners as undervalued and takes short positions in stocks that Boston Partners has identified as overvalued. The cash proceeds from short sales are invested in short-term cash instruments to produce a return on such proceeds just below the federal funds rate. Boston Partners invests, both long and short, in equity securities issued by large-, mid-, small and “micro” cap companies, as well as other instruments that are convertible into equity securities. Selling securities short is a form of leverage. The principal derivative instruments in which Boston Partners invests are futures, swaps and options on securities, securities indices or currencies, options on these futures, forward foreign currency contracts and interest rate or currency swaps. Boston Partners’ investments in derivative instruments may be leveraged and result in losses exceeding the amounts invested. Boston Partners’ sleeve of the Fund is not designed to be market neutral.
Boston Partners determines the size of each long or short position by analyzing the tradeoff between the attractiveness of each position and its impact on the risk of the overall portfolio. Boston Partners seeks to construct a portfolio with less volatility than the U.S. equity market by selling short securities to offset a portion of its long positions. Selection of individual securities to be held long or sold short will be based on a mix of quantitative techniques and fundamental security analysis. Boston Partners selects stocks on the basis of three criteria: value, fundamental business strength and momentum. Boston Partners examines various factors in determining the value characteristics of such issuers including price-to-book value ratios and price-to-earnings ratios. These value characteristics are examined in the context of the issuer’s operating and financial fundamentals such as return on equity, earnings growth and cash flow. Boston Partners selects securities for its sleeve of the Fund based on a continuous study of trends in industries and companies, earnings power and growth and other investment criteria.
16 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Boston Partners will sell a stock when it no longer meets one or more investment criteria, either through obtaining target value or due to an adverse change in fundamentals or business momentum. Each holding has a target valuation established at purchase, which Boston Partners constantly monitors and adjusts as appropriate.
AQR – Subadviser Sleeve
AQR seeks to provide three different sources of return: 1) the potential gains from its long-short equity positions, 2) overall exposure to equity markets, and 3) the tactical variation of its net exposure to equity markets. AQR seeks to provide higher risk-adjusted returns with lower volatility compared to global equity markets. AQR invests its sleeve primarily in equity instruments and equity related and/or derivative instruments. Equity instruments include common stock, preferred stock, rights, warrants and depositary receipts. Equity related and/or derivative instruments include equity swaps (both single-name and index swaps), equity index futures and exchange-traded funds and similar pooled investment vehicles.
In managing its sleeve of the Fund, AQR takes long positions in those instruments that, based on proprietary quantitative models, AQR forecasts to be undervalued and likely to increase in price, and takes short positions in those instruments that AQR forecasts to be overvalued and likely to decrease in price.
AQR uses a set of value, momentum, quality and other economic indicators to generate an investment portfolio based on AQR’s global security selection and asset allocation models.
Value indicators identify investments that appear cheap based on fundamental measures, often as a result of distress or lack of favor. Examples of value indicators include using price-to-earnings and price-to-book ratios for choosing individual equities.
Momentum indicators identify investments with strong recent performance. Examples of momentum indicators include simple price momentum for choosing individual equities.
Quality indicators identify stable companies in good business health, including those with strong profitability and stable earnings.
In addition to these three main indicators, AQR may use a number of additional quantitative indicators based on the Adviser’s proprietary research. AQR may add or modify the economic indicators employed in selecting portfolio holdings from time to time.
Applying these indicators, AQR may take long or short positions in industries, sectors and companies that it believes are attractive or unattractive. In the aggregate AQR expects to have net long exposure to the equity markets, which AQR may adjust over time. When AQR determines that market conditions are unfavorable, AQR may reduce its long market exposure. Similarly, when AQR determines that market conditions are favorable, AQR may increase its long market exposure. AQR’s sleeve of the Fund is not designed to be market neutral and AQR will use a tactical allocation overlay to manage the sleeve’s beta exposure to broad global markets through the use of equity swaps, equity index futures and forward foreign currency contracts. AQR may, but is not required to, hedge the sleeve’s exposure to foreign currencies using forward foreign currency contracts or futures.
Analytic - Subadviser Sleeve
Analytic primarily invests its sleeve in equity securities such as common stocks, warrants and rights. Analytic employs a strategy of taking long and short positions in equity securities publicly traded in the U.S. and in developed foreign markets. Analytic evaluates various stock attributes (e.g., price-to-earnings ratio, return-on-assets, and momentum) in an attempt to create a portfolio of stocks with attractive risk characteristics and strong fundamentals. Analytic buys securities “long” that, based on multiple quantitative models, Analytic believes will outperform the equity market, and sells securities “short” that Analytic believes will underperform the equity market. Analytic’s long-short exposure will vary over time based on Analytic’s assessments of market conditions and other factors. Analytic may increase its sleeve’s short equity exposure when it believes that market conditions are particularly favorable for a short strategy, such as during periods of modest gains and moderate volatility in the global equity markets, or when the market is considered to be overvalued. Analytic’s sleeve of the Fund is not designed to be market neutral.
Prospectus 2016 17

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Columbia Management — Liquidity Strategy Sleeve
Columbia Management is responsible for managing cash flows into and out of the Fund resulting from the purchase and redemption of Fund shares. Columbia Management typically invests this sleeve in U.S. government securities, high-quality, short-term debt instruments, including investments in affiliated or unaffiliated money market funds, ETFs and futures (including index futures).
Principal Risks
An investment in the Fund involves risks, including those described below. There is no assurance that the Fund will achieve its investment objective and you may lose money . The value of the Fund’s holdings may decline, and the Fund’s net asset value (NAV) and share price may go down. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Active Management Risk. The Fund is actively managed and its performance therefore will reflect, in part, the ability of the portfolio managers to make investment decisions that will achieve the Fund’s investment objective. Due to its active management, the Fund could underperform its benchmark index and/or other funds with similar investment objectives and/or strategies.
Allocation Risk. Because the Fund uses an asset allocation strategy in pursuit of its investment objective, there is a risk that the Fund's allocation among asset classes, investments, managers, strategies and/or investment styles will cause the Fund's shares to lose value or cause the Fund to underperform other funds with similar investment objectives and/or strategies, or that the investments themselves will not produce the returns expected.
Alternative Strategies Investment Risk. An investment in alternative investment strategies (Alternative Strategies), whether through direct investment or through one or more underlying funds that use Alternative Strategies, involves risks, which may be significant. Alternative Strategies may include strategies, instruments or other assets, such as derivatives, that seek investment returns uncorrelated with the broad equity and fixed income/debt markets, as well as those providing exposure to other markets (such as commodity markets), including but not limited to absolute (positive) return strategies. Alternative Strategies may fail to achieve their desired performance, market or other exposure, or their returns (or lack thereof) may be more correlated with the broad equity and/or fixed income/debt markets than was anticipated, and the Fund may lose money. Some Alternative Strategies may be considered speculative.
Commodity Futures Trading Commission (CFTC) Regulatory Risk. The Fund does not qualify for an exemption from registration as a “commodity pool” under rules of the Commodity Exchange Act (the CEA). Accordingly, the Fund is a commodity pool under the CEA and the Investment Manager is registered as a “commodity pool operator” under the CEA. The Fund is subject to dual regulation by the SEC and the CFTC. Compliance with the CFTC’s regulatory requirements could increase Fund expenses, adversely affecting the Fund’s total return.
Convertible Securities Risk. Convertible securities are subject to the usual risks associated with debt instruments, such as interest rate risk (the risk of losses attributable to changes in interest rates) and credit risk (the risk that the issuer of a debt instrument will default or otherwise become unable, or be perceived to be unable or unwilling, to honor a financial obligation, such as making payments to the Fund when due). Convertible securities also react to changes in the value of the common stock into which they convert, and are thus subject to market risk (the risk that the market values of securities or other investments that the Fund holds will fall, sometimes rapidly or unpredictably, or fail to rise). Because the value of a convertible security can be influenced by both interest rates and the common stock's market movements, a convertible security generally is not as sensitive to interest rates as a similar debt instrument, and generally will not vary in value in response to other factors to the same extent as the underlying common stock. In the event of a liquidation of the issuing company, holders of convertible securities would typically be paid before the company's common stockholders but after holders of any senior debt obligations of the company. The Fund may be forced to convert a convertible security before it otherwise would choose to do so, which may decrease the Fund's return.
Counterparty Risk. The risk exists that a counterparty to a financial instrument held by the Fund or by a special purpose or structured vehicle in which the Fund invests may become insolvent or otherwise fail to perform its obligations due to financial difficulties, including making payments to the Fund. The Fund may obtain no or limited
18 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
recovery in a bankruptcy or other organizational proceedings, and any recovery may be significantly delayed. Transactions that the Fund enters into may involve counterparties in the financial services sector and, as a result, events affecting the financial services sector may cause the Fund’s share value to fluctuate.
Credit Risk. Credit risk is the risk that the value of debt instruments may decline if the issuer thereof defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations, such as making payments to the Fund when due. Various factors could affect the actual or perceived willingness or ability of the issuer to make timely interest or principal payments, including changes in the financial condition of the issuer or in general economic conditions. Rating agencies assign credit ratings to certain fixed-income instruments to indicate their credit risk. Lower quality or unrated securities held by the Fund may present increased credit risk as compared to higher-rated securities. Non-investment grade fixed-income instruments (commonly called “high-yield” or “junk”) may be subject to greater price fluctuations and are more likely to experience a default than investment grade fixed-income instruments and therefore may expose the Fund to increased credit risk. If the Fund purchases unrated fixed-income securities, or if the ratings of such investments held by the Fund are lowered after purchase, the Fund will depend on analysis of credit risk more heavily than usual.
Depositary Receipts Risk. Depositary receipts are receipts issued by a bank or trust company reflecting ownership of underlying securities issued by foreign companies. Some foreign securities are traded in the form of American Depositary Receipts (ADRs). Depositary receipts involve risks similar to the risks associated with investments in foreign securities, including those associated with investing in the particular country of an issuer, which may be related to the particular political, regulatory, economic, social and other conditions or events, including, for example, military confrontations, war and terrorism, occurring in the country and fluctuations in its currency, as well as market risk tied to the underlying foreign company. In addition, ADR holders may have limited voting rights, may not have the same rights afforded typical company stockholders in the event of a corporate action such as an acquisition, merger or rights offering and may experience difficulty in receiving company stockholder communications.
Derivatives Risk. Derivatives may involve significant risks. Derivatives are financial instruments, traded on an exchange or in the over-the-counter (OTC) markets, with a value in relation to, or derived from, the value of an underlying asset(s) (such as a security, commodity or currency) or other reference, such as an index, rate or other economic indicator (each an underlying reference). Derivatives may include those that are privately placed or otherwise exempt from SEC registration, including certain Rule 144A eligible securities. Derivatives could result in Fund losses if the underlying references do not perform as anticipated. Use of derivatives is a highly specialized activity that can involve investment techniques, risks, and tax planning different from those associated with more traditional investment instruments. A Fund’s derivatives strategy may not be successful and use of certain derivatives could result in substantial, potentially unlimited, losses to the Fund regardless of the Fund’s actual investment. A relatively small movement in the price, rate or other economic indicator associated with the underlying reference may result in substantial loss for the Fund. Derivatives may be more volatile than other types of investments. Derivatives can increase the Fund’s risk exposure to underlying references and their attendant risks, including the risk of an adverse credit event associated with the underlying reference (credit risk), the risk of adverse movement in the value, price or rate of the underlying reference (market risk), the risk of adverse movement in the value of underlying currencies (foreign currency risk) and the risk of adverse movement in underlying interest rates (interest rate risk). Derivatives may expose the Fund to additional risks, including the risk of loss due to a derivative position that is imperfectly correlated with the underlying reference it is intended to hedge or replicate (correlation risk), the risk that a counterparty will fail to perform as agreed (counterparty risk), the risk that a hedging strategy may fail to mitigate losses, and may offset gains (hedging risk), the risk that losses may be greater than the amount invested (leverage risk), the risk that the Fund may be unable to sell an investment at an advantageous time or price (liquidity risk), the risk that the investment may be difficult to value (pricing risk), and the risk that the price or value of the investment fluctuates significantly over short periods of time (volatility risk). The value of derivatives may be influenced by a variety of factors, including national and international political and economic developments. Potential changes to the regulation of the derivatives markets may make derivatives more costly, may limit the market for derivatives, or may otherwise adversely affect the value or performance of derivatives.
Prospectus 2016 19

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Derivatives Risk – Forward Contracts Risk. A forward contract is an over-the-counter derivative transaction between two parties to buy or sell a specified amount of an underlying reference at a specified price (or rate) on a specified date in the future. Forward contracts are negotiated on an individual basis and are not standardized or traded on exchanges. The market for forward contracts is substantially unregulated (there is no limit on daily price movements and speculative position limits are not applicable). The principals who deal in certain forward contract markets are not required to continue to make markets in the underlying references in which they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been periods during which certain participants in forward contract markets have refused to quote prices for certain underlying references or have quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at which they were prepared to sell. At or prior to maturity of a forward contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in forward contract prices. The liquidity of the markets for forward contracts depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the market for forwards could be reduced. A relatively small price movement in a forward contract may result in substantial losses to the Fund, exceeding the amount of the margin paid. Forward contracts can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
A forward foreign currency contract is a derivative (forward contract) in which the underlying reference is a country's or region’s currency. The Fund may agree to buy or sell a country's or region’s currency at a specific price on a specific date in the future. These instruments may fall in value (sometimes dramatically) due to foreign market downswings or foreign currency value fluctuations, subjecting the Fund to foreign currency risk (the risk that Fund performance may be negatively impacted by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund exposes a significant percentage of its assets to currencies other than the U.S. dollar). Unanticipated changes in the currency markets could result in reduced performance for the Fund. When the Fund converts its foreign currencies into U.S. dollars, it may incur currency conversion costs due to the spread between the prices at which it may buy and sell various currencies in the market.
A forward interest rate agreement is a derivative whereby the buyer locks in an interest rate at a future settlement date. If the interest rate on the settlement date exceeds the lock rate, the buyer pays the seller the difference between the two rates (based on the notional value of the agreement). If the lock rate exceeds the interest rate on the settlement date, the seller pays the buyer the difference between the two rates (based on the notional value of the agreement). The Fund may act as a buyer or a seller.
Derivatives Risk – Futures Contracts Risk. A futures contract is an exchange-traded derivative transaction between two parties in which a buyer (holding the “long” position) agrees to pay a fixed price (or rate) at a specified future date for delivery of an underlying reference from a seller (holding the “short” position). The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Certain futures contract markets are highly volatile, and futures contracts may be illiquid. Futures exchanges may limit fluctuations in futures contract prices by imposing a maximum permissible daily price movement. The Fund may be disadvantaged if it is prohibited from executing a trade outside the daily permissible price movement. At or prior to maturity of a futures contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in futures contract prices. The liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the futures market could be reduced. Positions in futures contracts may be closed out only on the exchange on which they were entered into or through a linked exchange, and no secondary market exists for such contracts. Futures positions are marked to market each day and variation margin payment must be paid to or by the Fund. Because of the low margin deposits normally required in futures trading, it is possible that the Fund may employ a high degree of leverage in the portfolio. As a result, a relatively small price movement in a futures contract may result in substantial losses to the Fund, exceeding the amount of the margin paid. For certain types of futures contracts, losses are potentially unlimited. Futures markets are highly volatile and the use of futures may increase the volatility of the Fund’s net asset value. Futures contracts executed (if any) on foreign exchanges may not provide the same protection as U.S. exchanges. Futures contracts can increase the Fund’s risk exposure to underlying
20 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
A bond (or debt instrument) future is a derivative that is an agreement for the contract holder to buy or sell a bond or other debt instrument, a basket of bonds or other debt instrument, or the bonds or other debt instruments in an index on a specified date at a predetermined price. The buyer (long position) of a bond future is obliged to buy the underlying reference at the agreed price on expiry of the future.
A currency future , also an FX future or foreign exchange future, is a derivative that is an agreement to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date.
An equity future is a derivative that is an agreement for the contract holder to buy or sell a specified amount of an individual equity, a basket of equities or the securities in an equity index on a specified date at a predetermined price.
An interest rate future is a derivative that is an agreement whereby the buyer and seller agree to the future delivery of an interest-bearing instrument on a specific date at a pre-determined price. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures.
Derivatives Risk – Options Risk. Options are derivatives that give the purchaser the option to buy (call) or sell (put) an underlying reference from or to a counterparty at a specified price (the strike price) on or before an expiration date. The Fund may purchase or write (i.e., sell) put and call options on an underlying reference it is otherwise permitted to invest in. By investing in options, the Fund is exposed to the risk that it may be required to buy or sell the underlying reference at a disadvantageous price on or before the expiration date. If the Fund sells a put option, the Fund may be required to buy the underlying reference at a strike price that is above market price, resulting in a loss. If the Fund sells a call option, the Fund may be required to sell the underlying reference at a strike price that is below market price, resulting in a loss. If the Fund sells a call option that is not covered (it does not own the underlying reference), the Fund's losses are potentially unlimited. Options may involve economic leverage, which could result in greater volatility in price movement. Options may be traded on a securities exchange or in the over-the-counter market. At or prior to maturity of an options contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in options prices. Options can increase the Fund’s risk exposure to underlying references and their attendant risks such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Swaps Risk. In a typical swap transaction, two parties agree to exchange the return earned on a specified underlying reference for a fixed return or the return from another underlying reference during a specified period of time. Swaps may be difficult to value and may be illiquid. Swaps could result in Fund losses if the underlying asset or reference does not perform as anticipated. Swaps create significant investment leverage such that a relatively small price movement in a swap may result in immediate and substantial losses to the Fund. The Fund may only close out a swap with its particular counterparty, and may only transfer a position with the consent of that counterparty. Certain swaps, such as short swap transactions and total return swaps, have the potential for unlimited losses, regardless of the size of the initial investment. Swaps can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, inflation risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Contracts for differences are swap arrangements in which the parties agree that their return (or loss) will be based on the relative performance of two different groups or baskets of securities or other instruments. Often, one or both baskets will be an established securities index. The Fund’s return will be based on changes in value of theoretical long futures positions in the securities comprising one basket (with an aggregate face value equal to the notional amount of the contract for differences) and theoretical short futures positions in the securities comprising the other basket. The Fund also may use actual long and short futures positions and achieve similar
Prospectus 2016 21

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
  market exposure by netting the payment obligations of the two contracts. If the short basket outperforms the long basket, the Fund will realize a loss – even in circumstances when the securities in both the long and short baskets appreciate in value.
A credit default swap (including a swap on a credit default index, sometimes referred to as a credit default swap index) is a derivative and special type of swap where one party pays, in effect, an insurance premium through a stream of payments to another party in exchange for the right to receive a specified return upon the occurrence of a particular credit event by one or more third parties, such as bankruptcy, default or a similar event. A credit default swap may be embedded within a structured note or other derivative instrument. Credit default swaps enable an investor to buy or sell protection against such a credit event (such as an issuer’s bankruptcy, restructuring or failure to make timely payments of interest or principal). Credit default swap indices are indices that reflect the performance of a basket of credit default swaps and are subject to the same risks as credit default swaps. If such a default were to occur, any contractual remedies that the Fund may have may be subject to bankruptcy and insolvency laws, which could delay or limit the Fund's recovery. Thus, if the counterparty under a credit default swap defaults on its obligation to make payments thereunder, as a result of its bankruptcy or otherwise, the Fund may lose such payments altogether, or collect only a portion thereof, which collection could involve costs or delays. The Fund’s return from investment in a credit default swap index may not match the return of the referenced index. Further, investment in a credit default swap index could result in losses if the referenced index does not perform as expected. Unexpected changes in the composition of the index may also affect performance of the credit default swap index. If a referenced index has a dramatic intraday move that causes a material decline in the Fund’s net assets, the terms of the Fund’s credit default swap index may permit the counterparty to immediately close out the transaction. In that event, the Fund may be unable to enter into another credit default swap index or otherwise achieve desired exposure, even if the referenced index reverses all or a portion of its intraday move.
An interest rate swap is a derivative in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate (or vice versa) or from one floating rate to another. Interest rate swaps can be based on various measures of interest rates, including LIBOR, swap rates, treasury rates and foreign interest rates.
Portfolio and total return swaps are derivative swap transactions in which one party agrees to pay the other party an amount equal to the total return of a defined underlying reference during a specified period of time. In return, the other party would make periodic payments based on a fixed or variable interest rate or on the total return of a different underlying reference.
Derivatives Risk – Swaptions Risk. A swaption is an options contract on a swap agreement. These transactions give a party the right (but not the obligation) to enter into new swap agreements or to shorten, extend, cancel or otherwise modify an existing swap agreement at some designated future time on specified terms, in return for payment of the purchase price (the “premium”) of the option. A Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The writer of the contract receives the premium and bears the risk of unfavorable changes in the market value on the underlying swap agreement. Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars.
Emerging Market Securities Risk. Securities issued by foreign governments or companies in emerging market countries, such as China, Russia and certain countries in Eastern Europe, the Middle East, Asia, Latin America or Africa, are more likely to have greater exposure to the risks of investing in foreign securities that are described in Foreign Securities Risk. In addition, emerging market countries are more likely to experience instability resulting, for example, from rapid changes or developments in social, political, economic or other conditions. Their economies are usually less mature and their securities markets are typically less developed with more limited trading activity ( i.e. , lower trading volumes and less liquidity) than more developed countries. Emerging market securities tend to be more volatile than securities in more developed markets. Many emerging market countries are heavily dependent on international trade and have fewer trading partners, which makes them more sensitive to world commodity prices and
22 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
economic downturns in other countries. Some emerging market countries have a higher risk of currency devaluations, and some of these countries may experience periods of high inflation or rapid changes in inflation rates and may have hostile relations with other countries.
Foreign Currency Risk. The performance of the Fund may be materially affected positively or negatively by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund invests a significant percentage of its assets in foreign securities or other assets denominated in currencies other than the U.S. dollar. Currency rates in foreign countries may fluctuate significantly over short or long periods of time for a number of reasons, including changes in interest rates, imposition of currency controls and economic or political developments in the U.S. or abroad. The Fund may also incur currency conversion costs when converting foreign currencies into U.S. dollars and vice versa.
Foreign Securities Risk. Investments in or exposure to foreign securities involve certain risks not associated with investments in or exposure to securities of U.S. companies. For example, foreign markets can be extremely volatile. Foreign securities may also be less liquid than securities of U.S. companies so that the Fund may, at times, be unable to sell foreign securities at desirable times or prices. Brokerage commissions, custodial costs and other fees are also generally higher for foreign securities. The Fund may have limited or no legal recourse in the event of default with respect to certain foreign securities, including those issued by foreign governments. In addition, foreign governments may impose withholding or other taxes on the Fund’s income, capital gains or proceeds from the disposition of foreign securities, which could reduce the Fund’s return on such securities. In some cases, such withholding or other taxes could potentially be confiscatory. Other risks include: possible delays in the settlement of transactions or in the payment of income; generally less publicly available information about foreign companies; the impact of economic, political, social, diplomatic or other conditions or events (including, for example, military confrontations, war and terrorism), possible seizure, expropriation or nationalization of a company or its assets or the assets of a particular investor or category of investors; accounting, auditing and financial reporting standards that may be less comprehensive and stringent than those applicable to domestic companies; the imposition of economic and other sanctions against a particular foreign country, its nationals or industries or businesses within the country; and the generally less stringent standard of care to which local agents may be held in the local markets. In addition, it may be difficult to obtain reliable information about the securities and business operations of certain foreign issuers. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country’s securities market is, the greater the level of risks. The risks posed by sanctions against a particular foreign country, its nationals or industries or businesses within the country may be heightened to the extent the Fund invests significantly in the affected country or region or in issuers from the affected country that depend on global markets.
Frequent Trading Risk.  The portfolio managers may actively and frequently trade investments in the Fund's portfolio to carry out its investment strategies. Frequent trading of investments increases the possibility that the Fund, as relevant, will realize taxable capital gains (including short-term capital gains, which are generally taxable to shareholders at higher rates than long-term capital gains for U.S. federal income tax purposes), which could reduce the Fund's after-tax return. Frequent trading can also mean higher brokerage and other transaction costs, which could reduce the Fund's return. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s performance.
Geographic Focus Risk. The Fund may be particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. Currency devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund.
High-Yield Investments Risk. Securities and other debt instruments held by the Fund that are rated below investment grade (commonly called “high-yield” or “junk” bonds) and unrated debt instruments of comparable quality tend to be more sensitive to credit risk than higher-rated debt instruments and may experience greater price fluctuations in response to perceived changes in the ability of the issuing entity or obligor to pay interest and principal when due than to changes in interest rates. These investments are generally more likely to experience a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to
Prospectus 2016 23

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
the issuer’s capacity to pay interest and repay principal. These debt instruments typically pay a premium – a higher interest rate or yield – because of the increased risk of loss, including default. High-yield debt instruments may require a greater degree of judgment to establish a price, may be difficult to sell at the time and price the Fund desires, may carry high transaction costs, and also are generally less liquid than higher-rated debt instruments. The ratings provided by third party rating agencies are based on analyses by these ratings agencies of the credit quality of the debt instruments and may not take into account every risk related to whether interest or principal will be timely repaid. In adverse economic and other circumstances, issuers of lower-rated debt instruments are more likely to have difficulty making principal and interest payments than issuers of higher-rated debt instruments.
Interest Rate Risk. Interest rate risk is the risk of losses attributable to changes in interest rates. In general, if prevailing interest rates (which are at historic lows) rise, the values of fixed-income instruments tend to fall, and if interest rates fall, the values of fixed-income instruments tend to rise. Changes in the value of a fixed-income instrument usually will not affect the amount of income the Fund receives from it but will generally affect the value of the Fund's shares. In general, the longer the maturity or duration of a fixed-income instrument, the greater its sensitivity to changes in interest rates. Interest rate declines also may increase prepayments of debt obligations, which, in turn, would increase prepayment risk. Similarly, a period of rising interest rates may negatively impact the Fund’s performance. Actions by governments and central banking authorities can result in increases in interest rates. Such actions may negatively affect the value of fixed-income instruments held by the Fund, resulting in a negative impact on the Fund's performance and NAV. Any interest rate increases could cause the value of the Fund’s investments in fixed-income instruments to decrease. Rising interest rates may prompt redemptions from the Fund, which may force the Fund to sell investments at a time when it is not advantageous to do so, which could result in losses.
Investing in Other Funds Risk. The Fund’s investment in other funds (affiliated and/or unaffiliated funds, including exchange-traded funds (ETFs)) subjects the Fund to the investment performance (positive or negative) and risks of the underlying funds in direct proportion to the Fund’s investment therein. In addition, investments in ETFs have unique characteristics, including, but not limited to, the expense structure and additional expenses associated with investing in ETFs. The performance of the underlying funds could be adversely affected if other investors in the same underlying funds make relatively large investments or redemptions in such underlying funds. The Fund, and its shareholders, indirectly bear a portion of the expenses of any funds in which the Fund invests. Because the expenses and costs of an underlying fund are shared by its investors, redemptions by other investors in the underlying funds could result in decreased economies of scale and increased operating expenses for such underlying fund. These transactions might also result in higher brokerage, tax or other costs for the underlying funds. This risk may be particularly important when one investor owns a substantial portion of the underlying funds. The Investment Manager may have potential conflicts of interest in selecting affiliated underlying funds for investment by the Fund because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds, as well as a potential conflict in selecting affiliated funds over unaffiliated funds. Also, to the extent that the Fund is constrained/restricted from investing (or investing further) in a particular underlying fund for one or more reasons (e.g., underlying fund capacity constraints or regulatory restrictions) or if the Fund chooses to sell its investment in an underlying fund because of poor investment performance or for other reasons, the Fund may have to invest in other underlying funds, including less desirable funds – from a strategy or investment performance standpoint – which could have a negative impact on Fund performance. In addition, Fund performance could be negatively impacted if an appropriate alternate underlying fund does not present itself in a timely manner or at all.
Issuer Risk. An issuer in which the Fund invests or to which it has exposure may perform poorly, and the value of its securities may therefore decline, which would negatively affect the Fund’s performance. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters or other events, conditions or factors.
Leverage Risk. Leverage occurs when the Fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Use of leverage can produce volatility and may exaggerate changes in the net asset value of Fund shares and in the return on the Fund’s portfolio, which may increase the risk that the Fund will lose more than it has invested. The use of leverage may cause the Fund to liquidate portfolio
24 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
positions when it may not be advantageous to do so to satisfy its obligations or to meet any required asset segregation or position coverage requirements. Futures contracts, options on futures contracts, forward contracts and other derivatives can allow the Fund to obtain large investment exposures in return for meeting relatively small margin requirements. As a result, investments in those transactions may be highly leveraged. If the Fund uses leverage, through the purchase of particular instruments such as derivatives, the Fund may experience capital losses that exceed the net assets of the Fund. Because short sales involve borrowing securities and then selling them, the Fund’s short sales effectively leverage the Fund’s assets. The Fund's assets that are used as collateral to secure the Fund's obligations to return the securities sold short may decrease in value while the short positions are outstanding, which may force the Fund to use its other assets to increase the collateral. Leverage can create an interest expense that may lower the Fund's overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund's volatility and risk of loss. There can be no guarantee that a leveraging strategy will be successful.
Liquidity Risk. Liquidity risk is the risk associated with any event, circumstance, or characteristic of an investment or market that negatively impacts the Fund’s ability to sell, or realize the proceeds from the sale of, an investment at a desirable time or price. Liquidity risk may arise because of, for example, a lack of marketability of the investment, which means that when seeking to sell its portfolio investments, the Fund could find that selling is more difficult than anticipated, especially during times of high market volatility. Decreases in the number of financial institutions, including banks and broker-dealers, willing to make markets (match up sellers and buyers) in the Fund’s investments or decreases in their capacity or willingness to trade such investments may increase the Fund’s exposure to this risk. The debt market has experienced considerable growth, and financial institutions making markets in instruments purchased and sold by the Fund (e.g., bond dealers) have been subject to increased regulation. The impact of that growth and regulation on the ability and willingness of financial institutions to engage in trading or “making a market” in such instruments remains unsettled. Certain types of investments, such as lower-rated securities or those that are purchased and sold in over-the-counter markets, may be especially subject to liquidity risk. Securities or other assets in which the Fund invests may be traded in the over-the-counter market rather than on an exchange and therefore may be more difficult to purchase or sell at a fair price, which may have a negative impact on the Fund’s performance. Market participants attempting to sell the same or a similar instrument at the same time as the Fund could exacerbate the Fund’s exposure to liquidity risk. The Fund may have to accept a lower selling price for the holding, sell other, liquid or more liquid, investments that it might otherwise prefer to hold (thereby increasing the proportion of the Fund’s investments in less liquid or illiquid securities), or forego another more appealing investment opportunity. Certain investments that were liquid when purchased by the Fund may later become illiquid, particularly in times of overall economic distress. Changing regulatory, market or other conditions or environments (for example, the interest rate or credit environments) may also adversely affect the liquidity and the price of the Fund's investments. Judgment plays a larger role in valuing illiquid or less liquid investments as compared to valuing liquid or more liquid investments. Price volatility may be higher for illiquid or less liquid investments as a result of, for example, the relatively less frequent pricing of such securities (as compared to liquid or more liquid investments). Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. Overall market liquidity and other factors can lead to an increase in Fund redemptions, which may negatively impact Fund performance and NAV, including, for example, if the Fund is forced to sell investments in a down market.
Market Risk. Market risk refers to the possibility that the market values of securities or other investments that the Fund holds will fall, sometimes rapidly or unpredictably, or fail to rise. The value of Fund investments may fall or fail to rise because of a variety of actual or perceived factors affecting an issuer (e.g., an unfavorable earnings report), the industry or sector in which it operates, or the market as a whole, which may reduce the value of an investment in the Fund. Accordingly, an investment in the Fund could lose money over short or long periods. The market values of the investments the Fund holds can be affected by changes or perceived changes in U.S. or foreign economies and financial markets, and the liquidity of these investments, among other factors.
Money Market Fund Investment Risk. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically $1.00
Prospectus 2016 25

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. If the liquidity of a money market fund’s portfolio deteriorates below certain levels, the money market fund may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up to 2% on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Investment Manager would otherwise redeem shares. In addition to the fees and expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests, including affiliated money market funds. To the extent these fees and expenses, along with the fees and expenses of any other funds in which the Fund may invest, are expected to equal or exceed 0.01% of the Fund’s average daily net assets, they will be reflected in the Annual Fund Operating Expenses set forth in the table under “Fees and Expenses of the Fund.” By investing in a money market fund, the Fund will be exposed to the investment risks of the money market fund in direct proportion to such investment. The money market fund may not achieve its investment objective. The Fund, through its investment in the money market fund, may not achieve its investment objective. To the extent the Fund invests in instruments such as derivatives, the Fund may hold investments, which may be significant, in money market fund shares to cover its obligations resulting from the Fund’s investments in derivatives. Money market funds and the securities they invest in are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money market funds.
Mortgage- and Other Asset-Backed Securities Risk.  The value of any mortgage-backed and other asset-backed securities held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements; or the market's assessment of the quality of underlying assets. Mortgage-backed securities represent interests in, or are backed by, pools of mortgages from which payments of interest and principal (net of fees paid to the issuer or guarantor of the securities) are distributed to the holders of the mortgage-backed securities. Other types of asset-backed securities typically represent interests in, or are backed by, pools of receivables such as credit, automobile, student and home equity loans. Mortgage- and other asset-backed securities can have a fixed or an adjustable rate. Mortgage- and other asset-backed securities are subject to prepayment risk, which is the possibility that the underlying mortgage or other asset may be refinanced or prepaid prior to maturity during periods of declining or low interest rates, causing the Fund to have to reinvest the money received in securities that have lower yields. In addition, the impact of prepayments on the value of mortgage- and other asset-backed securities may be difficult to predict and may result in greater volatility. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making them more volatile and more sensitive to changes in interest rates. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed (i) by the full faith and credit of the U.S. Government (in the case of securities guaranteed by the Government National Mortgage Association) or (ii) by its agencies, authorities, enterprises or instrumentalities (in the case of securities guaranteed by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC)), which are not insured or guaranteed by the U.S. Government (although FNMA and FHLMC may be able to access capital from the U.S. Treasury to meet their obligations under such securities). Mortgage-backed securities issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may be supported by various credit enhancements, such as pool insurance, guarantees issued by governmental entities, letters of credit from a bank or senior/subordinated structures, and may entail greater risk than obligations guaranteed by the U.S. Government, whether or not such obligations are guaranteed by the private issuer.
Multi-Adviser Risk. The Fund has multiple advisory firms that each manage a portion of the Fund’s net assets on a daily basis. Each adviser makes investment decisions independently from the other adviser(s). It is possible that the security selection process of one adviser will not complement or may conflict or even contradict that of the other
26 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
adviser(s), including making off-setting trades that have no net effect to the Fund, but which may increase Fund expenses. As a result, the Fund's exposure to a given security, industry, sector or market capitalization could be smaller or larger than if the Fund were managed by a single adviser, which could adversely affect the Fund's performance.
New Fund Risk. Investors in newly formed funds bear the risk that the fund may not be successful in implementing its investment strategy, and may not employ a successful investment strategy, either of which could result in the fund being liquidated at any time without shareholder approval and/or at a time that may not be favorable for certain shareholders. Such a liquidation could have negative tax consequences for shareholders.
Non-Diversified Fund Risk.  The Fund is non-diversified, which generally means that it will invest a greater percentage of its total assets in the securities of fewer issuers than a “diversified” fund. This increases the risk that a change in the value of any one investment held by the Fund could affect the overall value of the Fund more than it would affect that of a diversified fund holding a greater number of investments. Accordingly, the Fund's value will likely be more volatile than the value of a more diversified fund.
Preferred Stock Risk. Preferred stock is a type of stock that generally pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. The most significant risks associated with investments in preferred stock include issuer risk, market risk and interest rate risk ( i.e. , the risk of losses attributable to changes in interest rates).
Quantitative Model Risk. The Fund may use quantitative methods to select investments. Securities or other investments selected using quantitative methods may perform differently from the market as a whole or from their expected performance for many reasons, including factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. Any errors or imperfections in the Fund portfolio manager’s quantitative analyses or models, or in the data on which they are based, could adversely affect the portfolio manager’s effective use of such analyses or models, which in turn could adversely affect the Fund’s performance. It is not possible or practicable for a manager to factor all relevant, available data into quantitative model forecasts and/or trading decisions. Quantitative managers will use their discretion to determine what data to gather with respect to an investment strategy and what data the models will take into account to produce forecasts that may have an impact on ultimate trading decisions. Shareholders should be aware that there is no guarantee that a quantitative manager will use any specific data or type of data in making trading decisions on behalf of the Fund, nor is there any guarantee that the data actually utilized in generating forecasts or making trading decisions on behalf of the Fund will be the most accurate data available or free from errors. There can be no assurance that these methodologies will enable the Fund to achieve its objective.
Real Estate-Related Investment Risk. Investments in real estate investment trusts (REITs) and in securities of other companies (wherever organized) principally engaged in the real estate industry subject the Fund to, among other things, risks similar to those of direct investments in real estate and the real estate industry in general. These include risks related to general and local economic conditions, possible lack of availability of financing and changes in interest rates or property values. REITs are entities that either own properties or make construction or mortgage loans, and also may include operating or finance companies. The value of interests in a REIT may be affected by, among other factors, changes in the value of the underlying properties owned by the REIT, changes in the prospect for earnings and/or cash flow growth of the REIT itself, defaults by borrowers or tenants, market saturation, decreases in market rates for rents, and other economic, political, or regulatory matters affecting the real estate industry, including REITs. REITs and similar non-U.S. entities depend upon specialized management skills, may have limited financial resources, may have less trading volume in their securities, and may be subject to more abrupt or erratic price movements than the overall securities markets. REITs are also subject to the risk of failing to qualify for favorable tax treatment under the Internal Revenue Code of 1986, as amended. Some REITs (especially mortgage REITs) are affected by risks similar to those associated with investments in debt securities including changes in interest rates and the quality of credit extended.
Prospectus 2016 27

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Regulatory Risk — Alternative Investments. Legal, tax, and regulatory developments may adversely affect the Fund and its investments. The regulatory environment for the Fund and certain of its investments is evolving, and changes in the regulation of investment funds, their managers, and their trading activities and capital markets, or a regulator’s disagreement with the Fund’s or others’ interpretation of the application of certain regulations, may adversely affect the ability of the Fund to pursue its investment strategy, its ability to obtain leverage and financing, and the value of investments held by the Fund. There has been an increase in governmental, as well as self-regulatory, scrutiny of the investment industry in general and the alternative investment industry in particular. It is impossible to predict what, if any, changes in regulations may occur, but any regulation that restricts the ability of the Fund or any underlying funds or other investments to trade in securities or other instruments or the ability of the Fund or underlying funds to employ, or brokers and other counterparties to extend, credit in their trading (as well as other regulatory changes that result) could have a material adverse impact on the Fund’s performance.
Shareholders should understand that the Fund’s business is dynamic and is expected to change over time. Therefore, the Fund and its underlying investments may be subject to new or additional regulatory constraints in the future. Such regulations may have a significant impact on shareholders or the operations of the Fund, including, without limitation, restricting the types of investments the Fund may make, preventing the Fund from exercising its voting rights with regard to certain financial instruments, requiring the Fund to disclose the identity of its investors or otherwise. To the extent the Fund or its underlying investments are subject to such regulation, such regulations may have a detrimental effect on one or more shareholders. Prospective investors are encouraged to consult their own advisors regarding an investment in the Fund.
Repurchase Agreements  Risk. Repurchase agreements are agreements in which the seller of a security to the Fund agrees to repurchase that security from the Fund at a mutually agreed upon price and time. Repurchase agreements carry the risk that the counterparty may not fulfill its obligations under the agreement. This could cause the Fund's income and the value of your investment in the Fund to decline.
Reverse Repurchase Agreements Risk. Reverse repurchase agreements are agreements in which a Fund sells a security to a counterparty, such as a bank or broker-dealer, in return for cash and agrees to repurchase that security at a mutually agreed upon price and time. Reverse repurchase agreements carry the risk that the market value of the security sold by the Fund may decline below the price at which the Fund must repurchase the security. Reverse repurchase agreements also may be viewed as a form of borrowing, and borrowed assets used for investment creates leverage risk. Leverage can create an interest expense that may lower the Fund's overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that this strategy will be successful.
Sector Risk. At times, the Fund may have a significant portion of its assets invested in securities of companies conducting business in a related group of industries within an economic sector. Companies in the same economic sector may be similarly affected by economic, regulatory, political or market events or conditions, which may make the Fund more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly. Generally, the more broadly the Fund invests, the more it spreads risk and potentially reduces the risks of loss and volatility.
Short Positions Risk. The Fund may establish short positions which introduce more risk to the Fund than long positions (where the Fund owns the instrument or other asset) because the maximum sustainable loss on an instrument or other asset purchased (held long) is limited to the amount paid for the instrument or other asset plus the transaction costs, whereas there is no maximum price of the shorted instrument or other asset when purchased in the open market. Therefore, in theory, short positions have unlimited risk. The Fund’s use of short positions in effect “leverages” the Fund. Leverage potentially exposes the Fund to greater risks of loss due to unanticipated market movements, which may magnify losses and increase the volatility of returns. To the extent the Fund takes a short position in a derivative instrument or other asset, this involves the risk of a potentially unlimited increase in the value of the underlying instrument or other asset.
Small- and Mid-Cap Company Securities Risk. Securities of small- and mid-capitalization companies (small- and mid-cap companies) can, in certain circumstances, have a higher potential for gains than securities of larger, more established companies (larger companies) but may also have more risk. For example, small- and mid-cap companies
28 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
may be more vulnerable to market downturns and adverse business or economic events than larger companies because they may have more limited financial resources and business operations. Small- and mid-cap companies are also more likely than larger companies to have more limited product lines and operating histories and to depend on smaller management teams. Securities of small- and mid-cap companies may trade less frequently and in smaller volumes and may be less liquid and fluctuate more sharply in value than securities of larger companies. When the Fund takes significant positions in small- and mid-cap companies with limited trading volumes, the liquidation of those positions, particularly in a distressed market, could be prolonged and result in losses to the Fund. In addition, some small- and mid-cap companies may not be widely followed by the investment community, which can lower the demand for their stocks.
Sovereign Debt Risk. A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.
With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis and that has led to defaults and the restructuring of certain indebtedness to the detriment of debt-holders.
Special Situations Risk. Securities of companies that are involved in an initial public offering or a major corporate event, such as a business consolidation or restructuring, may be exposed to heightened risk because of the high degree of uncertainty that can be associated with such events. Securities issued in initial public offerings often are issued by companies that are in the early stages of development, have a history of little or no revenues and may operate at a loss following the offering. It is possible that there will be no active trading market for the securities after the offering, and that the market price of the securities may be subject to significant and unpredictable fluctuations. Initial public offerings are subject to many of the same risks as investing in companies with smaller market capitalizations. To the extent the Fund determines to invest in initial public offerings, it may not be able to invest to the extent desired, because, for example, only a small portion (if any) of the securities being offered in an initial public offering are available to the Fund. The investment performance of the Fund during periods when it is unable to invest significantly or at all in initial public offerings may be lower than during periods when the Fund is able to do so. Securities purchased in initial public offerings which are sold within 12 months after purchase may result in increased short-term capital gains, which will be taxable to the Fund’s shareholders as ordinary income. Certain “special situation” investments are investments in securities or other instruments that are determined to be illiquid or lacking a readily ascertainable fair value. Certain special situation investments prevent ownership interests therein from being withdrawn until the special situation investment, or a portion thereof, is realized or deemed realized, which may negatively impact Fund performance. Investing in special situations may have a magnified effect on the performance of funds with small amounts of assets.
U.S. Government Obligations Risk. While U.S. Treasury obligations are backed by the “full faith and credit” of the U.S. Government, such securities are nonetheless subject to credit risk ( i.e. , the risk that the U.S. Government may be, or may be perceived to be, unable or unwilling to honor its financial obligations, such as making payments). Securities issued or guaranteed by federal agencies or authorities and U.S. Government-sponsored instrumentalities or enterprises may or may not be backed by the full faith and credit of the U.S. Government. For example, securities issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Federal Home Loan Banks are neither insured nor guaranteed by the U.S. Government. These securities may be supported by the ability to borrow from the U.S. Treasury or only by the credit of the issuing agency, authority, instrumentality or enterprise and, as a result, are subject to greater credit risk than securities issued or guaranteed by the U.S. Treasury.
Value Securities Risk. Value securities are securities of companies that may have experienced, for example, adverse business, industry or other developments or may be subject to special risks that have caused the securities to be out of favor and, in turn, potentially undervalued. The market value of a portfolio security may not meet the portfolio
Prospectus 2016 29

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
manager's perceived value assessment of that security, or may decline in price, even though the portfolio manager(s) believe(s) the securities are already undervalued. There is also a risk that it may take longer than expected for the value of these investments to rise to the portfolio manager’s perceived value. In addition, value securities, at times, may not perform as well as growth securities or the stock market in general, and may be out of favor with investors for varying periods of time.
Volatility Risk. The Fund may have investments that appreciate or decrease significantly in value over short periods of time. This may cause the Fund’s NAV per share to experience significant increases or declines in value over short periods of time, however, all investments long- or short-term are subject to risk of loss.
Warrants and Rights Risk. Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants are subject to the risks associated with the security underlying the warrant, including market risk. Warrants may expire unexercised and subject the Fund to liquidity risk (the risk that it may not be possible for the Fund to liquidate the instrument at an advantageous time or price), which may result in Fund losses. Rights are available to existing shareholders of an issuer to enable them to maintain proportionate ownership in the issuer by being able to buy newly issued shares. Rights allow shareholders to buy the shares below the current market price. Rights are typically short-term instruments that are valued separately and trade in the secondary market during a subscription (or offering) period. Holders can exercise the rights and purchase the stock, sell the rights or let them expire. Their value, and their risk of investment loss, is a function of that of the underlying security.
Additional Investment Strategies and Policies
This section describes certain investment strategies and policies that the Fund may utilize in pursuit of its investment objective and some additional factors and risks involved with investing in the Fund.
Investment Guidelines
As a general matter, and except as specifically described in the discussion of the Fund's principal investment strategies in this prospectus or as otherwise required by the Investment Company Act of 1940, as amended (the 1940 Act), the rules and regulations thereunder and any applicable exemptive relief, whenever an investment policy or limitation states a percentage of the Fund's assets that may be invested in any security or other asset or sets forth a policy regarding an investment standard, compliance with that percentage limitation or standard will be determined solely at the time of the Fund's investment in the security or asset.
Holding Other Kinds of Investments
The Fund may hold investments that are not part of its principal investment strategies. These investments and their risks are described below and/or in the Statement of Additional Information (SAI). The Fund may choose not to invest in certain securities described in this prospectus and in the SAI, although it has the ability to do so. Information on the Fund’s holdings can be found in the Fund’s shareholder reports or by visiting columbiathreadneedle.com/us.
Transactions in Derivatives
The Fund may enter into derivative transactions or otherwise have exposure to derivative transactions through underlying investments. Derivatives are financial contracts whose values are, for example, based on (or “derived” from) traditional securities (such as a stock or bond), assets (such as a commodity like gold or a foreign currency), reference rates (such as the London Interbank Offered Rate (commonly known as LIBOR)) or market indices (such as the Standard & Poor's (S&P) 500 ® Index). The use of derivatives is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Derivatives involve special risks and may result in losses or may limit the Fund's potential gain from favorable market movements. Derivative strategies often involve leverage, which may exaggerate a loss, potentially causing the Fund to lose more money than it would have lost had it invested in the underlying security or other asset directly. The values of derivatives may move in unexpected ways, especially in unusual market conditions, and may result in increased volatility in the value of the derivative and/or the Fund’s shares, among other consequences. The use of derivatives
30 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
may also increase the amount of taxes payable by shareholders holding shares in a taxable account. Other risks arise from the Fund's potential inability to terminate or to sell derivative positions. A liquid secondary market may not always exist for the Fund's derivative positions at times when the Fund might wish to terminate or to sell such positions. Over-the-counter instruments (investments not traded on an exchange) may be illiquid, and transactions in derivatives traded in the over-the-counter market are subject to the risk that the other party will not meet its obligations. The use of derivatives also involves the risks of mispricing or improper valuation and that changes in the value of the derivative may not correlate perfectly with the underlying security, asset, reference rate or index. The Fund also may not be able to find a suitable derivative transaction counterparty, and thus may be unable to engage in derivative transactions when it is deemed favorable to do so, or at all. U.S. federal legislation has been enacted that provides for new clearing, margin, reporting and registration requirements for participants in the derivatives market. These changes could restrict and/or impose significant costs or other burdens upon the Fund’s participation in derivatives transactions. For more information on the risks of derivative investments and strategies, see the SAI.
Affiliated Fund Investing
The Investment Manager or an affiliate serves as investment adviser to funds using the Columbia brand (Columbia Funds), including those that are structured as “fund-of-funds”, and provides asset-allocation services to (i) shareholders by investing in shares of other Columbia Funds, which may include the Fund (collectively referred to in this section as Underlying Funds), and (ii) discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in Underlying Funds. These affiliated products, individually or collectively, may own a significant percentage of the outstanding shares of one or more Underlying Funds, and the Investment Manager seeks to balance potential conflicts of interest between the affiliated products and the Underlying Funds in which they invest. The affiliated products’ investment in the Underlying Funds may have the effect of creating economies of scale, possibly resulting in lower expense ratios for the Underlying Funds, because the affiliated products may own substantial portions of the shares of Underlying Funds. However, redemption of Underlying Fund shares by one or more affiliated products could cause the expense ratio of an Underlying Fund to increase, as its fixed costs would be spread over a smaller asset base. Because of large positions of certain affiliated products, the Underlying Funds may experience relatively large inflows and outflows of cash due to affiliated products’ purchases and sales of Underlying Fund shares. Although the Investment Manager or its affiliate may seek to minimize the impact of these transactions where possible, for example, by structuring them over a reasonable period of time or through other measures, Underlying Funds may experience increased expenses as they buy and sell portfolio securities to manage the cash flow effect related to these transactions. Further, when the Investment Manager or its affiliate structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, those affiliated products, including funds-of-funds, may pay more or less (for purchase activity), or receive more or less (for redemption activity), for shares of the Underlying Funds than if the transactions were executed in one transaction. In addition, substantial redemptions by affiliated products within a short period of time could require the Underlying Fund to liquidate positions more rapidly than would otherwise be desirable, which may have the effect of reducing or eliminating potential gain or causing it to realize a loss. In order to meet such redemptions, an Underlying Fund may be forced to sell its liquid (or more liquid) positions, leaving the Underlying Fund holding, post-redemption, a relatively larger position in illiquid securities (securities that are not readily marketable or that cannot be sold or disposed of in the ordinary course of business, within seven days, at approximately the value at which the holder has valued the security) or less liquid securities. Substantial redemptions may also adversely affect the ability of the Underlying Fund to implement its investment strategy. The Investment Manager or its affiliate also has an economic conflict of interest in determining the allocation of affiliated products’ assets among the Underlying Funds, as it earns different fees from the various Underlying Funds.
Investing in Money Market Funds
The Fund may invest cash in, or hold as collateral for certain investments, shares of registered or unregistered money market funds, including funds advised by the Investment Manager or its affiliates. These funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The Fund and its shareholders indirectly bear a portion of the expenses of any money market fund or other fund in which the Fund may invest.
Prospectus 2016 31

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Lending of Portfolio Securities
The Fund may lend portfolio securities to broker-dealers or other financial intermediaries on a fully collateralized basis in order to earn additional income. The Fund may lose money from securities lending if, for example, it is delayed in or prevented from selling the collateral after the loan is made or recovering the securities loaned or if it incurs losses on the reinvestment of cash collateral.
The Fund currently does not participate in the securities lending program but the Board of Trustees (the Board) may determine to renew participation in the future. For more information on lending of portfolio securities and the risks involved, see the SAI and the annual and semiannual reports to shareholders.
Investing Defensively
The Fund may from time to time take temporary defensive investment positions that may be inconsistent with the Fund’s principal investment strategies in attempting to respond to adverse market, economic, political, social or other conditions, including, without limitation, investing some or all of its assets in money market instruments or shares of affiliated or unaffiliated money market funds or holding some or all of its assets in cash or cash equivalents. The Fund may take such defensive investment positions for as long a period as deemed necessary.
The Fund may not achieve its investment objective while it is investing defensively. Investing defensively may adversely affect Fund performance. During these times, the portfolio managers may make frequent portfolio holding changes, which could result in increased trading expenses and taxes, and decreased Fund performance. See also Investing in Money Market Funds above for more information.
Other Strategic and Investment Measures
The Fund may also from time to time take temporary portfolio positions that may or may not be consistent with the Fund’s principal investment strategies in attempting to respond to adverse market, economic, political, social or other conditions, including, without limitation, investing in derivatives, such as forward contracts, futures contracts, options, structured investments and swaps, for various purposes, including among others, investing in particular derivatives in seeking to reduce investment exposures, or in seeking to achieve indirect investment exposures, to a sector, country, region or currency where the Investment Manager believes such positioning is appropriate. The Fund may take such portfolio positions for as long a period as deemed necessary. While the Fund is so positioned, derivatives could comprise a substantial portion of the Fund’s investments and the Fund may not achieve its investment objective. Investing in this manner may adversely affect Fund performance. During these times, the portfolio managers may make frequent portfolio holding changes, which could result in increased trading expenses and taxes, and decreased Fund performance. For information on the risks of investing in derivatives, see Transactions in Derivatives above.
Portfolio Holdings Disclosure
The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Fund policy generally permits the disclosure of portfolio holdings information on the Fund's website (columbiathreadneedle.com/us) only after a certain amount of time has passed, as described in the SAI.
Purchases and sales of portfolio securities can take place at any time, so the portfolio holdings information available on the Fund's website may not always be current.
32 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
FUNDamentals
Portfolio Holdings Versus the Benchmarks
The Fund does not limit its investments to the securities within its benchmark(s), and it is anticipated that the Fund's holdings will diverge significantly from those of its benchmark(s). In addition, the Fund may invest in securities outside any industry and geographic sectors represented in its benchmark(s). The Fund's weightings in individual securities, and in industry or geographic sectors, may also vary considerably from those of its benchmark(s). In addition, the value of the Fund’s investments may be significantly more volatile than the value of the securities or assets comprising the Fund’s benchmark. The Fund may be exposed to greater risk of loss than a direct investment in the securities or assets comprising the Fund’s benchmark.
eDelivery and Mailings to Households
In order to reduce shareholder expenses, the Fund may, if prior consent has been provided, mail only one copy of the Fund’s prospectus and each annual and semiannual report to those addresses shared by two or more accounts. If you wish to receive separate copies of these documents, call 800.345.6611 or, if your shares are held through a financial intermediary, contact your intermediary directly. Additionally, you may elect to enroll in eDelivery to receive electronic versions of these documents by logging into your account at investor.columbiathreadneedle.com/us.
Cash Flows
The timing and magnitude of cash inflows from investors buying Fund shares could prevent the Fund from always being fully invested. Conversely, the timing and magnitude of cash outflows to shareholders redeeming Fund shares could require the Fund to sell portfolio securities at less than opportune times or to hold ready reserves of uninvested cash in amounts larger than might otherwise be the case to meet shareholder redemptions. Either situation could adversely impact the Fund’s performance.
Understanding Annual Fund Operating Expenses
The Fund’s annual operating expenses, as presented in the Annual Fund Operating Expenses table in the Fees and Expenses of the Fund section of this prospectus, generally are based on estimated expenses for the Fund’s current fiscal period and are expressed as a percentage (expense ratio) of the Fund’s average net assets. The expense ratio reflects current fee arrangements.
FUNDamentals
Other Expenses
“Other expenses” consist of the fees the Fund pays to its custodian, transfer agent, auditors, lawyers and trustees, costs relating to compliance and miscellaneous expenses. These fees include certain sub-transfer agency and shareholder servicing fees. For more information on these fees, see About Class A Shares — Selling and Servicing Agent Compensation.
Fee Waiver/Expense Reimbursement Arrangements
The Investment Manager and certain of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) through August 31, 2018, unless sooner terminated at the sole discretion of the Fund's Board, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s custodian, do not exceed the annual rate of:
    
Active Portfolios ® Multi-Manager Directional Alternatives Fund
Class A 2.29%
Prospectus 2016 33

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Under the agreement, the following fees and expenses are excluded from the Fund’s operating expenses when calculating the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes (including foreign transaction taxes), expenses associated with investment in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Fund’s Board. This agreement may be modified or amended only with approval from all parties.
Obtaining Recent Net Asset Value Per Share
The price you pay or receive when you buy, sell or exchange shares is the Fund's next determined net asset value (or NAV) per share. The Fund calculates the NAV per share at the end of each business day. For additional information on how the Fund calculates its NAV, see Buying, Selling and Exchanging Shares Share Price Determination below.
You may obtain the current NAV of Fund shares at no cost by calling 800.345.6611 or by sending an e-mail to serviceinquiries@columbiathreadneedle.com.
Primary Service Providers
The Fund enters into contractual arrangements (Contracts) with various parties, including, among others, the Investment Manager, the Distributor, the Transfer Agent and the Fund’s custodian. The Fund’s Contracts are solely among the parties thereto. Shareholders are not parties to, or intended to be third-party beneficiaries of, any Contracts. Further, this prospectus, the SAI and any Contracts are not intended to give rise to any agreement, duty, special relationship or other obligation between the Fund and any investor, or give rise to any contractual, tort or other rights in any individual shareholder, group of shareholders or other person, including any right to assert a fiduciary or other duty, enforce the Contracts against the parties or to seek any remedy thereunder, either directly or on behalf of the Fund. Nothing in the previous sentence should be read to suggest any waiver of any rights under federal or state securities laws.
The Investment Manager, the Distributor and the Transfer Agent are all affiliates of Ameriprise Financial, Inc. (Ameriprise Financial). They and their affiliates currently provide key services, including investment advisory, administration, distribution, shareholder servicing and transfer agency services, to the Fund and various other funds, including the Columbia Funds, and are paid for providing these services. These service relationships are described below.
The Investment Manager
Columbia Management Investment Advisers, LLC is located at 225 Franklin Street, Boston, MA 02110 and serves as investment adviser and administrator to the Columbia Funds. The Investment Manager is a registered investment adviser and a wholly-owned subsidiary of Ameriprise Financial. The Investment Manager’s management experience covers all major asset classes, including equity securities, fixed-income securities and money market instruments. In addition to serving as an investment adviser to traditional mutual funds, exchange-traded funds and closed-end funds, the Investment Manager acts as an investment adviser for itself, its affiliates, individuals, corporations, retirement plans, private investment companies and financial intermediaries.
Subject to oversight by the Board, the Investment Manager manages the day-to-day operations of the Fund. The Investment Manager is responsible for the investment management of the Fund, but has delegated certain of its duties, including day-to-day portfolio management of all or a portion of the Fund’s assets to one or more investment subadvisers that determine what securities and other investments the Fund should buy or sell and executes these portfolio transactions. The Investment Manager is also responsible for overseeing the administrative operations of the Fund, including the general supervision of the Fund’s operations, the coordination of the Fund’s other service providers and the provision of related clerical and administrative services.
The SEC has issued an order that permits the Investment Manager, subject to the approval of the Board, to appoint an unaffiliated subadviser or to change the terms of a subadvisory agreement, including fees paid thereunder, for the Fund without first obtaining shareholder approval, thereby avoiding the expense and delays typically associated with
34 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
obtaining shareholder approval. The Investment Manager and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create certain conflicts of interest. When making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, the Investment Manager discloses to the Board the nature of any such material relationships.
With respect to the Fund, the Fund’s Board has approved a subadvisory agreement between the Investment Manager and Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial. At present, Threadneedle is not providing services to the Fund pursuant to the subadvisory agreement.
The Fund pays the Investment Manager a fee for its investment management services, which include investment advisory services and administrative services. The fee is calculated as a percentage of the average daily net assets of the Fund and is paid monthly. The fee is 1.60% of the Fund’s average daily net assets on all assets.
A discussion regarding the basis for the Board approving the investment management services agreement will be available in the Fund's semiannual report to shareholders for the fiscal period ended October 31, 2016.
The Investment Manager has, with the approval of the Board, engaged an investment subadviser(s) to make the day-to-day investment decisions for the Fund. The Investment Manager pays the subadviser(s) for investment advisory services and retains ultimate responsibility (subject to Board oversight) for overseeing any subadviser it engages and for evaluating the Fund’s needs and the subadvisers’ skills and abilities on an ongoing basis. Based on its evaluations, the Investment Manager may at times recommend to the Board that the Fund change, add or terminate one or more subadvisers; continue to retain a subadviser even though the subadviser’s ownership or corporate structure has changed; or materially change a subadvisory agreement with a subadviser. A discussion regarding the basis for the Board approving the adoption of the subadvisory agreement with Boston Partners, AQR and Analytic will be available in the Fund’s semiannual report to shareholders for the fiscal period ended October 31, 2016.
Subadvisers
Boston Partners, which has served as Subadviser to the Fund since October 2016, is an SEC registered investment adviser located at 909 Third Avenue, New York, NY 10022. Boston Partners, subject to the supervision of Columbia Management, provides day-to-day management of a portion of the Fund’s portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Columbia Management. Boston Partners is a wholly owned subsidiary of Robeco Group (“Robeco”), a global investment management company headquartered in Rotterdam, the Netherlands. Robeco is majority owned by ORIX Corporation of Japan.
AQR, which has served as Subadviser to the Fund since October 2016, is located at Two Greenwich Plaza, Greenwich, CT 06830. AQR, subject to the supervision of Columbia Management, provides day-to-day management of a portion of the Fund’s portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Columbia Management. AQR is a registered investment adviser. AQR was organized as a Delaware limited liability company in 1998 and provides investment management services to registered investment companies, collective investment vehicles, private investment partnerships, foreign investment companies and separately managed accounts.
Analytic, which has served as Subadviser to the Fund since October 2016, is located at 555 West Fifth Street Los Angeles, CA 90013. Analytic, subject to the supervision of Columbia Management, provides day-to-day management of a portion of the Fund’s portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Columbia Management. Analytic was formed in 1970 as Analytic Investment Management. In 1985, Analytic was purchased and held as a wholly-owned subsidiary of United Asset Management. In 1996, Analytic acquired TSA Capital and later changed its name to Analytic Investors, Inc. In 2000, United Asset Management was purchased by Old Mutual Asset Management. On December 31, 2012 Analytic completed a successful management buy-back transaction with its former parent company, Old Mutual Asset Management. It is anticipated that Wells Capital Management, Inc., a subsidiary of Wells Fargo & Company, will acquire Analytic effective October 1, 2016.
Prospectus 2016 35

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
Portfolio Managers
Information about the portfolio managers primarily responsible for overseeing the Fund’s and a Subsidiary's investments is shown below. The SAI provides additional information about the portfolio managers, including information relating to compensation, other accounts managed by the portfolio managers, and ownership by the portfolio managers of Fund shares.
Subadviser: Boston Partners
    
Portfolio Manager   Title   Role with Fund   Managed Fund Since
Joseph Feeney, Jr., CFA   Co-Chief Executive Officer and Chief Investment Officer of Boston Partners   Co-manager   October 2016
Eric Connerly, CFA   Director of Quantitative Research of Boston Partners   Co-manager   October 2016
Mr. Feeney joined Boston Partners in 1995. Mr. Feeney began his investment career in 1985 and earned an M.B.A. from University of Chicago and a B.S. from the University of New Hampshire.
Mr. Connerly joined Boston Partners in 1998. Mr. Connerly began his investment career in 1993 and earned an M.B.A. from Columbia Business School and a B.S. from Georgetown University.
Subadviser: AQR Capital Management, LLC (AQR)
    
Portfolio Manager   Title   Role with Fund   Managed Fund Since
Michelle Aghassi, Ph.D.   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Andrea Frazzini, Ph.D., M.S.   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Jacques Friedman, M.S.   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Hoon Kim, Ph.D.,M.B.A., CFA   Portfolio Manager and Principal of AQR   Co-manager   October 2016
Dr. Aghassi is a Principal of AQR. Dr. Aghassi joined AQR in 2005 and is co-head of research for its Global Stock Selection group, overseeing research and is a part of the portfolio management. Dr. Aghassi earned a B.Sc. in mathematics from the Brown and a Ph.D. in operations research from the Massachusetts Institute of Technology.
Dr. Frazzini is a Principal of AQR. Dr. Frazzini joined AQR in 2008 and develops quantitative models for its Global Stock Selection team. He earned a B.S. in economics from the University of Rome III, an M.S. in economics from the London School of Economics and a Ph.D. in economics from Yale University.
Mr. Friedman is a Principal of AQR. Mr. Friedman joined AQR at its inception in 1998 and heads its Global Stock Selection team, overseeing research and portfolio management. He earned a B.S. in applied mathematics from Brown University and an M.S. in applied mathematics from the University of Washington.
Mr. Kim is a Principal of AQR. Dr. Kim joined AQR in 2005 and develops quantitative models and oversees portfolio management for its Global Stock Selection team. Dr. Kim earned a B.A. in business administration from Yonsei University in South Korea and an M.B.A. and Ph.D. in business and accounting from Carnegie Mellon University. He is a CPA (in Korea) and a CFA charterholder.
Subadviser: Analytic
    
Portfolio Manager   Title   Role with Fund   Managed Fund Since
Harindra de Silva, CFA   President/Portfolio Manager of Analytic   Co-manager   October 2016
Dennis Bein, CFA   Chief Investment Officer /Portfolio Manager of Analytic   Co-manager   October 2016
David Krider, CFA   Portfolio Manager of Analytic   Co-manager   October 2016
Mr. De Silva joined Analytic in 1995. Mr. De Silva began his investment career in 1986 and earned an Ph.D. from University of California, an M.S. and M.B.A. from University of Rochester and a B.S. from University of Manchester.
Mr. Bein joined Analytic in 1995. Mr. Bein began his investment career in 1990 and earned an M.B.A. and a B.A. from University of California.
Mr. Krider joined Analytic in 2005. Mr. Krider began his investment career in 1993 and earned a B.S. from California Institute of Technology.
36 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
The Distributor
Shares of the Fund are distributed by Columbia Management Investment Distributors, Inc., which is located at 225 Franklin Street, Boston, MA 02110. The Distributor is a registered broker-dealer and an indirect, wholly-owned subsidiary of Ameriprise Financial. The Distributor and its affiliates may pay commissions, distribution and service fees and/or other compensation to entities, including Ameriprise Financial affiliates, for selling shares and providing services to investors.
The Transfer Agent
Columbia Management Investment Services Corp. is a registered transfer agent and wholly-owned subsidiary of Ameriprise Financial. The Transfer Agent is located at 225 Franklin Street, Boston, MA 02110, and its responsibilities include processing purchases, redemptions and exchanges of Fund shares, calculating and paying distributions, maintaining shareholder records, preparing account statements and providing customer service. The Transfer Agent has engaged DST Systems, Inc., including its affiliate, Boston Financial Data Services, Inc., to provide various shareholder or “sub-transfer agency” services. In addition, the Transfer Agent enters into agreements with various financial intermediaries through which you may hold Fund shares, pursuant to which the Transfer Agent pays these financial intermediaries for providing certain shareholder services. Depending on the type of account, the Fund pays the Transfer Agent a per account fee or a fee based on the assets invested through omnibus accounts, and reimburses the Transfer Agent for certain out-of-pocket expenses.
Other Roles and Relationships of Ameriprise Financial and its Affiliates — Certain Conflicts of Interest
The Investment Manager, Distributor and Transfer Agent, all affiliates of Ameriprise Financial, provide various services to the Fund and other Columbia Funds for which they are compensated. Ameriprise Financial and its other affiliates may also provide other services to these funds and be compensated for them.
The Investment Manager and its affiliates may provide investment advisory and other services to other clients and customers substantially similar to those provided to the Columbia Funds. These activities, and other financial services activities of Ameriprise Financial and its affiliates, may present actual and potential conflicts of interest and introduce certain investment constraints.
Ameriprise Financial is a major financial services company, engaged in a broad range of financial activities beyond the mutual fund-related activities of the Investment Manager, including, among others, insurance, broker-dealer (sales and trading), asset management, banking and other financial activities. These additional activities may involve multiple advisory, financial, insurance and other interests in securities and other instruments, and in companies that issue securities and other instruments, that may be bought, sold or held by the Columbia Funds.
Conflicts of interest and limitations that could affect a Columbia Fund may arise from, for example, the following:
compensation and other benefits received by the Investment Manager and other Ameriprise Financial affiliates related to the management/administration of a Columbia Fund and the sale of its shares;
the allocation of, and competition for, investment opportunities among the Fund, other funds and accounts advised/managed by the Investment Manager and other Ameriprise Financial affiliates, or Ameriprise Financial itself and its affiliates;
separate and potentially divergent management of a Columbia Fund and other funds and accounts advised/managed by the Investment Manager and other Ameriprise Financial affiliates;
regulatory and other investment restrictions on investment activities of the Investment Manager and other Ameriprise Financial affiliates and accounts advised/managed by them;
insurance and other relationships of Ameriprise Financial affiliates with companies and other entities in which a Columbia Fund invests; and
regulatory and other restrictions relating to the sharing of information between Ameriprise Financial and its affiliates, including the Investment Manager, and a Columbia Fund.
Prospectus 2016 37

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
More Information About the Fund (continued)
The Investment Manager and Ameriprise Financial have adopted various policies and procedures that are intended to identify, monitor and address conflicts of interest. However, there is no assurance that these policies, procedures and disclosures will be effective.
Additional information about Ameriprise Financial and the types of conflicts of interest and other matters referenced above is set forth in the Investment Management and Other Services — Other Roles and Relationships of Ameriprise Financial and its Affiliates — Certain Conflicts of Interest section of the SAI. Investors in the Columbia Funds should carefully review these disclosures and consult with their financial advisor if they have any questions.
Certain Legal Matters
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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund’s shareholder reports and in the SAI. Additionally, Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the SEC 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 sec.gov.
38 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
About Class A Shares
Description of the Share Class
The Fund, together with other funds managed by Columbia Management offered only through wrap programs sponsored and/or managed by Ameriprise Financial or its affiliates, are referred to as the Active Portfolio Funds. The Active Portfolio Funds, together with the other Columbia Funds, are referred to as the Funds.
Funds Contact Information
Additional information about the Funds can be obtained at columbiathreadneedle.com/us,* by calling toll-free 800.345.6611, or by writing (regular mail) to Columbia Management Investment Services Corp., P.O. Box 8081, Boston, MA 02266-8081 or (express mail) Columbia Management Investment Services Corp., c/o Boston Financial, 30 Dan Road, Suite 8081, Canton, MA 02021-2809.
* The website references in this prospectus are inactive links and information contained in or otherwise accessible through the referenced websites does not form a part of this prospectus.
FUNDamentals
Selling and/or Servicing Agents
The terms “selling agent” and “servicing agent” (collectively, selling agents) refer to the financial intermediaries that are authorized to sell and/or service shares of the Funds. Selling agents include broker-dealers and financial advisors as well as firms that employ such broker-dealers and financial advisors, including, for example, brokerage firms, banks, investment advisers, third party administrators and other financial intermediaries, including Ameriprise Financial and its affiliates.
Omnibus Accounts
The term “omnibus account” refers to a selling agent’s account with the Fund (through the Transfer Agent) that represents the combined holdings of, and transactions in, Fund shares of one or more clients of the selling agent (beneficial shareholders). Omnibus accounts are held in the name of the selling agents and not in the name of the beneficial shareholders invested in the Fund through omnibus accounts.
Retirement Plans and Omnibus Retirement Plans
The term “retirement plan” refers to retirement plans created under Sections 401(a), 401(k), 457 and 403(b) of the Internal Revenue Code of 1986, as amended (the Code), non-qualified deferred compensation plans governed by Section 409A of the Code and similar plans, but does not refer to individual retirement plans. The term “omnibus retirement plan” refers to a retirement plan that has a plan-level or omnibus account with the Transfer Agent.
The Fund offers its only class of shares in this prospectus. The following summarizes the primary features of the Class A shares offered by this prospectus. Contact your financial advisor or Columbia Funds for more information about the Fund's Class A shares.
Share Class Features
    
Eligible Investors
and Minimum
Initial Investments (a)
Investment
Limits
Conversion
Features
Front-End
Sales Charges
Contingent
Deferred Sales
Charges (CDSCs)
Maximum
Distribution and Service Fees
Class A shares of the Fund are available only through certain wrap fee programs sponsored and/or managed by Ameriprise Financial or its affiliates. Eligible investors are subject to a minimum initial investment requirement of $500. None None None None 0.25% distribution
and/or service fees
(a) See Buying, Selling and Exchanging Shares — Transaction Rules and Policies for more details on the eligible investors and minimum initial and subsequent investment and account balance requirements.
Prospectus 2016 39

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
About Class A Shares (continued)
Distribution and Service Fees
The Board has approved, and the Active Portfolio Funds have adopted, distribution and/or shareholder service plans which set the distribution and/or service fees that are periodically deducted from the Funds’ assets. These fees are calculated daily and are intended to compensate the Distributor and/or eligible selling agents for selling Fund shares and directly or indirectly providing services to shareholders. Because the fees are paid out of the Fund's assets on an ongoing basis, they will increase the cost of your investment over time. These payments or expenses include providing distribution and/or shareholder service fees to selling agents that sell Fund shares or provide services to Fund shareholders. Because the fees are paid out of the Fund's assets on an ongoing basis, they will increase the cost of your investment over time. The table below shows the maximum annual distribution and/or service fees (as an annual % of average daily net assets) and the combined amount of such fees applicable to Class A shares:
    
  Distribution
Fee
Service
Fee
Combined
Total
Class A up to 0.25% up to 0.25% 0.25%
The distribution and/or service fees for Class A shares may be subject to the requirements of Rule 12b-1 under the 1940 Act. The Distributor may retain these fees otherwise payable to selling agents if the amounts due are below an amount determined by the Distributor in its sole discretion.
If you maintain shares of the Fund directly with the Fund, without working with a financial advisor or other selling agent, distribution and service fees may be retained by the Distributor as payment or reimbursement for incurring certain distribution and shareholder service related expenses.
Over time, these distribution and/or service fees will reduce the return on your investment and may cost you more than paying other types of sales charges. The Fund will pay these fees to the Distributor and/or to eligible selling agents for as long as the distribution plan and/or shareholder servicing plans continue in effect, which is expected to be indefinitely. The Fund may reduce or discontinue payments at any time. Your selling agent may also charge you other additional fees for providing services to your account, which may be different from those described here.
Selling and Servicing Agent Compensation
The Distributor, the Investment Manager and their affiliates make payments, from their own resources, to selling agents, including other Ameriprise Financial affiliates, for marketing/sales support services relating to the Funds (Marketing Support Payments). Such payments are generally based upon one or more of the following factors: average net assets of the Funds sold by the Distributor attributable to that selling agent; gross sales of the Funds distributed by the Distributor attributable to that selling agent; reimbursement of ticket charges (fees that a selling agent charges its representatives for effecting transactions in Fund shares); or a negotiated lump sum payment. While the financial arrangements may vary for each selling agent, Marketing Support Payments to any one selling agent are generally between 0.05% and 0.40% on an annual basis for payments based on average net assets of the Fund attributable to the selling agent, and between 0.05% and 0.25% on an annual basis for firms receiving a payment based on gross sales of the Funds attributable to the selling agent. The Distributor, the Investment Manager and their affiliates may make payments in larger amounts or on a basis other than those described above when dealing with certain selling agents. Not all selling agents receive Marketing Support Payments.
In addition, the Transfer Agent has arrangements in place to compensate servicing agents, including other Ameriprise Financial affiliates, that hold Fund shares through networked and omnibus accounts, including omnibus retirement plans, for services that they provide to beneficial shareholders (Shareholder Services). Shareholder Services and fees vary by servicing agent and according to distribution channel and may include sub-accounting, sub-transfer agency, participant recordkeeping, shareholder or participant reporting, shareholder or participant transaction processing, shareholder or participant tax monitoring and reporting, maintenance of shareholder records, preparation of account statements and provision of customer service, and are not intended to include services that are primarily intended to result in the sale of Fund shares. Payments made by the Fund, the Transfer Agent and its affiliates for Shareholder Services vary by servicing agent but generally are not expected, with certain limited exceptions, to exceed 0.40% of the average aggregate value of the Fund’s shares. Generally, each Fund pays the Transfer Agent a
40 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
About Class A Shares (continued)
per account fee or a percentage of the average aggregate value of shares per annum maintained in omnibus accounts up to the lesser of the amount charged by the servicing agent or a channel-specific or share class-specific cap established by the Board from time to time. Fee amounts in excess of the amount reimbursed by the Fund are borne by the Transfer Agent, the Investment Manager and/or their affiliates.
In addition to the payments described above, the Distributor, the Investment Manager and their affiliates may make other payments or allow promotional incentives to broker-dealers to the extent permitted by SEC and Financial Industry Regulatory Authority (FINRA) rules and by other applicable laws and regulations.
Amounts paid by the Distributor, the Investment Manager and their affiliates are paid out of their own resources and do not increase the amount paid by you or the Fund. You can find further details in the SAI about the payments made by the Distributor, the Investment Manager and their affiliates, as well as lists of the selling agents and servicing agents, including Ameriprise Financial affiliates, to which the Distributor, the Investment Manager or their affiliates have agreed to make Marketing Support Payments and pay Shareholder Services fees.
Your selling agent may charge you fees and commissions in addition to those described in this prospectus. You should consult with your selling agent and review carefully any disclosure your selling agent provides regarding its services and compensation. Depending on the financial arrangement in place at any particular time, a selling agent and its financial advisors may have a financial incentive for its recommendation of the Fund or a particular share class over others.
Prospectus 2016 41

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares
Share Price Determination
The price you pay or receive when you buy, sell or exchange shares is the Fund's next determined net asset value (or NAV) per share. The Fund calculates the NAV per share at the end of each business day.
FUNDamentals
NAV Calculation
The Fund calculates its NAV as follows:
NAV =   (Value of assets of the share class) – (Liabilities of the share class)
Number of outstanding shares of the class
FUNDamentals
Business Days
A business day is any day that the New York Stock Exchange (NYSE) is open. A business day typically ends at the close of regular trading on the NYSE, usually at 4:00 p.m. Eastern time. If the NYSE is scheduled to close early, the business day will be considered to end as of the time of the NYSE’s scheduled close. The Fund will not treat an intraday unscheduled disruption in NYSE trading or an intraday unscheduled closing as a close of regular trading on the NYSE for these purposes and will price its shares as of the regularly scheduled closing time for that day (typically, 4:00 p.m. Eastern time). Notwithstanding the foregoing, the NAV of Fund shares may be determined at such other time or times (in addition to or in lieu of the time set forth above) as the Fund’s Board may approve or ratify. On holidays and other days when the NYSE is closed, the Fund's NAV is not calculated and the Fund does not accept buy or sell orders. However, the value of the Fund's assets may still be affected on such days to the extent that the Fund holds foreign securities that trade on days that foreign securities markets are open.
Equity securities are valued primarily on the basis of market quotations reported on stock exchanges and other securities markets around the world. If an equity security is listed on a national exchange, the security is valued at the closing price or, if the closing price is not readily available, the mean of the closing bid and asked prices. Certain equity securities, debt securities and other assets are valued differently. For instance, bank loans trading in the secondary market are valued primarily on the basis of indicative bids, fixed-income investments maturing in 60 days or less are valued primarily using the amortized cost method, unless this methodology results in a valuation that does not approximate the market value of these securities, and those maturing in excess of 60 days are valued primarily using a market-based price obtained from a pricing service, if available. Investments in other open-end funds are valued at their latest NAVs. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored pursuant to a policy approved by the Fund's Board. For a money market fund, the Fund's investments are generally valued at amortized cost, which approximates market value.
If a market price is not readily available or is deemed not to reflect market value, the Fund will determine the price of a portfolio security based on a determination of the security's fair value pursuant to a policy approved by the Fund's Board. In addition, the Fund may use fair valuation to price securities that trade on a foreign exchange when a significant event has occurred after the foreign exchange closes but before the time at which the Fund's share price is calculated. Foreign exchanges typically close before the time at which Fund share prices are calculated, and may be closed altogether on some days when the Fund is open. Such significant events affecting a foreign security may include, but are not limited to: (1) corporate actions, earnings announcements, litigation or other events impacting a single issuer; (2) governmental action that affects securities in one sector or country; (3) natural disasters or armed conflicts affecting a country or region; or (4) significant domestic or foreign market fluctuations. The Fund uses various criteria, including an evaluation of U.S. market moves after the close of foreign markets, in determining whether a foreign security's market price is readily available and reflective of market value and, if not, the fair value
42 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
of the security. To the extent the Fund has significant holdings of small cap stocks, high-yield bonds, floating rate loans, or tax-exempt, foreign or other securities that may trade infrequently, fair valuation may be used more frequently than for other funds.
Fair valuation may have the effect of reducing stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, when the Fund uses fair valuation to price securities, it may value those securities higher or lower than another fund would have priced the security. Also, the use of fair valuation may cause the Fund's performance to diverge to a greater degree from the performance of various benchmarks used to compare the Fund's performance because benchmarks generally do not use fair valuation techniques. Because of the judgment involved in fair valuation decisions, there can be no assurance that the value ascribed to a particular security is accurate. The Fund has retained one or more independent fair valuation pricing services to assist in the fair valuation process for foreign securities.
Transaction Rules and Policies
The Fund, the Distributor or the Transfer Agent may refuse any order to buy or exchange shares. If this happens, the Fund will return any money it received, but no interest will be paid on that money.
Order Processing
Orders to buy, sell or exchange Fund shares are processed on business days. Orders can be made by mail, by telephone or online. Orders received in “good form” by the Transfer Agent or your selling agent before the end of a business day are priced at the NAV per share on that day. Orders received after the end of a business day will receive the next business day's NAV per share. When a written order to buy, sell or exchange shares is sent to the Transfer Agent, the share price used to fill the order is the next price calculated by the Fund after the Transfer Agent receives the order at its transaction processing center in Canton, Massachusetts, not the P.O. Box provided for regular mail delivery. The market value of the Fund's investments may change between the time you submit your order and the time the Fund next calculates its NAV per share. The business day that applies to your order is also called the trade date.
“Good Form”
An order is in “good form” if the Transfer Agent or your selling agent has all of the information and documentation it deems necessary to effect your order. For example, when you sell shares by letter of instruction, “good form” means that your letter has (i) complete instructions and the signatures of all account owners, (ii) a Medallion Signature Guarantee for amounts greater than $100,000 and other transactions, as described below, and (iii) any other required documents completed and attached. For the documents required for sales by corporations, agents, fiduciaries, surviving joint owners and other legal entities, call 800.345.6611.
Medallion Signature Guarantees
The Transfer Agent may require a Medallion Signature Guarantee for your signature in order to process certain transactions. A Medallion Signature Guarantee helps assure that a signature is genuine and not a forgery. A Medallion Signature Guarantee must be provided by an eligible guarantor institution including, but not limited to, the following: a bank, credit union, savings association, broker or dealer that participates in the Securities Transfer Association Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) or the New York Stock Exchange Medallion Signature Program (MSP). Notarization by a notary public is not an acceptable signature guarantee. The Transfer Agent reserves the right to reject a signature guarantee and to request additional documentation for any transaction.
A Medallion Signature Guarantee is required if: (i) the transaction amount is over $100,000; (ii) you want your check made payable to someone other than the registered account owner(s); (iii) the address of record has changed within the last 30 days; (iv) you want the check mailed to an address other than the address of record; (v) you want proceeds to be sent according to existing bank account instructions not coded for outgoing Automated Clearing House (ACH) or wire, or to a bank account not on file; (vi) you are the beneficiary of the account and the account owner is deceased (other documentation may be required); or (vii) you are changing legal ownership of your account.
Prospectus 2016 43

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
Customer Identification Program
Federal law requires the Fund to obtain and record specific personal information to verify your identity when you open an account. This information may include your name, address, date of birth (for individuals) and taxpayer or other government issued identification (e.g., social security number (SSN) or other taxpayer identification number (TIN)). If you fail to provide the requested information, the Fund may need to delay the date of your purchase or may be unable to open your account, which may result in a return of your investment monies. In addition, if the Fund is unable to verify your identity after your account is open, the Fund reserves the right to close your account or take other steps as deemed reasonable. The Fund will not be liable for any loss resulting from any purchase delay, application rejection or account closure due to a failure to provide proper identifying information.
Small Account Policy — Broker-Dealer and Wrap Fee Accounts
The Funds may automatically redeem, at any time, broker-dealer networked accounts and wrap fee accounts that have account balances of $20 or less or have less than one share.
Information Sharing Agreements
As required by Rule 22c-2 under the 1940 Act, the Funds or certain of their service providers will enter into information sharing agreements with selling agents, including participating life insurance companies and selling agents that sponsor or offer retirement plans through which shares of the Funds are made available for purchase. Pursuant to Rule 22c-2, selling agents are required, upon request, to: (i) provide shareholder account and transaction information; and (ii) execute instructions from the Fund to restrict or prohibit further purchases of Fund shares by shareholders who have been identified by the Fund as having engaged in transactions that violate the Fund's excessive trading policies and procedures.
Excessive Trading Practices Policy
Right to Reject or Restrict Share Transaction Orders — The Fund is intended for investors with long-term investment purposes and is not intended as a vehicle for frequent trading activity (market timing) that is excessive. Investors should transact in Fund shares primarily for investment purposes. The Board has adopted excessive trading policies and procedures that are designed to deter excessive trading by investors (the Excessive Trading Policies and Procedures). The Fund discourages and does not accommodate excessive trading.
The Fund reserves the right to reject, without any prior notice, any purchase or exchange order for any reason, and will not be liable for any loss resulting from rejected orders. For example, the Fund may in its sole discretion restrict or reject a purchase or exchange order even if the transaction is not subject to the specific limitation described below if the Fund or its agents determine that accepting the order could interfere with efficient management of the Fund's portfolio or is otherwise contrary to the Fund's best interests. The Excessive Trading Policies and Procedures apply equally to purchase or exchange transactions communicated directly to the Transfer Agent and to those received by selling agents.
Specific Buying and Exchanging Limitations — If a Fund detects that an investor has made two “material round trips” in any 28-day period, it will generally reject the investor's future purchase orders, including exchange purchase orders, involving any Fund.
For these purposes, a “round trip” is a purchase or exchange into the Fund followed by a sale or exchange out of the Fund, or a sale or exchange out of the Fund followed by a purchase or exchange into the Fund. A “material” round trip is one that is deemed by the Fund to be material in terms of its amount or its potential detrimental impact on the Fund. Independent of this limit, the Fund may, in its sole discretion, reject future buy orders by any person, group or account that appears to have engaged in any type of excessive trading activity.
These limits generally do not apply to automated transactions or transactions by registered investment companies in a “fund-of-funds” structure. These limits do not apply to payroll deduction contributions by retirement plan participants, transactions initiated by a retirement plan sponsor or certain other retirement plan transactions consisting of rollover transactions, loan repayments and disbursements, and required minimum distribution redemptions. They may be modified or rescinded for accounts held by certain retirement plans to conform to plan limits, for considerations relating to the Employee Retirement Income Security Act of 1974 or regulations of the
44 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
Department of Labor, and for certain asset allocation or wrap programs. Accounts known to be under common ownership or control generally will be counted together, but accounts maintained or managed by a common intermediary generally will not be considered to be under common ownership or control. The Fund retains the right to modify these restrictions at any time without prior notice to shareholders. In addition, the Fund may, in its sole discretion, reinstate trading privileges that have been revoked under the Fund's Excessive Trading Policies and Procedures.
Limitations on the Ability to Detect and Prevent Excessive Trading Practices — The Fund takes various steps designed to detect and prevent excessive trading, including daily review of available shareholder transaction information. However, the Fund receives buy, sell or exchange orders through selling agents, and cannot always know of or reasonably detect excessive trading that may be facilitated by selling agents or by the use of the omnibus account arrangements they offer. Omnibus account arrangements are common forms of holding shares of mutual funds, particularly among certain selling agents such as broker-dealers, retirement plans and variable insurance products. These arrangements often permit selling agents to aggregate their clients' transactions and accounts, and in these circumstances, the identity of the shareholders is often not known to the Fund.
Some selling agents apply their own restrictions or policies to underlying investor accounts, which may be more or less restrictive than those described here. This may impact the Fund's ability to curtail excessive trading, even where it is identified. For these and other reasons, it is possible that excessive trading may occur despite the Fund's efforts to detect and prevent it.
Although these restrictions and policies involve judgments that are inherently subjective and may involve some selectivity in their application, the Fund seeks to act in a manner that it believes is consistent with the best interests of shareholders in making any such judgments.
Risks of Excessive Trading — Excessive trading creates certain risks to the Fund's long-term shareholders and may create the following adverse effects:
negative impact on the Fund's performance;
potential dilution of the value of the Fund's shares;
interference with the efficient management of the Fund's portfolio, such as the need to maintain undesirably large cash positions, the need to use its line of credit or the need to buy or sell securities it otherwise would not have bought or sold;
losses on the sale of investments resulting from the need to sell securities at less favorable prices;
increased taxable gains to the Fund's remaining shareholders resulting from the need to sell securities to meet sell orders; and
increased brokerage and administrative costs.
To the extent that the Fund invests significantly in foreign securities traded on markets that close before the Fund's valuation time, it may be particularly susceptible to dilution as a result of excessive trading. Because events may occur after the close of foreign markets and before the Fund's valuation time that influence the value of foreign securities, investors may seek to trade Fund shares in an effort to benefit from their understanding of the value of foreign securities as of the Fund's valuation time. This is often referred to as price arbitrage. The Fund has adopted procedures designed to adjust closing market prices of foreign securities under certain circumstances to reflect what the Fund believes to be the fair value of those securities as of its valuation time. To the extent the adjustments do not work fully, investors engaging in price arbitrage may cause dilution in the value of the Fund's shares held by other shareholders.
Similarly, to the extent that the Fund invests significantly in thinly traded high-yield bonds (junk bonds) or equity securities of small-capitalization companies, because these securities are often traded infrequently, investors may seek to trade Fund shares in an effort to benefit from their understanding of the value of these securities. This is also a type of price arbitrage. Any such frequent trading strategies may interfere with efficient management of the Fund's portfolio to a greater degree than would be the case for mutual funds that invest in highly liquid securities, in part because the Fund may have difficulty selling those portfolio securities at advantageous times or prices to satisfy
Prospectus 2016 45

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
large and/or frequent sell orders. Any successful price arbitrage may also cause dilution in the value of Fund shares held by other shareholders. The risks of excessive trading described above also apply to any underlying funds in which the Fund invests.
46 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
Opening an Account and Placing Orders
We encourage you to consult with a financial advisor who can help you with your investment decisions and who can help you open an account. Once you have an account, you can buy, sell or exchange shares by contacting your financial advisor who will send your order to the Transfer Agent or your selling agent. As described below, once you have an account you can also communicate your orders directly to the Transfer Agent by mail, by telephone or online.
The Funds are generally available directly and through broker-dealers, banks and other selling agents or institutions, and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by selling agents. You may exchange or sell shares through your selling agent. If you maintain your account directly with your selling agent, you must contact that agent to process your transaction.
Not all selling agents offer the Funds and certain selling agents that offer the Funds may not offer all Funds on all investment platforms or programs. Please consult with your financial advisor to determine the availability of the Funds. If you set up an account at a selling agent that does not have, and is unable to obtain, a selling agreement with the Distributor, you will not be able to transfer Fund holdings to that account. In that event, you must either maintain your Fund holdings with your current selling agent, find another selling agent with a selling agreement, or sell your Fund shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability.
Selling agents that offer the Funds may charge you additional fees for the services they provide and they may have different policies that are not described in this prospectus. Some policy differences may include different minimum investment amounts, exchange privileges, Fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the selling agents through which your shares of the Fund are held. Since the Fund (and its service providers) may not have a record of your account transactions, you should always contact the financial advisor employed by the selling agent through which you purchased or at which you maintain your shares of the Fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The Fund and its service providers, including the Distributor and the Transfer Agent, are not responsible for the failure of these selling agents to carry out their obligations to its customers.
The Fund may engage selling agents to receive purchase, exchange and sell orders on its behalf. Accounts established directly with the Fund will be serviced by the Transfer Agent. The Funds, the Transfer Agent and the Distributor do not provide investment advice.
Buying Shares
Eligible Investors
Fund shares are available only to certain eligible investors through certain wrap fee programs (Ameriprise Active Portfolios ® ) sponsored and/or managed by Ameriprise Financial or its affiliates.
Minimum Initial Investments and Account Balances
There is a $500 minimum initial and no additional investment for the Fund's shares.
If you unwrap your Ameriprise brokerage account, you may continue to hold, but not purchase additional shares of, the Active Portfolio Funds. However, if you transfer your brokerage account to another broker-dealer, your holdings in Active Portfolio Funds are not transferable. You may liquidate your Active Portfolio Fund holdings or continue to hold them in your Ameriprise brokerage account.
Each Active Portfolio Fund reserves the right to modify its minimum investment and related requirements at any time, with or without prior notice.
Other Purchase Rules You Should Know
Once the Transfer Agent or your selling agent receives your buy order in “good form,” your purchase will be made at the next calculated public offering price per share, which is the net asset value per share plus any sales charge that applies.
Prospectus 2016 47

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
You generally buy Class A shares of Active Portfolio Funds at net asset value per share because no front-end sales charge applies to purchases of Class A shares of Active Portfolio Funds.
The Distributor and the Transfer Agent reserve the right to cancel your order if the Fund does not receive payment within three business days of receiving your buy order. The Fund will return any payment received for orders that have been cancelled, but no interest will be paid on that money.
Selling agents are responsible for sending your buy orders to the Transfer Agent and ensuring that we receive your money on time.
Shares purchased are recorded on the books of the Fund. The Fund does not issue certificates.
Selling Shares
When you sell your shares, the Fund is effectively buying them back from you. This is called a redemption. The payment will be sent within seven days after your request is received in “good form.” When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in “good form.”
Active Portfolio Funds are sold through wrap fee programs sponsored and/or managed by Ameriprise Financial or its affiliates. For detailed rules regarding the sale of shares of these Funds, contact your selling agent.
In-Kind Redemptions
The Fund reserves the right to honor redemption orders with in-kind distributions of portfolio securities instead of cash. In the event the Fund distributes portfolio securities in-kind, you may incur brokerage and transaction costs associated with converting the portfolio securities you receive into cash. Also, the portfolio securities you receive may increase or decrease in value before you convert them into cash. For U.S. federal income tax purposes redemptions paid in securities are generally treated the same as redemptions paid in cash.
Other Redemption Rules You Should Know
Once the Transfer Agent or your selling agent receives your redemption order in “good form,” your shares will be sold at the next calculated NAV per share.
If you sell your shares that are held directly with the Funds (through the Transfer Agent), we will normally send the redemption proceeds by mail or electronically transfer them to your bank account within three business days after the Transfer Agent or your selling agent receives your order in “good form.”
If you sell your shares through a selling agent, the Funds will normally send the redemption proceeds by Fedwire within three business days after the Transfer Agent or your selling agent receives your order in “good form.”
If you paid for your shares by check or from your bank account as an ACH transaction, the Funds will hold the redemption proceeds when you sell those shares for ten calendar days after the trade date of the purchase.
No interest will be paid on uncashed redemption checks.
The Funds can delay payment of the redemption proceeds for up to seven days and may suspend redemptions and/or further postpone payment of redemption proceeds when the NYSE is closed or trading thereon is restricted or during emergency or other circumstances, including as determined by the SEC.
Other restrictions may apply to retirement accounts. For information about these restrictions, contact your retirement plan administrator.
For broker-dealer and wrap fee accounts: The Fund reserves the right to redeem your shares if your account falls below the Fund's minimum initial investment requirement. The Fund will notify your broker-dealer prior to redeeming shares, and will provide details on how to avoid such redemption.
Class A shares of an Active Portfolio Fund may be exchanged for Class A shares of another Active Portfolio Fund.
You may only exchange shares of an Active Portfolio Fund for shares of another Columbia Fund if the other Columbia Fund is an Active Portfolio Fund.
48 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Buying, Selling and Exchanging Shares (continued)
Exchanging Shares
You can generally sell shares of your Active Portfolio Fund to buy shares of another Active Portfolio Fund, in what is called an exchange. You should read the prospectus of, and make sure you understand the investment objective, principal investment strategies, risks, fees and expenses of, the Fund into which you are exchanging.
Please contact your selling agent for more information.
Other Exchange Rules You Should Know
Exchanges are made at the NAV next calculated after your exchange order is received in “good form.”
Once the Fund receives your exchange request, you cannot cancel it after the market closes.
The rules for buying shares of a Fund generally apply to exchanges into that Fund, including, if your exchange creates a new Fund account, it must satisfy the minimum investment amount, unless a waiver applies.
Shares of the purchased Fund may not be used on the same day for another exchange or sale.
You may make exchanges only into a Fund that is legally offered and sold in your state of residence. Contact the Transfer Agent or your selling agent for more information.
You generally may make an exchange only into a Fund that is accepting investments.
The Fund may change or cancel your right to make an exchange by giving the amount of notice required by regulatory authorities (generally 60 days for a material change or cancellation).
Unless your account is part of a tax-advantaged arrangement, an exchange for shares of another Fund is a taxable event, and you may recognize a gain or loss for tax purposes.
Prospectus 2016 49

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Distributions and Taxes
Distributions to Shareholders
A mutual fund can make money two ways:
It can earn income on its investments. Examples of fund income are interest paid on money market instruments and bonds, and dividends paid on common stocks.
A mutual fund can also have capital gains if the value of its investments increases. While a fund continues to hold an investment, any gain is generally unrealized. If the fund sells an investment, it generally will realize a capital gain if it sells that investment for a higher price than its adjusted cost basis, and will generally realize a capital loss if it sells that investment for a lower price than its adjusted cost basis. Capital gains and losses are either short-term or long-term, depending on whether the fund holds the securities for one year or less (short-term) or more than one year (long-term).
Mutual funds make payments of fund earnings to shareholders, distributing them among all shareholders of the fund.
As a shareholder, you are entitled to your portion of a fund's distributed income, including capital gains. Reinvesting your distributions buys you more shares of a fund which lets you take advantage of the potential for compound growth. Putting the money you earn back into your investment means it, in turn, may earn even more money. Over time, the power of compounding has the potential to significantly increase the value of your investment. There is no assurance, however, that you'll earn more money if you reinvest your distributions rather than receive them in cash.
The Fund intends to pay out, in the form of distributions to shareholders, a sufficient amount of its income and gains so that the Fund will qualify for treatment as a regulated investment company and generally will not have to pay any federal excise tax. The Fund generally intends to distribute any net realized capital gain (whether long-term or short-term gain) at least once a year. Normally, the Fund will declare and pay distributions of net investment income according to the following schedule:
    
Declaration and Distribution Schedule
Declarations Annually
Distributions Annually
The Fund may declare or pay distributions of net investment income more frequently.
Each time a distribution is made, the net asset value per share of the share class is reduced by the amount of the distribution.
The Fund generally pays cash distributions within five business days after the distribution was declared. If you sell all of your shares after the record date, but before the payment date, for a distribution, you'll normally receive that distribution in cash within five business days after the sale was made.
The Fund will automatically reinvest distributions in additional shares of the same share class of the Fund unless you inform us you want to receive your distributions in cash (the selling agent through which you purchased shares may have different policies). You can do this by contacting the Fund at the address on the back cover, or by calling us at 800.345.6611. No sales charges apply to the purchase or sale of such shares.
For accounts held directly with the Fund, distributions of $10 or less will automatically be reinvested in additional Fund shares only. If you elect to receive distributions by check and the check is returned as undeliverable, all subsequent distributions will be reinvested in additional shares of the Fund.
Unless you are a tax-exempt investor or holding Fund shares through a tax-advantaged account (such as a 401(k) plan or IRA), you should consider avoiding buying Fund shares shortly before the Fund makes a distribution (other than distributions of net investment income that are declared daily) of net investment income or net realized capital gain, because doing so can cost you money in taxes to the extent the distribution consists of taxable income or gains. This is because you will, in effect, receive part of your purchase price back in the distribution. This is known as
50 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Distributions and Taxes (continued)
“buying a dividend.” To avoid “buying a dividend,” before you invest check the Fund's distribution schedule, which is available at the Funds' website and/or by calling the Funds' telephone number listed at the beginning of the section entitled About Class A Shares .
Taxes
You should be aware of the following considerations applicable to all Funds (unless otherwise noted):
The Fund intends to elect to be treated, and to qualify and to be eligible for treatment each year as a regulated investment company. A regulated investment company generally is not subject to tax at the fund level on income and gains from investments that are distributed to shareholders. However, the Fund's failure to qualify for treatment as a regulated investment company would result in Fund-level taxation, and consequently, a reduction in income available for distribution to you and in the net asset value of your shares. Even if the Fund qualifies for treatment as a regulated investment company, the Fund may be subject to federal excise tax on certain undistributed income or gains.
Otherwise taxable distributions generally are taxable to you when paid, whether they are paid in cash or automatically reinvested in additional Fund shares. Dividends paid in January are deemed paid on December 31 of the prior year if the dividend was declared and payable to shareholders of record in October, November, or December of such prior year.
Distributions of the Fund's ordinary income and net short-term capital gain, if any, generally are taxable to you as ordinary income. Distributions of the Fund's net long-term capital gain, if any, generally are taxable to you as long-term capital gain. Whether capital gains are long-term or short-term is determined by how long the Fund has owned the investments that generated them, rather than how long you have owned your shares.
From time to time, a distribution from the Fund could constitute a return of capital, which is not taxable to you so long as the amount of the distribution does not exceed your tax basis in your Fund shares. A return of capital reduces your tax basis in your Fund shares, with any amounts exceeding such basis generally taxable as capital gain.
If you are an individual and you meet certain holding period and other requirements for your Fund shares, a portion of your distributions may be treated as “qualified dividend income” taxable at the lower net long-term capital gain rates instead of the higher ordinary income rates. Qualified dividend income is income attributable to the Fund's dividends received from certain U.S. and foreign corporations, as long as the Fund meets certain holding period and other requirements for the stock producing such dividends.
Certain high-income individuals (as well as estates and trusts) are subject to a 3.8% tax on net investment income. For individuals, the 3.8% tax applies to the lesser of (1) the amount (if any) by which the taxpayer's modified adjusted gross income exceeds certain threshold amounts or (2) the taxpayer's “net investment income.”
  Net investment income generally includes for this purpose dividends, including any capital gain dividends, paid by the Fund, and net gains recognized on the sale, redemption or exchange of shares of the Fund.
Certain derivative instruments when held in the Fund's portfolio subject the Fund to special tax rules, the effect of which may be to, among other things, accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of Fund portfolio securities, or convert capital gains into ordinary income, short-term capital losses into long-term capital losses or long-term capital gains into short-term capital gains. These rules could therefore affect the amount, timing and/or character of distributions to shareholders.
Generally, a Fund realizes a capital gain or loss on an option when the option expires, or when it is exercised, sold or otherwise terminated. However, if an option is a “section 1256 contract,” which includes most traded options on a broad-based index, and the Fund holds such option at the end of its taxable year, the Fund is deemed to sell such option at fair market value at such time and recognize any gain or loss thereon, which is generally deemed to be 60% long-term and 40% short-term gain or loss, as described further in the SAI.
Income and proceeds received by the Fund from sources within foreign countries may be subject to foreign taxes. If at the end of the taxable year more than 50% of the value of the Fund's assets consists of securities of foreign corporations, and the Fund makes a special election, you will generally be required to include in your income for
Prospectus 2016 51

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Distributions and Taxes (continued)
  U.S. federal income tax purposes your share of the qualifying foreign income taxes paid by the Fund in respect of its foreign portfolio securities. You may be able to claim a foreign tax credit or deduction in respect of this amount, subject to certain limitations. There is no assurance that the Fund will make this election for a taxable year, even if it is eligible to do so.
A sale, redemption or exchange of Fund shares is a taxable event. This includes redemptions where you are paid in securities. Your sales, redemptions and exchanges of Fund shares (including those paid in securities) usually will result in a taxable capital gain or loss to you, equal to the difference between the amount you receive for your shares (or are deemed to have received in the case of exchanges) and your adjusted tax basis in the shares, which is generally the amount you paid (or are deemed to have paid in the case of exchanges) for them. Any such capital gain or loss generally will be long-term capital gain or loss if you have held your Fund shares for more than one year at the time of sale or exchange. In certain circumstances, capital losses may be converted from short-term to long-term; in other circumstances, capital losses may be disallowed under the “wash sale” rules.
For sales, redemptions and exchanges of shares that were acquired in a non-qualified account after 2011, the Fund generally is required to report to shareholders and the Internal Revenue Service (IRS) cost basis information with respect to those shares. The Fund uses average cost basis as its default method of calculating cost basis. For more information regarding average cost basis reporting, other available cost basis methods, and selecting or changing to a different cost basis method, please see the SAI, columbiathreadneedle.com/us, or contact the Fund at 800.345.6611. If you hold Fund shares through a selling agent (e.g., a brokerage firm), you should contact your selling agent to learn about its cost basis reporting default method and the reporting elections available to your account.
The Fund is required by federal law to withhold tax on any taxable or tax-exempt distributions and redemption proceeds paid to you if: you have not provided a correct TIN or have not certified to the Fund that withholding does not apply, the IRS has notified us that the TIN listed on your account is incorrect according to its records, or the IRS informs the Fund that you are otherwise subject to backup withholding.
FUNDamentals
Taxes
The information provided above is only a summary of how U.S. federal income taxes may affect your investment in the Fund. It is not intended as a substitute for careful tax planning. Your investment in the Fund may have other tax implications. It does not apply to certain types of investors who may be subject to special rules, including foreign or tax-exempt investors or those holding Fund shares through a tax-advantaged account, such as a 401(k) plan or IRA. Please see the SAI for more detailed tax information. You should consult with your own tax advisor about the particular tax consequences to you of an investment in the Fund, including the effect of any foreign, state and local taxes, and the effect of possible changes in applicable tax laws.
52 Prospectus 2016

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
Financial Highlights
Because the Fund had not commenced operations prior to the date of this prospectus, no financial highlights are provided.
Prospectus 2016 53

 

Table of Contents
[This page intentionally left blank]

 

Table of Contents
[This page intentionally left blank]

 

Table of Contents
Active Portfolios ®   Multi-Manager Directional Alternatives Fund
P.O. Box 8081
Boston, MA 02266-8081
Additional Information About the Fund
Additional information about the Fund’s investments will be available in the Fund’s annual and semiannual reports to shareholders. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year. The SAI also provides additional information about the Fund and its policies. The SAI, which has been filed with the SEC, is legally part of this prospectus (incorporated by reference). To obtain these documents free of charge, to request other information about the Fund and to make shareholder inquiries, please contact the Fund as follows:
By Mail:   Columbia Funds
c/o Columbia Management Investment Services Corp.
P.O. Box 8081
Boston, MA 02266-8081
By Telephone: 800.345.6611
Online: columbiathreadneedle.com/us
You can review and copy information about the Fund (including this prospectus, the SAI and shareholder reports when available) at the SEC’s Public Reference Room in Washington, D.C. To find out more about the operation of the Public Reference Room, call the SEC at 202.551.8090. Reports and other information about the Fund are also available in the EDGAR Database on the SEC’s website at http://www.sec.gov. You can receive copies of this information, for a fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section, Securities and Exchange Commission, Washington, D.C. 20549-1520.
The investment company registration number of Columbia Funds Series Trust I, of which the Fund is a series, is 811-04367.
© 2016 Columbia Management Investment Distributors, Inc.
225 Franklin Street, Boston, MA 02110
800.345.6611
PRO283_04_F01_(10/16)


Table of Contents
STATEMENT OF ADDITIONAL INFORMATION
October 3, 2016
Columbia Funds Series Trust I
Active Portfolios ® Multi-Manager Alternatives Fund**
Class A: CPASX    
Active Portfolios ® Multi-Manager Directional Alternatives Fund
Class A: CDAAX    
Active Portfolios ® Multi-Manager Growth Fund
Class A: CSLGX    
Active Portfolios ® Multi-Manager Small Cap Equity Fund
Class A: CSCEX    
Active Portfolios ® Multi-Manager Total Return Bond Fund
Class A: CMCPX    
CMG Ultra Short Term Bond Fund
CMGUX    
Columbia Adaptive Risk Allocation Fund
Class A: CRAAX Class C: CRACX Class K: CRFRX
Class R: CRKRX Class R4: CARRX Class R5: CRDRX
Class W: CRAWX Class Y: CARYX Class Z: CRAZX
Columbia Alternative Beta Fund
Class A: CLAAX Class C: CLABX Class I: CLIIX
Class R: CRRLX Class R4: CLFUX Class R5: CLIVX
Class W: CLAWX Class Y: CLAYX Class Z: CLAZX
Columbia AMT-Free Connecticut Intermediate Muni Bond Fund
Class A: LCTAX Class B: LCTBX Class C: LCTCX
Class R4: CCTMX Class T: GCBAX Class Z: SCTEX
Columbia AMT-Free Intermediate Muni Bond Fund
Class A: LITAX Class B: LITBX Class C: LITCX
Class R4: CIMRX Class R5: CTMRX Class T: GIMAX
Class Z: SETMX    
Columbia AMT-Free Massachusetts Intermediate Muni Bond Fund
Class A: LMIAX Class B: LMIBX Class C: LMICX
Class R4: CMANX Class R5: CMAUX Class T: GMBAX
Class Z: SEMAX    
Columbia AMT-Free New York Intermediate Muni Bond Fund
Class A: LNYAX Class B: LNYBX Class C: LNYCX
Class R4: CNYIX Class R5: CNYUX Class T: GANYX
Class Z: GNYTX    
Columbia AMT-Free Oregon Intermediate Muni Bond Fund
Class A: COEAX Class B: COEBX Class C: CORCX
Class R4: CORMX Class R5: CODRX Class Z: CMBFX
Columbia Balanced Fund
Class A: CBLAX Class B: CBLBX Class C: CBLCX
Class K: CLRFX Class R: CBLRX Class R4: CBDRX
Class R5: CLREX Class Y: CBDYX Class Z: CBALX
Columbia Bond Fund
Class A: CNDAX Class B: CNDBX Class C: CNDCX
Class I: CBNIX Class R: CBFRX Class R4: CNDRX
Class R5: CNFRX Class T: CNDTX Class W: CBDWX
Class Y: CBFYX Class Z: UMMGX  
Columbia California Tax-Exempt Fund
Class A: CLMPX Class B: CCABX Class C: CCAOX
Class R4: CCARX Class R5: CCAUX Class Z: CCAZX
Columbia Contrarian Core Fund
Class A: LCCAX Class B: LCCBX Class C: LCCCX
Class I: CCCIX Class K: CCRFX Class R: CCCRX
Class R4: CORRX Class R5: COFRX Class T: SGIEX
Class W: CTRWX Class Y: COFYX Class Z: SMGIX
Columbia Corporate Income Fund
Class A: LIIAX Class B: CIOBX Class C: CIOCX
Class I: CPTIX Class R4: CIFRX Class R5: CPIRX
Class W: CPIWX Class Y: CRIYX Class Z: SRINX
Columbia Disciplined Small Core Fund
Class A: LSMAX Class B: LSMBX Class C: LSMCX
Class I: CPOIX Class R4: CFFRX Class R5: CLLRX
Class T: SSCEX Class W: CSCWX Class Y: CPFRX
Class Z: SMCEX    
Columbia Diversified Absolute Return Fund
Class A: CDUAX Class C: CDUCX Class I: CDUIX
Class R4: CDUFX Class R5: CDUGX Class W: CDUWX
Class Y*: - Class Z: CDUZX  
Columbia Diversified Real Return Fund
Class A: CDRAX Class C: CDRCX Class R4: CDRRX
Class R5: CDRFX Class W: CDTWX Class Y*: -
Class Z: CDRZX    
Columbia Dividend Income Fund
Class A: LBSAX Class B: LBSBX Class C: LBSCX
Class I: CDVIX Class R: CDIRX Class R4: CVIRX
Class R5: CDDRX Class T: GEQAX Class W: CDVWX
Class Y: CDDYX Class Z: GSFTX  
Columbia Emerging Markets Fund
Class A: EEMAX Class B: CEBMX Class C: EEMCX
Class I: CEHIX Class K: CEKMX Class R: CEMRX
Class R4: CEMHX Class R5: CEKRX Class W: CEMWX
Class Y: CEKYX Class Z: UMEMX  
Columbia Global Dividend Opportunity Fund
Class A: CSVAX Class B: CSVBX Class C: CSRCX
Class I: CEVIX Class R: CSGRX Class R4: CGOLX
Class R5: CADPX Class W: CTVWX Class Y: CLSYX
Class Z: CSVFX    
Columbia Global Energy and Natural Resources Fund
Class A: EENAX Class B: CEGBX Class C: EENCX
Class I: CERIX Class K: CEGFX Class R: CETRX
Class R4: CENRX Class R5: CNRRX Class Z: UMESX
Columbia Global Technology Growth Fund
Class A: CTCAX Class B: CTCBX Class C: CTHCX
Class I: CONIX Class R4: CTYRX Class R5: CTHRX
Class Y: CGTUX Class Z: CMTFX  
Columbia Greater China Fund
Class A: NGCAX Class B: NGCBX Class C: NGCCX
Class I: CCINX Class R4: CGCHX Class R5: CGCRX
Class W: CGCWX Class Z: LNGZX  
Columbia High Yield Municipal Fund
Class A: LHIAX Class B: CHMBX Class C: CHMCX
Class R4: CHIYX Class R5: CHMYX Class Y*: -
Class Z: SRHMX    
Columbia Large Cap Growth Fund
Class A: LEGAX Class B: LEGBX Class C: LEGCX
Class E: CLGEX Class F: CLGFX Class I: CLGIX
Class K: CLRUX Class R: CGWRX Class R4: CCGRX
Class R5: CLWFX Class T: GAEGX Class W: CLGWX
Class Y: CGFYX Class Z: GEGTX  
Columbia Mid Cap Growth Fund
Class A: CBSAX Class B: CBSBX Class C: CMCCX
Class I: CMTIX Class K: CMCKX Class R: CMGRX
Class R4: CPGRX Class R5: CMGVX Class T: CBSTX
Class W: CMRWX Class Y: CMGYX Class Z: CLSPX

 

Columbia Multi-Asset Income Fund
Class A: CLNAX Class C: CLCNX Class I: CLNIX
Class R4: CLNFX Class R5: CLNVX Class W: CLNWX
Class Y*: - Class Z: CLNZX  
Columbia New York Tax-Exempt Fund
Class A: COLNX Class B: CNYBX Class C: CNYCX
Class R4: CNYEX Class R5: CNYRX Class Z: CNYZX
Columbia Pacific/Asia Fund
Class A: CASAX Class C: CASCX Class I: CPCIX
Class R4: CPRAX Class W: CPAWX Class Y*: -
Class Z: USPAX    
Columbia Real Estate Equity Fund
Class A: CREAX Class B: CREBX Class C: CRECX
Class I: CREIX Class K: CRRFX Class R: CRSRX
Class R4: CRERX Class R5: CRRVX Class W: CREWX
Class Y*: - Class Z: CREEX  
Columbia Select Large Cap Growth Fund
Class A: ELGAX Class C: ELGCX Class I: CSPIX
Class R: URLGX Class R4: CSRRX Class R5: CGTRX
Class W: CSLWX Class Y: CCWRX Class Z: UMLGX
Columbia Small Cap Growth Fund I
Class A: CGOAX Class B: CGOBX Class C: CGOCX
Class I: CSWIX Class K: CSCKX Class R: CCRIX
Class R4: CHHRX Class R5: CSCRX Class Y: CSGYX
Class Z: CMSCX    
Columbia Small Cap Value Fund I
Class A: CSMIX Class B: CSSBX Class C: CSSCX
Class I: CVUIX Class R: CSVRX Class R4: CVVRX
Class R5: CUURX Class Y: CSVYX Class Z: CSCZX
Columbia Strategic Income Fund
Class A: COSIX Class B: CLSBX Class C: CLSCX
Class K: CSIVX Class R: CSNRX Class R4: CMNRX
Class R5: CTIVX Class W: CTTWX Class Y: CPHUX
Class Z: LSIZX    
Columbia Tax-Exempt Fund
Class A: COLTX Class B: CTEBX Class C: COLCX
Class R4: CTERX Class R5: CADMX Class Z: CTEZX
Columbia Total Return Bond Fund
Class A: LIBAX Class B: LIBBX Class C: LIBCX
Class I: CIMIX Class K: CIBKX Class R: CIBRX
Class R4: CBNRX Class R5: CTBRX Class W: CIBWX
Class Y: CTBYX Class Z: SRBFX  
Columbia U.S. Social Bond Fund
Class A: CONAX Class C: CONCX Class R4: CONFX
Class R5: COVNX Class Z: CONZX  
Columbia U.S. Treasury Index Fund
Class A: LUTAX Class B: LUTBX Class C: LUTCX
Class I: CUTIX Class R5: CUTRX Class W: CTIWX
Class Y*: - Class Z: IUTIX  
*This class of shares is not currently available for purchase.
** Effective on or about October 12, 2016, the Fund will change its name from Active Portfolios® Multi-Manager Alternative Strategies Fund to Active Portfolios® Multi-Manager Alternatives Fund.
Unless the context indicates otherwise, references herein to “each Fund,” “the Fund,” “a Fund,” “the Funds” or “Funds” refers to each Fund listed above.
This Statement of Additional Information (SAI) is not a prospectus, is not a substitute for reading any prospectus and is intended to be read in conjunction with each Fund’s current prospectus (as amended or supplemented), the date of which may be found in the section of this SAI entitled About the Trust . The most recent annual report for each Fund, which includes the Fund’s audited financial statements for its most recent fiscal period, is incorporated by reference into this SAI.
Copies of the Funds' current prospectuses and annual and semiannual reports may be obtained without charge by writing Columbia Management Investment Services Corp., P.O. Box 8081, Boston, MA 02266-8081, by calling Columbia Funds at 800.345.6611 or by visiting the Columbia Funds’ website at www.columbiathreadneedle.com/us.

 

Table of Contents
    

2

7

10

18

18

54

81

82

83

83

108

119

125

126

128

132

133

135

140

140

144

144

155

159

159

162

164

165

172

172

172

173

178

181

183

183

184

186

186

187

189

205

246

A-1

B-1

C-1

D-1

S-1
Statement of Additional Information – October 3, 2016 1

 

Table of Contents
SAI PRIMER
The SAI is a part of the Funds' registration statement that is filed with the SEC. The registration statement includes the Funds' prospectuses, the SAI and certain exhibits. The SAI, and any supplements to it, can be found online at www.columbiathreadneedle.com/us and/or by accessing the SEC’s website at www.sec.gov.
For purposes of any electronic version of this SAI, all references to websites or universal resource locators (URLs), are intended to be inactive and are not meant to incorporate the contents of any such website or URL into this SAI.
The SAI generally provides additional information about the Funds that is not required to be in the Funds' prospectuses. The SAI expands discussions of certain matters described in the Funds' prospectuses and provides certain additional information about the Funds that may be of interest to some investors. Among other things, the SAI provides information about:
the organization of the Trust;
the Funds' investments;
the Funds' investment adviser, investment subadviser(s) (if any) and other service providers, including roles and relationships of Ameriprise Financial and its affiliates, and conflicts of interest;
the governance of the Funds;
the Funds' brokerage practices;
the share classes offered by the Funds;
the purchase, redemption and pricing of Fund shares; and
the application of U.S. federal income tax laws.
Investors may find this information important and helpful. If you have any questions about the Funds, please call Columbia Funds at 800.345.6611 or contact your financial advisor.
Before reading the SAI, you should consult the prospectus for the Fund as well as the Glossary below, which defines certain of the terms used in the SAI.
Glossary
1933 Act Securities Act of 1933, as amended
1934 Act Securities Exchange Act of 1934, as amended
1940 Act Investment Company Act of 1940, as amended
Analytic Investors Analytic Investors, LLC
Active Portfolio Funds AP – Alternatives Fund, AP – Directional Alternatives Fund, AP – Growth Fund, AP – Small Cap Equity Fund, and AP – Total Return Bond Fund
Administrative Services Agreement The Administrative Services Agreement, as amended, if applicable, between a Trust, on behalf of the Funds, and the Investment Manager
Ameriprise Financial Ameriprise Financial, Inc.
AQR AQR Capital Management, LLC
BANA Bank of America, National Association
Bank of America Bank of America Corporation
BFDS/DST Boston Financial Data Services, Inc./DST Systems, Inc.
BMO BMO Asset Management Corp.
Board The Trust's Board of Trustees
Boston Partners Boston Partners, a d.b.a. of Boston Partners Global Investors, Inc.
Statement of Additional Information – October 3, 2016 2

 

Table of Contents
Business Day Any day on which the NYSE is open for business. A business day typically ends at the close of regular trading on the NYSE, usually at 4:00 p.m. Eastern time. If the NYSE is scheduled to close early, the business day will be considered to end as of the time of the NYSE’s scheduled close. The Fund will not treat an intraday unscheduled disruption in NYSE trading or an intraday unscheduled closing as a close of regular trading on the NYSE for these purposes and will price its shares as of the regularly scheduled closing time for that day (typically, 4:00 p.m. Eastern time). Notwithstanding the foregoing, the NAV of Fund shares may be determined at such other time or times (in addition to or in lieu of the time set forth above) as the Fund’s Board may approve or ratify. On holidays and other days when the NYSE is closed, the Fund's NAV is not calculated and the Fund does not accept buy or sell orders. However, the value of the Fund's assets may still be affected on such days to the extent that the Fund holds foreign securities that trade on days that foreign securities markets are open.
CEA Commodity Exchange Act
CFST Columbia Funds Series Trust
CFST I Columbia Funds Series Trust I
CFST II Columbia Funds Series Trust II
CFTC The United States Commodities Futures Trading Commission
CMOs Collateralized mortgage obligations
Code Internal Revenue Code of 1986, as amended
Codes of Ethics The codes of ethics adopted by the Funds, the Investment Manager, Columbia Management Investment Distributors, Inc. and/or any sub-adviser, as applicable, pursuant to Rule 17j-1 under the 1940 Act
Columbia Funds Complex The fund complex that is comprised of the registered investment companies advised by the Investment Manager or its affiliates
Columbia Funds or Columbia Fund Family The open-end investment management companies, including the Funds, advised by the Investment Manager or its affiliates or principally underwritten by the Distributor
Columbia Management Columbia Management Investment Advisers, LLC
Conestoga Conestoga Capital Advisors, LLC
Custodian JPMorgan Chase Bank, N.A.
CVP – Managed Volatility Funds Columbia Variable Portfolio – Managed Volatility Conservative Fund, Columbia Variable Portfolio – Managed Volatility Conservative Growth Fund, Columbia Variable Portfolio – Managed Volatility Growth Fund and Columbia Variable Portfolio – Managed Volatility Moderate Growth Fund
DGHM Dalton, Greiner, Hartman, Maher & Co., LLC
Distribution Agreement The Distribution Agreement between the Trust, on behalf of the Funds, and the Distributor
Distribution Plan(s) One or more of the plans adopted by the Board pursuant to Rule 12b-1 under the 1940 Act for the distribution of the Funds’ shares
Distributor Columbia Management Investment Distributors, Inc.
EAM EAM Investors, LLC
FDIC Federal Deposit Insurance Corporation
Federated Federated Investment Management Company
FHLMC The Federal Home Loan Mortgage Corporation
Fitch Fitch, Inc.
FNMA Federal National Mortgage Association
The Fund(s) or a Fund One or more of the open-end management investment companies listed on the front cover of this SAI
GNMA Government National Mortgage Association
Statement of Additional Information – October 3, 2016 3

 

Table of Contents
Independent Trustees The Trustees of the Board who are not “interested persons” (as defined in the 1940 Act) of the Funds
Interested Trustees The Trustees of the Board who are currently deemed to be “interested persons” (as defined in the 1940 Act) of the Funds
Investment Management Services Agreement The Investment Management Services Agreement, as amended, if applicable, between the Trust, on behalf of the Funds, and the Investment Manager
Investment Manager Columbia Management Investment Advisers, LLC
IRS United States Internal Revenue Service
JPMorgan JPMorgan Chase Bank, N.A., the Funds' custodian
LIBOR London Interbank Offered Rate
Loomis Sayles Loomis, Sayles & Company, L.P.
Management Agreement The Management Agreements, as amended, if applicable, between the Trust, on behalf of the Funds, and the Investment Manager
Moody’s Moody’s Investors Service, Inc.
NASDAQ National Association of Securities Dealers Automated Quotations system
   
NAV Net asset value per share of a Fund
NRSRO Nationally recognized statistical ratings organization (such as, for example, Moody’s, Fitch or S&P)
NSCC National Securities Clearing Corporation
NYSE New York Stock Exchange
Previous Adviser Columbia Management Advisors, LLC, the investment adviser of certain Columbia Funds prior to May 1, 2010 when Ameriprise Financial acquired the long-term asset management business of the Previous Adviser, which is an indirect wholly-owned subsidiary of Bank of America.
Previous Distributor Columbia Management Distributors, Inc., the distributor of certain Columbia Funds prior to May 1, 2010 when Ameriprise Financial acquired the long-term asset management business of the Previous Adviser, which is an indirect wholly-owned subsidiary of Bank of America.
Previous Transfer Agent Columbia Management Services, Inc., the transfer agent of certain Columbia Funds prior to May 1, 2010 when Ameriprise Financial acquired the long-term asset management business of the Previous Adviser, which is an indirect wholly-owned subsidiary of Bank of America.
Prudential PGIM, Inc., the asset management arm of Prudential Financial
    
PwC PricewaterhouseCoopers LLP
REIT Real estate investment trust
REMIC Real estate mortgage investment conduit
RIC A “regulated investment company,” as such term is used in the Code
S&P Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s” and “S&P” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Investment Manager. The Columbia Funds are not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Columbia Funds)
SAI This Statement of Additional Information, as amended and supplemented from time-to-time
SEC United States Securities and Exchange Commission
Statement of Additional Information – October 3, 2016 4

 

Table of Contents
Selling Agent(s) and/or Servicing Agent(s) One or more of the financial intermediaries that are authorized to sell and/or service shares of the Funds, which include, broker-dealers and financial advisors as well as firms that employ such broker-dealers and financial advisors, including, for example, brokerage firms, banks, investment advisors, third party administrators and other financial intermediaries, including Ameriprise Financial and its affiliates.
Shares Shares of a Fund
Subadvisory Agreement The Subadvisory Agreement among the Trust on behalf of the Fund(s), the Investment Manager and a Fund’s investment subadviser(s), as the context may require
Subsidiary One or more wholly-owned subsidiaries of a Fund
TCW TCW Investment Management Company LLC
Threadneedle Threadneedle International Limited
Transfer Agency Agreement The Transfer and Dividend Disbursing Agent Agreement between the Trust, on behalf of the Funds, and the Transfer Agent
Transfer Agent Columbia Management Investment Services Corp.
Trustee(s) One or more members of the Board’s Trustees
Trust Columbia Funds Series Trust I, the registered investment company in the Columbia Fund Family to which this SAI relates
Wasatch Wasatch Advisors Inc
Water Island Water Island Capital, LLC
Statement of Additional Information – October 3, 2016 5

 

Table of Contents
Throughout this SAI, the Funds are referred to as follows:
Fund Name:   Referred to as:
Active Portfolios ® Multi-Manager Alternatives Fund   AP – Alternatives Fund
Active Portfolios ® Multi-Manager Directional Alternatives Fund   AP – Directional Alternatives Fund
Active Portfolios ® Multi-Manager Growth Fund   AP – Growth Fund
Active Portfolios ® Multi-Manager Small Cap Equity Fund   AP – Small Cap Equity Fund
Active Portfolios ® Multi-Manager Total Return Bond Fund   AP – Total Return Bond Fund
CMG Ultra Short Term Bond Fund   Ultra Short Term Bond Fund
Columbia Adaptive Risk Allocation Fund   Adaptive Risk Allocation Fund
Columbia Alternative Beta Fund   Alternative Beta Fund
Columbia AMT-Free Connecticut Intermediate Muni Bond Fund   AMT-Free CT Intermediate Muni Bond Fund
Columbia AMT-Free Intermediate Muni Bond Fund   AMT-Free Intermediate Muni Bond Fund
Columbia AMT-Free Massachusetts Intermediate Muni Bond Fund   AMT-Free MA Intermediate Muni Bond Fund
Columbia AMT-Free New York Intermediate Muni Bond Fund   AMT-Free NY Intermediate Muni Bond Fund
Columbia AMT-Free Oregon Intermediate Muni Bond Fund   AMT-Free OR Intermediate Muni Bond Fund
Columbia Balanced Fund   Balanced Fund
Columbia Bond Fund   Bond Fund
Columbia California Tax-Exempt Fund   CA Tax-Exempt Fund
Columbia Contrarian Core Fund   Contrarian Core Fund
Columbia Corporate Income Fund   Corporate Income Fund
Columbia Disciplined Small Core Fund   Disciplined Small Core Fund
Columbia Diversified Absolute Return Fund   Diversified Absolute Return Fund
Columbia Diversified Real Return Fund   Diversified Real Return Fund
Columbia Dividend Income Fund   Dividend Income Fund
Columbia Emerging Markets Fund   Emerging Markets Fund
Columbia Global Dividend Opportunity Fund   Global Dividend Opportunity Fund
Columbia Global Energy and Natural Resources Fund   Global Energy and Natural Resources Fund
Columbia Global Technology Growth Fund   Global Technology Growth Fund
Columbia Greater China Fund   Greater China Fund
Columbia High Yield Municipal Fund   HY Municipal Fund
Columbia Large Cap Growth Fund   Large Cap Growth Fund
Columbia Mid Cap Growth Fund   Mid Cap Growth Fund
Columbia Multi-Asset Income Fund   Multi-Asset Income Fund
Columbia New York Tax-Exempt Fund   NY Tax-Exempt Fund
Columbia Pacific/Asia Fund   Pacific/Asia Fund
Columbia Real Estate Equity Fund   Real Estate Equity Fund
Columbia Select Large Cap Growth Fund   Select Large Cap Growth Fund
Columbia Small Cap Growth Fund I   Small Cap Growth Fund I
Columbia Small Cap Value Fund I   Small Cap Value Fund I
Columbia Strategic Income Fund   Strategic Income Fund
Columbia Tax-Exempt Fund   Tax-Exempt Fund
Columbia Total Return Bond Fund   Total Return Bond Fund
Columbia U.S. Social Bond Fund   U.S. Social Bond Fund
Columbia U.S. Treasury Index Fund   U.S. Treasury Index Fund
Statement of Additional Information – October 3, 2016 6

 

Table of Contents
ABOUT THE Trust
The Trust is an open-end management investment company registered under the 1940 Act with an address at 225 Franklin Street, Boston, Massachusetts 02110.
The Trust was organized as a Massachusetts business trust on October 6, 1987. On October 13, 2003, the Trust changed its name from Liberty-Stein Roe Funds Municipal Trust to Columbia Funds Trust IX. On September 19, 2005, the Trust changed its name from Columbia Funds Trust IX to its current name. The offering of the shares is registered under the 1933 Act.
Fund Fiscal Year End Prospectus Date Date Began
Operations*
Diversified** Fund Investment Category***
Adaptive Risk Allocation Fund May 31 10/1/2016 6/19/2012 No Alternative
Alternative Beta Fund May 31 10/1/2016 1/28/2015 No Alternative
AMT-Free CT Intermediate Muni Bond Fund October 31 3/1/2016 8/1/1994 No Tax-exempt fixed-income
AMT-Free Intermediate Muni Bond Fund October 31 3/1/2016 6/14/1993 Yes Tax-exempt fixed-income
AMT-Free MA Intermediate Muni Bond Fund October 31 3/1/2016 6/14/1993 No Tax-exempt fixed-income
AMT-Free NY Intermediate Muni Bond Fund October 31 3/1/2016 12/31/1991 No Tax-exempt fixed-income
AMT-Free OR Intermediate Muni Bond Fund July 31 12/1/2015 7/2/1984 Yes Tax-exempt fixed-income
AP – Alternatives Fund August 31 1/1/2016 4/23/2012 No Alternative
AP – Directional Alternatives Fund April 30 10/3/2016 No Alternative
AP – Growth Fund March 31 8/1/2016 4/20/2012 Yes Equity
AP – Small Cap Equity Fund August 31 1/1/2016 4/20/2012 Yes Equity
AP – Total Return Bond Fund August 31 1/1/2016 4/20/2012 Yes Taxable fixed-income
Balanced Fund August 31 1/1/2016 10/1/1991 Yes Equity/Taxable fixed-income
Bond Fund April 30 9/1/2016 1/9/1986 Yes Taxable fixed-income
CA Tax-Exempt Fund October 31 3/1/2016 6/16/1986 No Tax-exempt fixed-income
Contrarian Core Fund August 31 1/1/2016 12/14/1992 Yes Equity
Corporate Income Fund April 30 9/1/2016 3/5/1986 Yes Taxable fixed-income
Disciplined Small Core Fund August 31 1/1/2016 12/14/1992 Yes Equity
Diversified Absolute Return Fund May 31 10/1/2016 2/19/2015 Yes Alternative
Diversified Real Return Fund January 31 6/1/2016 3/11/2014 Yes Fund-of-funds-fixed income
Dividend Income Fund May 31 10/1/2016 3/4/1998 Yes Equity
Emerging Markets Fund August 31 1/1/2016 1/2/1998 Yes Equity
Global Dividend Opportunity Fund August 31 1/1/2016 11/9/2000 Yes Equity
Global Energy and Natural Resources Fund August 31 1/1/2016 12/31/1992 No Equity
Global Technology Growth Fund August 31 1/1/2016 11/9/2000 No Equity
Greater China Fund August 31 1/1/2016 5/16/1997 No Equity
HY Municipal Fund May 31 10/1/2016 3/5/1984 Yes Tax-exempt fixed-income
Large Cap Growth Fund July 31 12/1/2015 12/14/1990 Yes Equity
Mid Cap Growth Fund August 31 1/1/2016 11/20/1985 Yes Equity
Multi-Asset Income Fund April 30 9/1/2016 3/27/2015 Yes Flexible
NY Tax-Exempt Fund October 31 3/1/2016 9/26/1986 No Tax-exempt fixed-income
Pacific/Asia Fund March 31 8/1/2016 12/31/1992 Yes Equity
Real Estate Equity Fund December 31 5/1/2016 4/1/1994 No Equity
Statement of Additional Information – October 3, 2016 7

 

Table of Contents
Fund Fiscal Year End Prospectus Date Date Began
Operations*
Diversified** Fund Investment Category***
Select Large Cap Growth Fund March 31 8/1/2016 10/1/1997 Yes Equity
Small Cap Growth Fund I August 31 1/1/2016 10/1/1996 Yes Equity
Small Cap Value Fund I April 30 9/1/2016 7/25/1986 Yes Equity
Strategic Income Fund October 31 3/1/2016 4/21/1977 Yes Taxable fixed-income
Tax-Exempt Fund July 31 12/1/2015 11/21/1978 Yes Tax-exempt fixed-income
Total Return Bond Fund April 30 9/1/2016 12/5/1978 Yes Taxable fixed-income
U.S. Social Bond Fund July 31 12/1/2015 3/26/2015 No Tax-exempt fixed-income
U.S. Treasury Index Fund April 30 9/1/2016 6/4/1991 Yes Taxable fixed-income
Ultra Short Term Bond Fund July 31 12/1/2015 3/8/2004 Yes Taxable fixed-income
The Fund is expected to commence operations on or about October 12, 2016.
* Certain Funds reorganized into series of the Trust. The date of operations for these Funds represents the date on which the predecessor funds began operation.
** A “diversified” Fund may not, with respect to 75% of its total assets, invest more than 5% of its total assets in securities of any one issuer or purchase more than 10% of the outstanding voting securities of any one issuer, except obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and except securities of other investment companies. A “non-diversified” Fund may invest a greater percentage of its total assets in the securities of fewer issuers than a “diversified” fund, which increases the risk that a change in the value of any one investment held by the Fund could affect the overall value of the Fund more than it would affect that of a “diversified” fund holding a greater number of investments. Accordingly, a “non-diversified” Fund’s value will likely be more volatile than the value of a more diversified fund.
*** The Fund Investment Category is used as a convenient way to describe Funds in this SAI and should not be deemed a description of the Fund’s principal investment strategies, which are described in the Fund’s prospectus.
Statement of Additional Information – October 3, 2016 8

 

Table of Contents
Name Changes. The table below identifies the Funds whose names have changed in the past five years, the effective date of the name change and the former name.
Fund Effective Date of Name Change Previous Fund Name
Adaptive Risk Allocation October 1, 2014 Columbia Risk Allocation Fund
Alternative Beta Fund October 1, 2016 Columbia Adaptive Alternatives Fund
AMT-Free CT Intermediate Muni Bond Fund July 7, 2014 Columbia Connecticut Intermediate Municipal Bond Fund
AMT-Free Intermediate Muni Bond Fund July 7, 2014 Columbia Intermediate Municipal Bond Fund
AMT-Free MA Intermediate Muni Bond Fund July 7, 2014 Columbia Massachusetts Intermediate Municipal Bond Fund
AMT-Free NY Intermediate Muni Bond Fund July 7, 2014 Columbia New York Intermediate Municipal Bond Fund
AMT-Free OR Intermediate Muni Bond Fund July 7, 2014 Columbia Oregon Intermediate Muni Bond Fund
AP – Alternatives Fund October 12, 2016 Active Portfolios ® – Multi-Manager Alternative Strategies Fund
AP – Growth Fund December 11, 2013 Columbia Active Portfolios ® – Select Large Cap Growth Fund
AP – Total Return Bond Fund April 11, 2016 Active Portfolios ® – Multi-Manager Core Plus Bond Fund
Disciplined Small Core Fund April 18, 2016 Columbia Small Cap Core Fund
Global Dividend Opportunity Fund August 17, 2012 Columbia Strategic Investor Fund
Global Energy and Natural Resources Fund August 5, 2013 Columbia Energy and Natural Resources Fund
Global Technology Growth Fund July 7, 2014 Columbia Technology Fund
Total Return Bond Fund February 19, 2016 Columbia Intermediate Bond Fund
Statement of Additional Information – October 3, 2016 9

 

Table of Contents
FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT POLICIES
The following discussion of “fundamental” and “non-fundamental” investment policies and limitations for each Fund supplements the discussion of investment policies in the Funds' prospectuses. A fundamental policy may be changed only with Board and shareholder approval. A non-fundamental policy may be changed only with Board approval and does not require shareholder approval.
Unless otherwise noted in a Fund’s prospectus or this SAI, whenever an investment policy or limitation states a maximum percentage of a Fund’s assets that may be invested in any security or other asset, or sets forth a policy regarding an investment standard, compliance with such percentage limitation or standard will be determined solely at the time of the Fund’s acquisition of such security or asset (Time of Purchase Standard). Thus, a Fund may continue to hold a security even though it causes the Fund to exceed a percentage limitation because of fluctuation in the value of the Fund’s assets.
Notwithstanding any of a Fund’s other investment policies, the Fund, subject to certain limitations, may invest its assets in another investment company. These underlying funds have adopted their own investment policies that may be more or less restrictive than those of the Fund. Unless a Fund has a policy to consider the policies of underlying funds, the Fund may engage in investment strategies indirectly that would otherwise be prohibited under the Fund’s investment policies.
In adhering to the fundamental and non-fundamental investment restrictions and policies applicable to each of Alternative Beta Fund, AP – Alternatives Fund and Diversified Absolute Return Fund, each Fund will, to the extent possible, treat any assets of its Subsidiary generally as if the assets were held directly by the Fund.
Fundamental Policies
The table below shows Fund-specific policies that may be changed only with a “vote of a majority of the outstanding voting securities” of the Fund, which means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. The table indicates whether or not a fund has a policy on a particular topic. A dash indicates that the Fund does not have a Fundamental policy on a particular topic. The specific policy is stated in the paragraphs that follow the table.
Fund A
Buy or
sell real
estate
B
Buy or sell
commodities
C
Issuer
Diversification
D
Concentrate
in any one
industry
E
Invest
80%
F
Act as an
underwriter
G
Lending
H
Borrow
money
I
Issue
senior
securities
Adaptive Risk Allocation Fund A1 B1 D1 F1 G1 H1 I1
Alternative Beta Fund A2 B4 D6 F2 G2 H2 I2
AMT-Free CT Intermediate Muni Bond Fund A1 B1 D1 E2 F1 G1 H1 I1
AMT-Free Intermediate Muni Bond Fund A1 B1 C1 D1 E3 F1 G1 H1 I1
AMT-Free MA Intermediate Muni Bond Fund A1 B1 D1 E4 F1 G1 H1 I1
AMT-Free NY Intermediate Muni Bond Fund A1 B1 D1 E5 F1 G1 H1 I1
AMT-Free OR Intermediate Muni Bond Fund A1 B1 C3 D1 E6 F1 G1 H1 I1
AP – Alternatives Fund A1 B2 D1 F1 G1 H1 I1
AP – Directional Alternatives Fund A2 B5 D7 F2 G3 H3 I3
AP – Growth Fund A1 B1 C1 D1 F1 G1 H1 I1
AP – Small Cap Equity Fund A1 B1 C1 D1 F1 G1 H1 I1
AP – Total Return Bond Fund A1 B1 C1 D1 F1 G1 H1 I1
Balanced Fund A1 B1 C1 D1 F1 G1 H1 I1
Bond Fund A1 B1 C1 D1 F1 G1 H1 I1
CA Tax-Exempt Fund A1 B1 D1 E1 F1 G1 H1 I1
Contrarian Core Fund A1 B1 C1 D1 F1 G1 H1 I1
Corporate Income Fund A1 B1 C1 D1 F1 G1 H1 I1
Disciplined Small Core Fund A1 B1 C1 D1 F1 G1 H1 I1
Diversified Absolute Return Fund A2 B4 C4 D6 F2 G2 H2 I2
Diversified Real Return Fund A1 B3 C1 D5 F1 G1 H1 I1
Dividend Income Fund A1 B1 C1 D1 F1 G1 H1 I1
Statement of Additional Information – October 3, 2016 10

 

Table of Contents
Fund A
Buy or
sell real
estate
B
Buy or sell
commodities
C
Issuer
Diversification
D
Concentrate
in any one
industry
E
Invest
80%
F
Act as an
underwriter
G
Lending
H
Borrow
money
I
Issue
senior
securities
Emerging Markets Fund A1 B1 C1 D1 F1 G1 H1 I1
Global Dividend Opportunity Fund A1 B1 C1 D1 F1 G1 H1 I1
Global Energy and Natural Resources Fund A1 B1 D2 F1 G1 H1 I1
Global Technology Growth Fund A1 B1 D4 E9 F1 G1 H1 I1
Greater China Fund A1 B1 C2 D1 F1 G1 H1 I1
HY Municipal Fund A1 B1 C1 D1 F1 G1 H1 I1
Large Cap Growth Fund A1 B1 C1 D1 F1 G1 H1 I1
Mid Cap Growth Fund A1 B1 C1 D1 F1 G1 H1 I1
Multi-Asset Income Fund A2 B4 C4 D6 F2 G2 H2 I2
NY Tax-Exempt Fund A1 B1 D1 E1 F1 G1 H1 I1
Pacific/Asia Fund A1 B1 C1 D1 F1 G1 H1 I1
Real Estate Equity Fund A1 B1 D3 E7 F1 G1 H1 I1
Select Large Cap Growth Fund A1 B1 C1 D1 F1 G1 H1 I1
Small Cap Growth Fund I A1 B1 C1 D1 F1 G1 H1 I1
Small Cap Value Fund I A1 B1 C1 D1 F1 G1 H1 I1
Strategic Income Fund A1 B1 C1 D1 F1 G1 H1 I1
Tax-Exempt Fund A1 B1 C1 D1 E8 F1 G1 H1 I1
Total Return Bond Fund A1 B1 C1 D1 F1 G1 H1 I1
U.S. Social Bond Fund A2 B4 D6 F2 G2 H2 I2
U.S. Treasury Index Fund A1 B1 C1 D1 F1 G1 H1 I1
Ultra Short Term Bond Fund A1 B1 C1 D1 F1 G1 H1 I1
A. Buy or sell real estate
A1 – The Fund may not purchase or sell real estate, except each Fund may: (i) purchase securities of issuers which deal or invest in real estate, (ii) purchase securities which are secured by real estate or interests in real estate and (iii) hold and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of securities which are secured by real estate or interests therein.
A2 – The Fund will not buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the Fund from investing in: (i) securities or other instruments backed by real estate or interests in real estate, (ii) securities or other instruments of issuers or entities that deal in real estate or are engaged in the real estate business, (iii) real estate investment trusts (REITs) or entities similar to REITs formed under the laws of non-U.S. countries or (iv) real estate or interests in real estate acquired through the exercise of its rights as a holder of securities secured by real estate or interests therein.
B. Buy or sell physical commodities
B1 – The Fund may not purchase or sell commodities, except that each Fund may to the extent consistent with its investment objective: (i) invest in securities of companies that purchase or sell commodities or which invest in such programs, (ii) purchase and sell options, forward contracts, futures contracts, and options on futures contracts and (iii) enter into swap contracts and other financial transactions relating to commodities. (a) This limitation does not apply to foreign currency transactions including without limitation forward currency contracts.
B2 – The Fund may invest up to 25% of its total assets in one or more wholly-owned subsidiaries that may invest in commodities, thereby indirectly gaining exposure to commodities, and may, to the extent consistent with its investment objective, (i) invest in securities of companies that purchase or sell commodities or which invest in such programs, (ii) purchase and sell options, forward contracts, futures contracts, and options on futures contracts and (iii) enter into swap contracts and other financial transactions relating to commodities. (a) This policy does not limit foreign currency transactions including without limitation forward currency contracts.
B3 – The Fund will not purchase or sell commodities, except to the extent permitted by applicable law from time to time.
Statement of Additional Information – October 3, 2016 11

 

Table of Contents
B4 – The Fund will not purchase or sell commodities, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief, as interpreted or modified by regulatory authority having jurisdiction, from time to time.
B5 – The Fund will not purchase or sell commodities, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.

(a) For purposes of the fundamental investment policy on buying and selling physical commodities above, at the time of the establishment of the restriction for certain Funds, swap contracts on financial instruments or rates were not within the understanding of the term “commodities.” Notwithstanding any federal legislation or regulatory action by the CFTC that subjects such swaps to regulation by the CFTC, these Funds will not consider such instruments to be commodities for purposes of this restriction.
C. Issuer Diversification*
C1 – The Fund may not purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that: (i) up to 25% of its total assets may be invested without regard to these limitations and (ii) a Fund’s assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder, or any applicable exemptive relief.
C2 – The Fund may not, as a matter of fundamental policy, purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that: (i) up to 50% of its total assets may be invested without regard to these limitations and (ii) the Fund’s assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder, or any applicable exemptive relief.
C3 – The Fund will not make any investment inconsistent with its classification as a diversified company under the 1940 Act.
C4 – The Fund will not purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that: (a) up to 25% of its total assets may be invested without regard to these limitations; and (b) a Fund’s assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder, or any applicable exemptive relief, as interpreted or modified by regulatory authority having jurisdiction, from time to time.

* For purposes of applying the limitation set forth in its issuer diversification policy above, a Fund does not consider futures or swaps central counterparties, where the Fund has exposure to such central counterparties in the course of making investments in futures and securities, to be issuers.
D. Concentration*
D1 – The Fund may not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (i) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States or any of their agencies, instrumentalities or political subdivisions; and (ii) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies or subsidiaries to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
D2 – The Fund may not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (i) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States or any of their agencies, instrumentalities or political subdivisions; (ii) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies or subsidiaries to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief; and (iii) under normal market conditions, the Fund will invest at least 25% of the value of its total assets at the time of purchase in the securities of issuers conducting their principal business activities in the energy and other natural resources groups of industries. (a)
Statement of Additional Information – October 3, 2016 12

 

Table of Contents
D3 – The Fund will invest at least 65% of the value of its total assets in securities of companies principally engaged in the real estate industry.
D4 – The Fund will, under normal market conditions, invest at least 25% of the value of its total assets at the time of purchase in the securities of issuers conducting their principal business activities in the technology and related group of industries, provided that: (i) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States or any of their agencies, instrumentalities or political subdivisions; and (ii) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies or subsidiaries to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
D5 – The Fund may not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (i) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state, municipality or territory of the United States, or any of their agencies, instrumentalities or political subdivisions; and (ii) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies or subsidiaries to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief. The Fund will consider the concentration policies of any underlying funds in which it invests when evaluating compliance with its concentration policy.
D6 – The Fund will not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (i) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state, municipality or territory of the United States or any of their agencies, instrumentalities or political subdivisions; and (ii) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more investment companies or subsidiaries to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief, as interpreted or modified by regulatory authority having jurisdiction, from time to time. The Fund will consider the concentration policies of any underlying funds in which it invests when evaluating compliance with its concentration policy.
D7 – The Fund will not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (i) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States or any of their agencies, instrumentalities or political subdivisions; and (ii) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more investment companies or subsidiaries to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.

* For purposes of applying the limitation set forth in its concentration policy, above, a Fund will generally use the industry classifications provided by the Global Industry Classification System (GICS) for classification of issuers of equity securities and the classifications provided by the Barclays Capital Aggregate Bond Index for classification of issues of fixed-income securities. To the extent that a Fund’s concentration policy requires the Fund to consider the concentration policies of any underlying funds in which it invests, the Fund will consider the portfolio positions at the time of purchase, which in the case of unaffiliated underlying funds is based on portfolio information made publicly available by them. Investments in private activity bonds that are backed only by the assets and revenues of a non-governmental issuer are subject to a Fund's industry concentration policy. A Fund does not consider futures or swaps clearinghouses or securities clearinghouses, where the Fund has exposure to such clearinghouses in the course of making investments in futures and securities, to be part of any industry.
(a) In determining whether Global Energy and Natural Resources Fund has invested at least 25% of the value of its total assets in the securities of one or more issuers conducting their principal business activities in the energy and other natural resources groups of industries, the Investment Manager currently uses the GICS produced by S&P and MSCI Inc. The Investment Manager currently considers companies in each of the indicated GICS industry groups to be within the energy and other natural resources groups of industries: (i) Energy, (ii) Utilities, and (iii) Materials, but limited to companies in the following GICS industries and sub-industries: the Chemicals industry (companies that primarily produce or distribute industrial and basic chemicals, including the Commodity Chemicals, Diversified Chemicals, Fertilizers & Agriculture Chemicals, Industrial Gases, and Specialty Chemicals sub-industries), the Metals & Mining industry (companies that primarily produce, process, extract, or distribute precious or basic metals or minerals, including the Aluminum, Diversified Metals & Mining, Gold, Precious Metals & Minerals, and Steel sub-industries), and the Paper & Forest Products industry (companies that primarily cultivate or manufacture timber or wood-related products or paper products, including the Forest Products and Paper Products sub-industries).
E. Invest 80%
E1 – The Fund will, under normal circumstances, invest at least 80% of its total assets in state bonds, subject to applicable state requirements.
E2 – Under normal circumstances, the Fund invests at least 80% of net assets in municipal securities that pay interest exempt from federal income tax (including the federal alternative minimum tax) and Connecticut individual income tax. These securities are issued by the State of Connecticut and its political subdivisions, agencies, authorities and
Statement of Additional Information – October 3, 2016 13

 

Table of Contents
  instrumentalities, by other qualified issuers (such as Guam, Puerto Rico and the U.S. Virgin Islands) and by mutual funds that invest in such securities. Dividends derived from interest on municipal securities other than such securities will generally be exempt from regular federal income tax (including the federal alternative minimum tax) but subject to Connecticut personal income tax. The Fund may comply with this 80% policy by investing in a partnership, trust or regulated investment company which invests in such securities, in which case the Fund’s investment in such entity shall be deemed to be an investment in the underlying securities in the same proportion as such entity’s investment in such securities bears to its net assets.
E3 – As a matter of fundamental policy, under normal circumstances, the Fund invests at least 80% of net assets in municipal securities that pay interest exempt from federal income tax (including the federal alternative minimum tax). These securities are issued by states and their political subdivisions, agencies, authorities and instrumentalities, by other qualified issuers (such as Guam, Puerto Rico and the U.S. Virgin Islands) and by mutual funds that invest in such securities. The Fund may comply with this 80% policy by investing in a partnership, trust, or regulated investment company which invests in such securities, in which case the Fund’s investment in such entity shall be deemed to be an investment in the underlying securities in the same proportion as such entity’s investment in such securities bears to its net assets.
E4 – Under normal circumstances, the Fund invests at least 80% of net assets in municipal securities that pay interest exempt from federal income tax (including the federal alternative minimum tax) and Massachusetts individual income tax. These securities are issued by the Commonwealth of Massachusetts and its political subdivisions, agencies, authorities and instrumentalities, by other qualified issuers (such as Guam, Puerto Rico and the U.S. Virgin Islands) and by mutual funds that invest in such securities. Dividends derived from interest on municipal securities other than such securities will generally be exempt from regular federal income tax (including the federal alternative minimum tax) but may be subject to Massachusetts personal income tax. The Fund may comply with this 80% policy by investing in a partnership, trust, or regulated investment company which invests in such securities, in which case the Fund’s investment in such entity shall be deemed to be an investment in the underlying securities in the same proportion as such entity’s investment in such securities bears to its net assets.
E5 – As a matter of fundamental policy, under normal circumstances, the Fund invests at least 80% of net assets in municipal securities that pay interest exempt from federal income tax (including the federal alternative minimum tax) and New York State individual income tax. These securities are issued by the State of New York and its political subdivisions, agencies, authorities and instrumentalities and by other qualified issuers (such as Guam, Puerto Rico and the U.S. Virgin Islands). Dividends derived from interest on municipal securities other than such securities will generally be exempt from regular federal income tax (including the federal alternative minimum tax) but may be subject to New York State and New York City personal income tax. The Fund may comply with this 80% policy by investing in a partnership, trust or regulated investment company which invests in such securities, in which case the Fund’s investment in such entity shall be deemed to be an investment in the underlying securities in the same proportion as such entity’s investment in such securities bears to its net assets.
E6 – Under normal circumstances, the Fund invests at least 80% of its net assets in municipal securities issued by the State of Oregon and its political subdivisions, agencies, authorities and instrumentalities.
E7 – Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities of companies principally engaged in the real estate industry, including REITs.
E8 – Under normal circumstances, the Fund invests at least 80% of its total assets in tax-exempt bonds.
E9 – Under normal circumstances, the Fund invests at least 80% of net assets in equity securities (including, but not limited to, common stocks, preferred stocks and securities convertible into common or preferred stocks) of technology companies that may benefit from technological improvements, advancements or developments.
F. Act as an underwriter
F1 – The Fund may not underwrite any issue of securities issued by other persons within the meaning of the 1933 Act except when it might be deemed to be an underwriter either: (i) in connection with the disposition of a portfolio security; or (ii) in connection with the purchase of securities directly from the issuer thereof in accordance with the Fund’s investment objective. This restriction shall not limit the Fund’s ability to invest in securities issued by other registered investment companies.
F2 – The Fund will not underwrite any issue of securities issued by other persons within the meaning of the 1933 Act except when it might be deemed to be an underwriter either: (i) in connection with the disposition of a portfolio security; or (ii) in connection with the purchase of securities directly from the issuer where the Fund later resells such securities. This restriction shall not limit the Fund’s ability to invest in securities issued by other registered investment companies.
Statement of Additional Information – October 3, 2016 14

 

Table of Contents
G. Lending
G1 – The Fund may not make loans, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
G2 – The Fund will not make loans, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief, as interpreted or modified by regulatory authority having jurisdiction, from time to time.
G3 – The Fund will not make loans, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
H. Borrowing
H1 – The Fund may not borrow money except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
H2 – The Fund will not borrow money except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief, as interpreted or modified by regulatory authority having jurisdiction, from time to time.
H3 – The Fund will not borrow money except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
I. Issue senior securities
I1 – The Fund may not issue senior securities, except as permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
I2 – The Fund will not issue senior securities, except as permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief, as interpreted or modified by regulatory authority having jurisdiction, from time to time.
I3 – The Fund will not issue senior securities, except as permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
Non-fundamental Policies
The following non-fundamental policies may be changed by the Board at any time and may be in addition to those described in the Funds' prospectus.
Investment in Illiquid Securities
No more than 15% of the net assets of any Fund will be held in securities and other instruments that are illiquid. “Illiquid Securities” are defined in accordance with the SEC staff’s current guidance and interpretations which provide that an illiquid security is a security which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the security. Compliance with this limitation is not measured under the Time of Purchase Standard.
Investment in Other Investment Companies
The Funds may not purchase securities of other investment companies except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
Investment in Foreign Securities
Bond Fund may invest up to 25% of its assets in dollar-denominated debt securities issued by foreign governments, companies or other entities.
Balanced Fund, Contrarian Core Fund and Dividend Income Fund each may invest up to 20% of its net assets in foreign securities.
Disciplined Small Core Fund, Large Cap Growth Fund, Mid Cap Growth Fund, Small Cap Growth Fund I and Small Cap Value Fund I each may invest up to 20% of its total assets in foreign securities.
Up to 25% of the net assets of AP – Total Return Bond Fund may be invested in foreign investments, which may include investments in non-U.S. dollar denominated securities, as well as investments in emerging markets securities.
AP – Small Cap Equity Fund may invest up to 25% of its net assets in foreign investments.
Ultra Short Term Bond Fund may invest up to 20% of its total assets in dollar-denominated foreign debt securities.
Statement of Additional Information – October 3, 2016 15

 

Table of Contents
Selling Securities Short
Each Fund (other than those Funds listed below) may not sell securities short, except as permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.
The following Funds may not sell securities short: AMT-Free OR Intermediate Muni Bond Fund, AP – Growth Fund, AP – Total Return Bond Fund, Balanced Fund, Bond Fund, Emerging Markets Fund, Global Dividend Opportunity Fund, Global Energy and Natural Resources Fund, Global Technology Growth Fund, Mid Cap Growth Fund, Pacific/Asia Fund, Real Estate Equity Fund, Select Large Cap Growth Fund and Small Cap Growth Fund I.
Tax-Exempt Fund may not have a short position, unless the Fund owns, or owns rights (exercisable without payment) to acquire, an equal amount of such securities.
Purchasing on Margin
Tax-Exempt Fund may not purchase securities on margin, but may receive short-term credit to clear securities transactions and may make initial or maintenance margin deposits in connection with futures transactions.
Names Rule Policy
To the extent a Fund is subject to Rule 35d-1 under the 1940 Act (the Names Rule), and does not otherwise have a fundamental policy in place to comply with the Names Rule, such Fund has adopted the following non-fundamental policy: Shareholders will receive at least 60 days’ notice of any change to the Fund’s investment objective or principal investment strategies made in order to comply with the Names Rule. The notice will be provided in plain English in a separate written document, and will contain the following prominent statement or similar statement in bold-face type: “Important Notice Regarding Change in Investment Policy.” This statement will appear on both the notice and the envelope in which it is delivered, unless it is delivered separately from other communications to investors, in which case the statement will appear either on the notice or the envelope in which the notice is delivered. A Fund subject to a fundamental policy in place to comply with the Names Rule will disclose in the More Information About the Fund section of its prospectus that its 80% policy cannot be changed without shareholder approval.
Summary of 1940 Act Restrictions on Certain Activities
Certain of the Fund’s fundamental and, if any, non-fundamental policies set forth above prohibit transactions “except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief.” The following discussion summarizes the flexibility that the Fund currently gains from these exceptions. To the extent the 1940 Act or the rules and regulations thereunder may, in the future, be amended to provide greater flexibility, or to the extent the SEC may in the future grant exemptive relief providing greater flexibility, the Fund will be able to use that flexibility without seeking shareholder approval of its fundamental policies.
Borrowing money – The 1940 Act permits a Fund to borrow up to 33  1 3 % of its total assets (including the amounts borrowed) from banks, plus an additional 5% of its total assets for temporary purposes, which may be borrowed from banks or other sources. The exception in the fundamental policy allows the Funds to borrow money subject to these conditions. Compliance with this limitation is not measured under the Time of Purchase Standard (meaning, a Fund may not exceed these thresholds including if, after borrowing, the Fund’s net assets decrease due to market fluctuations).
Buy or sell physical commodities – The 1940 Act does not directly limit a Fund’s ability to invest directly in physical commodities. However, a Fund’s direct and indirect investments in physical commodities may be limited by the Fund’s intention to qualify as a RIC, and can limit the Fund’s ability to so qualify. One of the requirements for favorable tax treatment as a RIC under the Code is that a Fund derive at least 90 percent of its gross income from certain qualifying sources of income. Income and gains from direct commodities investments, and from certain indirect investments therein, do not constitute qualifying income for this purpose. A Fund that qualifies for an exclusion from the definition of a commodity pool under the CEA and has on file a notice of exclusion under CFTC Rule 4.5 is limited in its ability to use certain financial instruments regulated under the CEA (“commodity interests”).
Investing in other investment companies – The 1940 Act, in summary, provides that a fund generally may not: (i) purchase more than 3% of the outstanding voting stock of another investment company; (ii) purchase securities issued by another investment company in an amount representing more than 5% of the investing fund’s total assets; or (iii) purchase securities issued by investment companies that in the aggregate represent more than 10% of the acquiring fund’s total assets (the “3, 5 and 10 Rule”). Affiliated funds-of-funds (i.e., those funds that invest in other funds within the same fund family), with respect to investments in such affiliated underlying funds, are not subject to the 3, 5 and 10 Rule and, therefore, may invest in affiliated underlying funds without restriction. A fund-of-funds may also invest its assets in unaffiliated funds, but the fund-of-funds generally may not purchase more than 3% of the outstanding voting stock of any one unaffiliated fund. Additionally, certain exceptions to these limitations apply to investments in money market open-end funds. If shares of the Fund are purchased by an affiliated fund
Statement of Additional Information – October 3, 2016 16

 

Table of Contents
beyond the 3, 5 and 10 Rule in reliance on Section 12(d)(1)(G) of the 1940 Act, for so long as shares of the Fund are held by such other affiliated fund beyond the 3, 5 and 10 Rule, the Fund will not purchase securities of a registered open-end investment company or registered unit investment trust in reliance on Section 12(d)(1)(F) or Section 12(d)(1)(G) of the 1940 Act.
Issuing senior securities – A “senior security” is an obligation with respect to the earnings or assets of a company that takes precedence over the claims of that company’s common stock with respect to the same earnings or assets. The 1940 Act prohibits an open-end fund from issuing senior securities other than certain borrowings from a bank, but SEC staff interpretations allow a Fund to engage in certain types of transactions that otherwise might raise senior security concerns (such as short sales, buying and selling financial futures contracts and other derivative instruments and selling put and call options), provided that the Fund segregates or designates on the Fund’s books and records liquid assets, or otherwise covers the transaction with offsetting portfolio securities, in amounts sufficient to offset any liability associated with the transaction. The exception in the fundamental policy allows the Fund to operate in reliance upon these staff interpretations.
Making loans (Lending) – Under the 1940 Act, an open-end fund may loan money or property to persons who do not control and are not under common control with the Fund, except that a Fund may make loans to a wholly-owned subsidiary. In addition, the SEC staff takes the position that a Fund may not lend portfolio securities representing more than one-third of the Fund’s total value. A Fund must receive from the borrower collateral at least equal in value to the loaned securities, marked to market daily. The exception in the fundamental policy allows the Fund to make loans to third parties, including loans of its portfolio securities, subject to these conditions.
Selling securities short – A Fund may sell a security short by borrowing the security, then selling it to a third party. The Fund will eventually need to close out the short sale by buying the security and returning it, together with interest, to the party from whom the Fund borrowed the security. The SEC staff takes the position that, as described under “Issuing senior securities” above, a mutual fund must segregate or designate on the Fund’s books and records liquid assets with a value equal to, or otherwise cover the obligation to return, the security. The exception in the fundamental policy allows the Fund to sell securities short provided it designates liquid assets with a value equal to, or otherwise covers the obligation to return, the security.
Statement of Additional Information – October 3, 2016 17

 

Table of Contents
ABOUT FUND INVESTMENTS
Each Fund’s investment objective, principal investment strategies and related principal risks are discussed in each Fund’s prospectus. Each Fund’s prospectus identifies the types of securities in which the Fund invests principally and summarizes the principal risks to the Fund’s portfolio as a whole associated with such investments. Unless otherwise indicated in the prospectus or this SAI, the investment objective and policies of a Fund may be changed without shareholder approval.
To the extent that a type of security identified in the table below for a Fund is not described in the Fund’s prospectus (or as a sub-category of such security type in this SAI), the Fund generally invests in such security type, if at all, as part of its non-principal investment strategies.
Information about individual types of securities (including certain of their associated risks) in which some or all of the Funds may invest is set forth below. Each Fund may invest in these types of securities, subject to its investment objective and fundamental and non-fundamental investment policies. A Fund is not required to invest in any or all of the types of securities listed below.
Funds-of-funds invest in a combination of underlying funds, although they may also invest directly in stocks, bonds and other securities. These underlying funds have their own investment strategies and types of investments they are allowed to engage in and purchase. Funds-of-funds may invest directly or indirectly through investments in underlying funds, in securities and other instruments and may engage in the investment strategies indicated in the table below.
Certain Investment Activity Limits. The overall investment and other activities of the Investment Manager and its affiliates may limit the investment opportunities for each Fund in certain markets, industries or transactions or in individual issuers where limitations are imposed upon the aggregate amount of investment by the Funds and other accounts managed by the Investment Manager and accounts of its affiliates (collectively, affiliated investors). From time to time, each Fund’s activities also may be restricted because of regulatory restrictions applicable to the Investment Manager and its affiliates and/or because of their internal policies. See Investment Management and Other Services – Other Roles and Relationships of Ameriprise Financial and its Affiliates – Certain Conflicts of Interest .
Temporary Defensive Positions. Each Fund may from time to time take temporary defensive investment positions that may be inconsistent with the Fund’s principal investment strategies in attempting to respond to adverse market, economic, political, social or other conditions, including, without limitation investing some or all of its assets in money market instruments or shares of affiliated or unaffiliated money market funds or holding some or all of its assets in cash or cash equivalents. The Fund may take such defensive investment positions for as long a period as deemed necessary.
Other Strategic and Investment Measures. A Fund may also from time to time take temporary portfolio positions that may or may not be consistent with the Fund’s principal investment strategies in attempting to respond to adverse market, economic, political, social or other conditions, including, without limitation, investing in derivatives, such as forward contracts, futures contracts, options, structured investments and swaps, for various purposes, including among others, investing in particular derivatives in seeking to reduce investment exposures, or in seeking to achieve indirect investment exposures, to a sector, country, region or currency where the Investment Manager (or Fund subadviser, if applicable) believes such defensive positioning is appropriate. Each Fund may do so without limit and for as long a period as deemed necessary, when the Investment Manager or the Fund’s subadviser, if applicable: (i) believes that market conditions are not favorable for profitable investing or to avoid losses, (ii) is unable to locate favorable investment opportunities; or (iii) determines that a temporary defensive position is advisable or necessary in order to meet anticipated redemption requests, or for other reasons. While the Fund is so positioned, derivatives could comprise a substantial portion of the Fund’s investments and the Fund may not achieve its investment objective. Investing in this manner may adversely affect Fund performance. During these times, the portfolio managers may make frequent portfolio holding changes, which could result in increased trading expenses and taxes, and decreased Fund performance.
Types of Investments
A black circle indicates that the investment strategy or type of investment generally is authorized for a category of Funds. Exceptions are noted following the table. See About the Trust for fund investment categories.
Type of Investment Alternative Equity
and
Flexible
Funds-of-Funds
– Equity and
Fixed Income
Taxable
Fixed
Income (a)
Tax-Exempt
Fixed
Income
Asset-Backed Securities
Bank Obligations (Domestic and Foreign)
Collateralized Bond Obligations
Statement of Additional Information – October 3, 2016 18

 

Table of Contents
Type of Investment Alternative Equity
and
Flexible
Funds-of-Funds
– Equity and
Fixed Income
Taxable
Fixed
Income (a)
Tax-Exempt
Fixed
Income
Commercial Paper
Common Stock
Convertible Securities
Corporate Debt Securities
Custody Receipts and Trust Certificates
Debt Obligations
Depositary Receipts
Derivatives
Dollar Rolls
Exchange-Traded Notes
Foreign Currency Transactions
Foreign Securities
Guaranteed Investment Contracts (Funding Agreements)
High-Yield Securities
Illiquid Securities
Inflation Protected Securities
Initial Public Offerings
Inverse Floaters
Investments in Other Investment Companies (Including ETFs)
Listed Private Equity Funds
Money Market Instruments
Mortgage-Backed Securities
Municipal Securities
Participation Interests
Partnership Securities
Preferred Stock
Private Placement and Other Restricted Securities
Real Estate Investment Trusts
Repurchase Agreements
Reverse Repurchase Agreements
Short Sales (b)
Sovereign Debt
Standby Commitments
U.S. Government and Related Obligations
Variable and Floating Rate Obligations
Warrants and Rights
(a) Total Return Bond Fund is not authorized to purchase common stock or bank obligations. U.S. Treasury Index Fund is not authorized to purchase asset-backed securities, bank obligations, convertible securities, corporate debt obligations (other than money market instruments), depositary receipts, dollar rolls, foreign currency transactions, foreign securities, guaranteed investment contracts, inverse floaters, high-yield securities, mortgage-backed securities, municipal securities, participation interests, partnership securities, REITs, reverse repurchase agreements, short sales, sovereign debt and standby commitments. Ultra Short Term Bond is not authorized to purchase common stock, foreign currency transactions and short sales.
(b) See Fundamental and Non-Fundamental Investment Policies for Funds that are not permitted to sell securities short.
Statement of Additional Information – October 3, 2016 19

 

Table of Contents
Asset-Backed Securities
Asset-backed securities represent interests in, or debt instruments that are backed by, pools of various types of assets that generate cash payments generally over fixed periods of time, such as, among others, motor vehicle installment sales, contracts, installment loan contracts, leases of various types of real and personal property, and receivables from revolving (credit card) agreements. Such securities entitle the security holders to receive distributions ( i.e. , principal and interest) that are tied to the payments made by the borrower on the underlying assets (less fees paid to the originator, servicer, or other parties, and fees paid for credit enhancement), so that the payments made on the underlying assets effectively pass through to such security holders. Asset-backed securities typically are created by an originator of loans or owner of accounts receivable that sells such underlying assets to a special purpose entity in a process called a securitization. The special purpose entity issues securities that are backed by the payments on the underlying assets, and have a minimum denomination and specific term. Asset-backed securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. Collateralized loan obligations (CLOs) are but one example of an asset-backed security. See Types of Investments – Variable- and Floating-Rate Obligations, – Debt Obligations – Zero-Coupon, Pay-in-Kind and Step-Coupon Securities and – Private Placement and Other Restricted Securities for more information.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with asset-backed securities include: Credit Risk, Interest Rate Risk, Liquidity Risk and Prepayment and Extension Risk.
Bank Obligations (Domestic and Foreign)
Bank obligations include certificates of deposit, bankers’ acceptances, time deposits and promissory notes that earn a specified rate of return and may be issued by (i) a domestic branch of a domestic bank, (ii) a foreign branch of a domestic bank, (iii) a domestic branch of a foreign bank or (iv) a foreign branch of a foreign bank. Bank obligations may be structured as fixed-, variable- or floating-rate obligations. See Types of Investments – Variable- and Floating-Rate Obligations for more information.
Certificates of deposit, or so-called CDs, typically are interest-bearing debt instruments issued by banks and have maturities ranging from a few weeks to several years. Yankee dollar certificates of deposit are negotiable CDs issued in the United States by branches and agencies of foreign banks. Eurodollar certificates of deposit are CDs issued by foreign banks with interest and principal paid in U.S. dollars. Eurodollar and Yankee Dollar CDs typically have maturities of less than two years and have interest rates that typically are pegged to the London Interbank Offered Rate or LIBOR. Bankers’ acceptances are time drafts drawn on and accepted by banks, are a customary means of effecting payment for merchandise sold in import-export transactions and are a general source of financing. A time deposit can be either a savings account or CD that is an obligation of a financial institution for a fixed term. Typically, there are penalties for early withdrawals of time deposits. Promissory notes are written commitments of the maker to pay the payee a specified sum of money either on demand or at a fixed or determinable future date, with or without interest.
Bank investment contracts are issued by banks. Pursuant to such contracts, a Fund may make cash contributions to a deposit fund of a bank. The bank then credits to the Fund payments at floating or fixed interest rates. A Fund also may hold funds on deposit with its custodian for temporary purposes.
Certain bank obligations, such as some CDs, are insured by the FDIC up to certain specified limits. Many other bank obligations, however, are neither guaranteed nor insured by the FDIC or the U.S. Government. These bank obligations are “backed” only by the creditworthiness of the issuing bank or parent financial institution. Domestic and foreign banks are subject to different governmental regulation. Accordingly, certain obligations of foreign banks, including Eurodollar and Yankee dollar obligations, involve different and/or heightened investment risks than those affecting obligations of domestic banks, including, among others, the possibilities that: (i) their liquidity could be impaired because of political or economic developments; (ii) the obligations may be less marketable than comparable obligations of domestic banks; (iii) a foreign jurisdiction might impose withholding and other taxes at high levels on interest income; (iv) foreign deposits may be seized or nationalized; (v) foreign governmental restrictions such as exchange controls may be imposed, which could adversely affect the payment of principal and/or interest on those obligations; (vi) there may be less publicly available information concerning foreign banks issuing the obligations; and (vii) the reserve requirements and accounting, auditing and financial reporting standards, practices and requirements applicable to foreign banks may differ (including, less stringent) from those applicable to domestic banks. Foreign banks generally are not subject to examination by any U.S. Government agency or instrumentality. See Types of Investments – Foreign Securities .
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with bank obligations include: Counterparty Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Liquidity Risk, and Prepayment and Extension Risk.
Statement of Additional Information – October 3, 2016 20

 

Table of Contents
Collateralized Bond Obligations
Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of bonds, which may include junk bonds (which are considered speculative investments). CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See Types of Investments – Mortgage-Backed Securities and – Asset-Backed Securities . ) CBOs are often privately offered and sold, and thus not registered under the federal securities laws.
Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then structured into “tranches.” Typically, the first tranche represents a senior claim on collateral and pays the lowest interest rate; the second tranche is junior to the first tranche and therefore subject to greater risk and pays a higher rate; the third tranche is junior to both the first and second tranche, represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments — money that is left over after the higher tranches have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, may earn certain of the tranches investment-grade bond ratings. Holders of third-tranche CBOs stand to earn higher or lower yields depending on the rate of defaults in the collateral pool. See Types of Investments – High-Yield Securities .
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with CBOs include: Credit Risk, Interest Rate Risk, Liquidity Risk, High-Yield Securities Risk and Prepayment and Extension Risk.
Commercial Paper
Commercial paper is a short-term debt obligation, usually sold on a discount basis, with a maturity ranging from 2 to 270 days issued by banks, corporations and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. See Types of Investments — Debt Obligations and — Illiquid Securities. See Appendix A for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with commercial paper include: Credit Risk and Liquidity Risk.
Common Stock
Common stock represents a unit of equity ownership of a corporation. Owners typically are entitled to vote on the selection of directors and other important corporate governance matters, and to receive dividend payments, if any, on their holdings. However, ownership of common stock does not entitle owners to participate in the day-to-day operations of the corporation. Common stocks of domestic and foreign public corporations can be listed, and their shares traded, on domestic stock exchanges, such as the NYSE or the NASDAQ Stock Market. Domestic and foreign corporations also may have their shares traded on foreign exchanges, such as the London Stock Exchange or Tokyo Stock Exchange. See Types of Investments – Foreign Securities . Common stock may be privately placed or publicly offered. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and market conditions generally. In the event that a corporation declares bankruptcy or is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. See Types of Investments – Private Placement and Other Restricted Securities, – Preferred Stock and – Convertible Securities for more information.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with common stock include: Issuer Risk and Market Risk.
Convertible Securities
Convertible securities include bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio or predetermined price (the conversion price). As such, convertible securities combine the investment characteristics of debt securities and equity securities. A holder of convertible securities is entitled to receive the income of a bond, debenture or note or the dividend of a preferred stock until the conversion privilege is exercised. The market value of convertible securities generally is a function of, among other factors, interest rates, the rates of return of similar nonconvertible securities and the financial strength of the issuer. The market value of convertible securities tends to decline as interest rates rise and, conversely, to rise as interest rates decline. However, a convertible security’s market value tends to reflect the market price of the common stock of the issuing company when that stock price approaches or is greater than its conversion price. As the market price of the underlying common stock declines, the price of the convertible security tends to be influenced more by the rate of return of the convertible security. Because both interest rate and common stock’s market movements can influence their value, convertible securities generally are not as sensitive to changes in interest rates as similar non-convertible debt securities nor generally as sensitive to changes in share price as the underlying common stock. Convertible securities may be structured as
Statement of Additional Information – October 3, 2016 21

 

Table of Contents
fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. See Types of Investments — Variable- and Floating-Rate Obligations, — Debt Obligations — Zero-Coupon, Pay-in-Kind and Step-Coupon Securities, — Common Stock, — Corporate Debt Securities and — Private Placement and Other Restricted Securities for more information.
Certain convertible securities may have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities (of the same or a different issuer) at a specified date and at a specified exchange ratio. Certain convertible securities may be convertible at the option of the issuer, which may require a holder to convert the security into the underlying common stock, even at times when the value of the underlying common stock or other equity security has declined substantially. In addition, some convertible securities may be rated below investment grade or may not be rated and, therefore, may be considered speculative investments. Companies that issue convertible securities frequently are small- and mid-capitalization companies and, accordingly, carry the risks associated with such companies. In addition, the credit rating of a company’s convertible securities generally is lower than that of its conventional debt securities. Convertible securities are senior to equity securities and have a claim to the assets of an issuer prior to the holders of the issuer’s common stock in the event of liquidation but generally are subordinate to similar non-convertible debt securities of the same issuer. Some convertible securities are particularly sensitive to changes in interest rates when their predetermined conversion price is much higher than the price for the issuing company’s common stock.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with convertible securities include: Convertible Securities Risk, Interest Rate Risk, Issuer Risk, Market Risk, Prepayment and Extension Risk, and Reinvestment Risk.
Corporate Debt Securities
Corporate debt securities are long and short term fixed income securities typically issued by businesses to finance their operations. Corporate debt securities are issued by public or private companies, as distinct from debt securities issued by a government or its agencies. The issuer of a corporate debt security often has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal periodically or on a specified maturity date. Corporate debt securities typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due at a specified time period; and (4) many are traded on major securities exchanges. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their interest rates, maturity dates and secured or unsecured status. Commercial paper has the shortest term and usually is unsecured, as are debentures. The broad category of corporate debt securities includes debt issued by domestic or foreign companies of all kinds, including those with small-, mid- and large-capitalizations. The category also includes bank loans, as well as assignments, participations and other interests in bank loans. Corporate debt securities may be rated investment grade or below investment grade and may be structured as fixed-, variable or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. They may also be senior or subordinated obligations. See Appendix A for a discussion of securities ratings. See Types of Investments — Variable- and Floating-Rate Obligations, — Private Placement and Other Restricted Securities, — Debt Obligations, — Commercial Paper and — High-Yield Securities for more information.
Extendible commercial notes (ECNs) are very similar to commercial paper except that, with ECNs, the issuer has the option to extend the notes’ maturity. ECNs are issued at a discount rate, with an initial redemption of not more than 90 days from the date of issue. If ECNs are not redeemed by the issuer on the initial redemption date, the issuer will pay a premium (step-up) rate based on the ECN’s credit rating at the time.
Because of the wide range of types and maturities of corporate debt securities, as well as the range of creditworthiness of issuers, corporate debt securities can have widely varying risk/return profiles. For example, commercial paper issued by a large established domestic corporation that is rated by an NRSRO as investment grade may have a relatively modest return on principal but present relatively limited risk. On the other hand, a long-term corporate note issued, for example, by a small foreign corporation from an emerging market country that has not been rated by an NRSRO may have the potential for relatively large returns on principal but carries a relatively high degree of risk.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with corporate debt securities include: Credit Risk, Interest Rate Risk, Issuer Risk, High-Yield Securities Risk, Prepayment and Extension Risk and Reinvestment Risk.
Statement of Additional Information – October 3, 2016 22

 

Table of Contents
Custody Receipts and Trust Certificates
Custody receipts and trust certificates are derivative products that evidence direct ownership in a pool of securities. Typically, a sponsor will deposit a pool of securities with a custodian in exchange for custody receipts evidencing interests in those securities. The sponsor generally then will sell the custody receipts or trust certificates in negotiated transactions at varying prices. Each custody receipt or trust certificate evidences the individual securities in the pool and the holder of a custody receipt or trust certificate generally will have all the rights and privileges of owners of those securities.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with custody receipts and trust certificates include: Liquidity Risk and Counterparty Risk. In addition, custody receipts and trust certificates generally are subject to the same risks as the securities evidenced by the receipts or certificates.
Debt Obligations
Many different types of debt obligations exist (for example, bills, bonds, and notes). Issuers of debt obligations have a contractual obligation to pay interest at a fixed, variable or floating rate on specified dates and to repay principal by a specified maturity date. Certain debt obligations (usually intermediate and long-term bonds) have provisions that allow the issuer to redeem or “call” a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return.
The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuer’s perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the market value of the bond usually rises, and when prevailing interest rates rise, the market value of the bond usually declines.
In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield and the lower the sensitivity to changes in interest rates.
As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. See Types of Investments — Corporate Debt Securities, — High-Yield Securities and — Preferred Stock — Trust-Preferred Securities for information.
Event-Linked Instruments/Catastrophe Bonds. A Fund may obtain event-linked exposure by investing in “event-linked bonds” or “event-linked swaps” or by implementing “event-linked strategies.” Event-linked exposure results in gains or losses that typically are contingent on, or formulaically related to, defined trigger events. Examples of trigger events include hurricanes, earthquakes, weather-related phenomena or statistics relating to such events. Some event-linked bonds are commonly referred to as “catastrophe bonds.” If a trigger event occurs, the principal amount of the bond is reduced (potentially to zero), and a Fund may lose all or a portion of its entire principal invested in the bond or the entire notional amount on a swap.
Stripped Securities. Stripped securities are the separate income or principal payments of a debt security and evidence ownership in either the future interest or principal payments on an instrument. There are many different types and variations of stripped securities. For example, Separate Trading of Registered Interest and Principal Securities (STRIPS) can be component parts of a U.S. Treasury security where the principal and interest components are traded independently through DTC, a clearing agency registered pursuant to Section 17A of the 1934 Act and created to hold securities for its participants, and to facilitate the clearance and settlement of securities transactions between participants through electronic computerized book-entries, thereby eliminating the need for physical movement of certificates. Treasury Investor Growth Receipts (TIGERs) are U.S. Treasury securities stripped by brokers. Stripped mortgage-backed securities, (SMBS) also can be issued by the U.S. Government or its agencies. Stripped securities may be structured as fixed-, variable- or floating-rate obligations.
SMBS usually are structured with two or more classes that receive different proportions of the interest and principal distributions from a pool of mortgage-backed assets. Common types of SMBS will be structured so that one class receives some of the interest and most of the principal from the mortgage-backed assets, while another class receives most of the interest and the remainder of the principal.
See Types of Investments – Mortgage-Backed Securities, – Variable- and Floating-Rate Obligations and – U.S. Government and Related Obligations for more information.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with stripped securities include: Credit Risk, Interest Rate Risk, Liquidity Risk, Prepayment and Extension Risk and Stripped Securities Risk
When-Issued, Delayed Delivery and Forward Commitment Transactions. When-issued, delayed delivery and forward commitment transactions involve the purchase or sale of securities by a Fund, with payment and delivery taking place in the future after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the
Statement of Additional Information – October 3, 2016 23

 

Table of Contents
purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. When engaging in when-issued, delayed delivery and forward commitment transactions, a Fund typically will designate liquid assets in an amount equal to or greater than the purchase price. The payment obligation and, if applicable, the interest rate that will be received on the securities, are fixed at the time that a Fund agrees to purchase the securities. A Fund generally will enter into when-issued, delayed delivery and forward commitment transactions only with the intention of completing such transactions.
However, a Fund’s portfolio manager may determine not to complete a transaction if he or she deems it appropriate to close out the transaction prior to its completion. In such cases, a Fund may realize short-term gains or losses. See Types of Investments — Asset-Backed Securities and — Mortgage-Backed Securities for more information.
To Be Announced Securities (“TBAs”). As with other delayed delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Fund agrees to accept any security that meets specified terms. For example, in a TBA mortgage-backed security transaction, the Fund and the seller would agree upon the issuer, interest rate and terms of the underlying mortgages. The seller would not identify the specific underlying mortgages until it issues the security. TBA mortgage-backed securities increase market risks because the underlying mortgages may be less favorable than anticipated by the Fund. See Types of Investments — Asset-Backed Securities and — Mortgage-Backed Securities for more information.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with when-issued, delayed delivery and forward commitment transactions include: Counterparty Risk, Credit Risk and Market Risk.
Zero-Coupon, Pay-in-Kind and Step-Coupon Securities. Zero-coupon, pay-in-kind and step-coupon securities are types of debt instruments that do not necessarily make payments of interest in fixed amounts or at fixed intervals. Asset-backed securities, convertible securities, corporate debt securities, foreign securities, high-yield securities, mortgage-backed securities, municipal securities, participation interests, stripped securities, U.S. Government and related obligations and other types of debt instruments may be structured as zero-coupon, pay-in-kind and step-coupon securities.
Zero-coupon securities do not pay interest on a current basis but instead accrue interest over the life of the security. These securities include, among others, zero-coupon bonds, which either may be issued at a discount by a corporation or government entity or may be created by a brokerage firm when it strips the coupons from a bond or note and then sells the bond or note and the coupon separately. This technique is used frequently with U.S. Treasury bonds, and zero-coupon securities are marketed under such names as CATS (Certificate of Accrual on Treasury Securities), TIGERs or STRIPS. Zero-coupon bonds also are issued by municipalities. Buying a municipal zero-coupon bond frees its purchaser of the obligation to pay regular federal income tax on imputed interest, since the interest is exempt for regular federal income tax purposes. Zero-coupon certificates of deposit and zero-coupon mortgages are generally structured in the same fashion as zero-coupon bonds; the certificate of deposit holder or mortgage holder receives face value at maturity and no payments until then.
Pay-in-kind securities normally give the issuer an option to pay cash at a coupon payment date or to give the holder of the security a similar security with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made.
Step-coupon securities trade at a discount from their face value and pay coupon interest that gradually increases over time. The coupon rate is paid according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The discount from the face amount or par value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived credit quality of the issue.
Zero-coupon, step-coupon and pay-in-kind securities holders generally have substantially all the rights and privileges of holders of the underlying coupon obligations or principal obligations. Holders of these securities typically have the right upon default on the underlying coupon obligations or principal obligations to proceed directly and individually against the issuer and are not required to act in concert with other holders of such securities.
See Appendix A for a discussion of securities ratings. See Types of Investments — Asset-Backed Securities and — Mortgage-Backed Securities for more information.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk and Zero-Coupon Bonds Risk.
Determining Investment Grade for Purposes of Investment Policies. Unless otherwise stated in the Fund’s prospectus, when determining, under a Fund’s investment policies, whether a debt instrument is investment grade or below investment grade for purposes of purchase by the Fund, the Fund will apply a particular credit quality rating methodology, as described within the
Statement of Additional Information – October 3, 2016 24

 

Table of Contents
Fund’s shareholder reports, when available. These methodologies typically make use of credit quality ratings assigned by a third-party rating agency or agencies, when available. Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. Credit quality ratings apply to the Fund’s debt instrument investments and not the Fund itself.
Ratings limitations under a Fund’s investment policies are applied at the time of purchase by a Fund. Subsequent to purchase, a debt instrument may cease to be rated by a rating agency or its rating may be reduced by a rating agency(ies) below the minimum required for purchase by a Fund. Neither event will require the sale of such debt instrument, but it may be a factor in considering whether to continue to hold the instrument. Unless otherwise stated in a Fund’s prospectus or in this SAI, a Fund may invest in debt instruments that are not rated by a rating agency. When a debt instrument is not rated by a rating agency, the Investment Manager or, as applicable, a Fund subadviser determines, at the time of purchase, whether such debt instrument is of investment grade or below investment grade (e.g., junk bond) quality. A Fund’s debt instrument holdings that are not rated by a rating agency are typically referred to as “Not Rated” within the Fund’s shareholder reports.
See Appendix A for a discussion of securities ratings.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with debt obligations include: Confidential Information Access Risk, Credit Risk, Highly Leveraged Transactions Risk, Impairment of Collateral Risk, Interest Rate Risk, Issuer Risk, Liquidity Risk, Prepayment and Extension Risk and Reinvestment Risk.
Determining Average Maturity. When determining the average maturity of a Fund's portfolio, the Fund may use the effective maturity of a portfolio security by, among other things, adjusting for interest rate reset dates, call dates or “put” dates.
Depositary Receipts
See Types of Investments – Foreign Securities below.
Derivatives
General
Derivatives are financial instruments whose values are based on (or “derived” from) traditional securities (such as a stock or a bond), assets (such as a commodity, like gold), reference rates (such as LIBOR), market indices (such as the S& P 500 ® Index) or customized baskets of securities or instruments. Some forms of derivatives, such as exchange-traded futures and options on securities, commodities, or indices, are traded on regulated exchanges. These types of derivatives are standardized contracts that can easily be bought and sold, and whose market values are determined and published daily. Non-standardized derivatives, on the other hand, tend to be more specialized or complex, and may be harder to value. Many derivative instruments often require little or no initial payment and therefore often create inherent economic leverage. Derivatives, when used properly, can enhance returns and be useful in hedging portfolios and managing risk. Some common types of derivatives include futures; options; options on futures; forward foreign currency exchange contracts; forward contracts on securities and securities indices; linked securities and structured products; CMOs; swap agreements and swaptions.
A Fund may use derivatives for a variety of reasons, including, for example: (i) to enhance its return; (ii) to attempt to protect against possible unfavorable changes in the market value of securities held in or to be purchased for its portfolio resulting from securities markets or currency exchange rate fluctuations ( i.e. , to hedge); (iii) to protect its unrealized gains reflected in the value of its portfolio securities; (iv) to facilitate the sale of such securities for investment purposes; (v) to reduce transaction costs; (vi) to manage the effective maturity or duration of its portfolio; and/or (vii) to maintain cash reserves while remaining fully invested.
A Fund may use any or all of the above investment techniques and may purchase different types of derivative instruments at any time and in any combination. The use of derivatives is a function of numerous variables, including market conditions. See also Types of Investments — Warrants and Rights and Debt Obligations — When Issued, Delayed Delivery and Forward Commitment Transactions .
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with transactions in derivatives (including the derivatives instruments discussed below) include: Counterparty Risk, Credit Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, Market Risk, Derivatives Risk, Derivatives Risk – Forward Contracts Risk, Derivatives Risk – Futures Contracts Risk, Derivatives Risk – Inverse Floaters Risk, Derivatives Risk – Options Risk, Derivatives Risk – Structured Investments Risk and/or Derivatives Risk – Swaps Risk.
Structured Investments (Indexed or Linked Securities)
General . Indexed or linked securities, also often referred to as “structured products,” are instruments that may have varying combinations of equity and debt characteristics. These instruments are structured to recast the investment characteristics of the underlying security or reference asset. If the issuer is a unit investment trust or other special purpose vehicle, the structuring will typically involve the deposit with or purchase by such issuer of specified instruments (such as commercial bank loans or
Statement of Additional Information – October 3, 2016 25

 

Table of Contents
securities) and/or the execution of various derivative transactions, and the issuance by that entity of one or more classes of securities (structured securities) backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments.
Indexed and Inverse Floating Rate Securities. A Fund may invest in securities that provide a potential return based on a particular index or interest rates. For example, a Fund may invest in debt securities that pay interest based on an index of interest rates. The principal amount payable upon maturity of certain securities also may be based on the value of the index. To the extent a Fund invests in these types of securities, a Fund’s return on such securities will rise and fall with the value of the particular index: that is, if the value of the index falls, the value of the indexed securities owned by a Fund will fall. Interest and principal payable on certain securities may also be based on relative changes among particular indices.
A Fund may also invest in so-called “inverse floaters” or “residual interest bonds” on which the interest rates vary inversely with a floating rate (which may be reset periodically by a dutch auction, a remarketing agent, or by reference to a short-term tax-exempt interest rate index). A Fund may purchase synthetically-created inverse floating rate bonds evidenced by custodial or trust receipts. A trust funds the purchase of a bond by issuing two classes of certificates: short-term floating rate notes (typically sold to third parties) and the inverse floaters (also known as residual certificates). No additional income beyond that provided by the trust’s underlying bond is created; rather, that income is merely divided-up between the two classes of certificates. Generally, income on inverse floating rate bonds will decrease when interest rates increase, and will increase when interest rates decrease. Such securities can have the effect of providing a degree of investment leverage, since they may increase or decrease in value in response to changes in market interest rates at a rate that is a multiple of the actual rate at which fixed-rate securities increase or decrease in response to such changes. As a result, the market values of such securities will generally be more volatile than the market values of fixed-rate securities. To seek to limit the volatility of these securities, a Fund may purchase inverse floating obligations that have shorter-term maturities or that contain limitations on the extent to which the interest rate may vary. Certain investments in such obligations may be illiquid. Furthermore, where such a security includes a contingent liability, in the event of an adverse movement in the underlying index or interest rate, a Fund may be required to pay substantial additional margin to maintain the position.
Credit-Linked Securities. Among the income-producing securities in which a Fund may invest are credit linked securities. The issuers of these securities frequently are limited purpose trusts or other special purpose vehicles that, in turn, invest in a derivative instrument or basket of derivative instruments, such as credit default swaps, interest rate swaps and other securities, in order to provide exposure to certain fixed income markets. For instance, a Fund may invest in credit-linked securities as a cash management tool in order to gain exposure to a certain market and/or to remain fully invested when more traditional income-producing securities are not available. Like an investment in a bond, investments in these credit linked securities represent the right to receive periodic income payments (in the form of distributions) and payment of principal at the end of the term of the security. However, these payments are conditioned on or linked to the issuer’s receipt of payments from, and the issuer’s potential obligations to, the counterparties to the derivative instruments and other securities in which the issuer invests. For instance, the issuer may sell one or more credit default swaps, under which the issuer would receive a stream of payments over the term of the swap agreements provided that no event of default has occurred with respect to the referenced debt obligation upon which the swap is based. If a default occurs, the stream of payments may stop and the issuer would be obligated to pay the counterparty the par (or other agreed upon value) of the referenced debt obligation. This, in turn, would reduce the amount of income and/or principal that a Fund would receive. A Fund’s investments in these securities are indirectly subject to the risks associated with derivative instruments. These securities generally are exempt from registration under the 1933 Act. Accordingly, there may be no established trading market for the securities and they may constitute illiquid investments.
Equity-Linked Notes. An equity-linked note (ELN) is a debt instrument whose value is based on the value of a single equity security, basket of equity securities or an index of equity securities (each, an Underlying Equity). An ELN typically provides interest income, thereby offering a yield advantage over investing directly in an Underlying Equity. The Fund may purchase ELNs that trade on a securities exchange or those that trade on the over-the-counter markets, including Rule 144A securities. The Fund may also purchase ELNs in a privately negotiated transaction with the issuer of the ELNs (or its broker-dealer affiliate). The Fund may or may not hold an ELN until its maturity.
Equity-linked securities also include issues such as Structured Yield Product Exchangeable for Stock (STRYPES), Trust Automatic Common Exchange Securities (TRACES), Trust Issued Mandatory Exchange Securities (TIMES) and Trust Enhanced Dividend Securities (TRENDS). The issuers of these equity-linked securities generally purchase and hold a portfolio of stripped U.S. Treasury securities maturing on a quarterly basis through the conversion date, and a forward purchase contract with an existing shareholder of the company relating to the common stock. Quarterly distributions on such equity-linked securities generally consist of the cash received from the U.S. Treasury securities and such equity-linked securities generally are not entitled to any dividends that may be declared on the common stock.
Statement of Additional Information – October 3, 2016 26

 

Table of Contents
ELNs also include participation notes issued by a bank or broker-dealer that entitles the Fund to a return measured by the change in value of an Underlying Equity. Participation notes are typically used when a direct investment in the Underlying Equity is restricted due to country-specific regulations. Investment in a participation note is not the same as investment in the constituent shares of the company (or other issuer type) to which the Underlying Equity is economically tied. A participation note represents only an obligation of the company or other issuer type to provide the Fund the economic performance equivalent to holding shares of the Underlying Equity. A participation note does not provide any beneficial or equitable entitlement or interest in the relevant Underlying Equity. In other words, shares of the Underlying Equity are not in any way owned by the Fund.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with equity-linked notes include: Counterparty Risk, Credit Risk, Liquidity Risk and Market Risk
Index-, Commodity- and Currency-Linked Securities. “Index-linked” or “commodity-linked” notes are debt securities of companies that call for interest payments and/or payment at maturity in different terms than the typical note where the borrower agrees to make fixed interest payments and to pay a fixed sum at maturity. Principal and/or interest payments on an index-linked or commodity-linked note depend on the performance of one or more market indices, such as the S&P 500 ® Index, a weighted index of commodity futures such as crude oil, gasoline and natural gas or the market prices of a particular commodity or basket of commodities or securities. Currency-linked debt securities are short-term or intermediate-term instruments having a value at maturity, and/or an interest rate, determined by reference to one or more foreign currencies. Payment of principal or periodic interest may be calculated as a multiple of the movement of one currency against another currency, or against an index.
Index-, commodity- and currency-linked securities may entail substantial risks. Such instruments may be subject to significant price volatility. The company issuing the instrument may fail to pay the amount due on maturity. The underlying investment may not perform as expected by a Fund’s portfolio manager. Markets and underlying investments and indexes may move in a direction that was not anticipated by a Fund’s portfolio manager. Performance of the derivatives may be influenced by interest rate and other market changes in the United States and abroad, and certain derivative instruments may be illiquid.
Linked securities are often issued by unit investment trusts. Examples of this include such index-linked securities as S&P Depositary Receipts (SPDRs), which is an interest in a unit investment trust holding a portfolio of securities linked to the S&P 500 ® Index, and a type of exchange-traded fund (ETF). Because a unit investment trust is an investment company under the 1940 Act, a Fund’s investments in SPDRs are subject to the limitations set forth in Section 12(d)(1)(A) of the 1940 Act, although the SEC has issued exemptive relief permitting investment companies such as the Funds to invest beyond the limits of Section 12(d)(1)(A) subject to certain conditions. SPDRs generally closely track the underlying portfolio of securities, trade like a share of common stock and pay periodic dividends proportionate to those paid by the portfolio of stocks that comprise the S&P 500 ® Index. As a holder of interests in a unit investment trust, a Fund would indirectly bear its ratable share of that unit investment trust’s expenses. At the same time, a Fund would continue to pay its own management and advisory fees and other expenses, as a result of which a Fund and its shareholders in effect would be absorbing levels of fees with respect to investments in such unit investment trusts.
Because linked securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured products may be structured as a class that is either subordinated or unsubordinated to the right of payment of another class. Subordinated linked securities typically have higher rates of return and present greater risks than unsubordinated structured products. Structured products sometimes are sold in private placement transactions and often have a limited trading market.
Investments in linked securities have the potential to lead to significant losses because of unexpected movements in the underlying financial asset, index, currency or other investment. The ability of a Fund to utilize linked securities successfully will depend on its ability correctly to predict pertinent market movements, which cannot be assured. Because currency-linked securities usually relate to foreign currencies, some of which may be currencies from emerging market countries, there are certain additional risks associated with such investments.
Futures Contracts and Options on Futures Contracts
Futures Contracts. A futures contract sale creates an obligation by the seller to deliver the type of security or other asset called for in the contract at a specified delivery time for a stated price. A futures contract purchase creates an obligation by the purchaser to take delivery of the type of security or other asset called for in the contract at a specified delivery time for a stated price. The specific security or other asset delivered or taken at the settlement date is not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract was made. A Fund may enter into futures contracts which are traded on national or foreign futures exchanges and are standardized as to maturity date and underlying security or other asset. Futures exchanges and trading in the United States are regulated under the CEA by the CFTC, a U.S. Government agency. See CFTC Regulation below for information on CFTC regulation.
Statement of Additional Information – October 3, 2016 27

 

Table of Contents
Traders in futures contracts may be broadly classified as either “hedgers” or “speculators.” Hedgers use the futures markets primarily to offset unfavorable changes (anticipated or potential) in the value of securities or other assets currently owned or expected to be acquired by them. Speculators less often own the securities or other assets underlying the futures contracts which they trade, and generally use futures contracts with the expectation of realizing profits from fluctuations in the value of the underlying securities or other assets.
Upon entering into futures contracts, in compliance with regulatory requirements, cash or liquid securities, at least equal in value to the amount of a Fund’s obligation under the contract (less any applicable margin deposits and any assets that constitute “cover” for such obligation), will be designated in a Fund’s books and records.
Unlike when a Fund purchases or sells a security, no price is paid or received by a Fund upon the purchase or sale of a futures contract, although a Fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash and/or U.S. Government securities in order to initiate and maintain open positions in futures contracts. This amount is known as “initial margin.” The nature of initial margin in futures transactions is different from that of margin in security transactions, in that futures contract margin does not involve the borrowing of funds by a Fund to finance the transactions. Rather, initial margin is in the nature of a performance bond or good faith deposit intended to assure completion of the contract (delivery or acceptance of the underlying security or other asset) that is returned to a Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Minimum initial margin requirements are established by the relevant futures exchange and may be changed. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are customarily purchased and sold on margin which may range upward from less than 5% of the value of the contract being traded. Subsequent payments, called “variation margin,” to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or other asset fluctuates, a process known as “marking to market.” If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional variation margin will be required. Conversely, a change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made for as long as the contract remains open. A Fund expects to earn interest income on its margin deposits.
Although futures contracts by their terms call for actual delivery or acceptance of securities or other assets (stock index futures contracts or futures contracts that reference other intangible assets do not permit delivery of the referenced assets), the contracts usually are closed out before the settlement date without the making or taking of delivery. A Fund may elect to close some or all of its futures positions at any time prior to their expiration. The purpose of taking such action would be to reduce or eliminate the position then currently held by a Fund. Closing out an open futures position is done by taking an opposite position (“buying” a contract which has previously been “sold,” “selling” a contract previously “purchased”) in an identical contract ( i.e. , the same aggregate amount of the specific type of security or other asset with the same delivery date) to terminate the position. Final determinations are made as to whether the price of the initial sale of the futures contract exceeds or is below the price of the offsetting purchase, or whether the purchase price exceeds or is below the offsetting sale price. Final determinations of variation margin are then made, additional cash is required to be paid by or released to a Fund, and a Fund realizes a loss or a gain. Brokerage commissions are incurred when a futures contract is bought or sold.
Successful use of futures contracts by a Fund is subject to its portfolio manager’s ability to predict correctly movements in the direction of interest rates and other factors affecting securities and commodities markets. This requires different skills and techniques than those required to predict changes in the prices of individual securities. A Fund, therefore, bears the risk that future market trends will be incorrectly predicted.
The risk of loss in trading futures contracts in some strategies can be substantial, due both to the relatively low margin deposits required and the potential for an extremely high degree of leverage involved in futures contracts. As a result, a relatively small price movement in a futures contract may result in an immediate and substantial loss to the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount posted as initial margin for the contract.
In the event of adverse price movements, a Fund would continue to be required to make daily cash payments in order to maintain its required margin. In such a situation, if a Fund has insufficient cash, it may have to sell portfolio securities in order to meet daily margin requirements at a time when it may be disadvantageous to do so. The inability to close the futures position also could have an adverse impact on the ability to hedge effectively.
To reduce or eliminate a hedge position held by a Fund, a Fund may seek to close out a position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract, which may limit a Fund’s ability to realize its profits or limit its losses. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be
Statement of Additional Information – October 3, 2016 28

 

Table of Contents
insufficient trading interest in certain contracts; (ii) restrictions may be imposed by an exchange on opening transactions, closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts, or underlying securities; (iv) unusual or unforeseen circumstances, such as volume in excess of trading or clearing capability, may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts (or a particular class or series of contracts), in which event the secondary market on that exchange (or in the class or series of contracts) would cease to exist, although outstanding contracts on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
Interest Rate Futures Contracts. Bond prices are established in both the cash market and the futures market. In the cash market, bonds are purchased and sold with payment for the full purchase price of the bond being made in cash, generally within five business days after the trade. In the futures market, a contract is made to purchase or sell a bond in the future for a set price on a certain date. Historically, the prices for bonds established in the futures markets have tended to move generally in the aggregate in concert with the cash market prices and have maintained fairly predictable relationships. Accordingly, a Fund may use interest rate futures contracts as a defense, or hedge, against anticipated interest rate changes. A Fund presently could accomplish a similar result to that which it hopes to achieve through the use of interest rate futures contracts by selling bonds with long maturities and investing in bonds with short maturities when interest rates are expected to increase, or conversely, selling bonds with short maturities and investing in bonds with long maturities when interest rates are expected to decline. However, because of the liquidity that is often available in the futures market, the protection is more likely to be achieved, perhaps at a lower cost and without changing the rate of interest being earned by a Fund, through using futures contracts.
Interest rate futures contracts are traded in an auction environment on the floors of several exchanges — principally, the Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Futures Exchange. Each exchange guarantees performance under contract provisions through a clearing corporation, a nonprofit organization managed by the exchange membership. A public market exists in futures contracts covering various financial instruments including long-term U.S. Treasury Bonds and Notes; GNMA modified pass-through mortgage backed securities; three-month U.S. Treasury Bills; and ninety-day commercial paper. A Fund may also invest in exchange-traded Eurodollar contracts, which are interest rate futures on the forward level of LIBOR. These contracts are generally considered liquid securities and trade on the Chicago Mercantile Exchange. Such Eurodollar contracts are generally used to “lock-in” or hedge the future level of short-term rates. A Fund may trade in any interest rate futures contracts for which there exists a public market, including, without limitation, the foregoing instruments.
Index Futures Contracts. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position in the index. A unit is the current value of the index. A Fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s).
Municipal Bond Index Futures Contracts. Municipal bond index futures contracts may act as a hedge against changes in market conditions. A municipal bond index assigns values daily to the municipal bonds included in the index based on the independent assessment of dealer-to-dealer municipal bond brokers. A municipal bond index futures contract represents a firm commitment by which two parties agree to take or make delivery of an amount equal to a specified dollar amount multiplied by the difference between the municipal bond index value on the last trading date of the contract and the price at which the futures contract is originally struck. No physical delivery of the underlying securities in the index is made.
Commodity-Linked Futures Contracts. Commodity-linked futures contracts are traded on futures exchanges. These futures exchanges offer a central marketplace in which to transact in futures contracts, a clearing corporation to process trades, and standardization of expiration dates and contract sizes. Futures markets also specify the terms and conditions of delivery as well as the maximum permissible price movement during a trading session. Additionally, the commodity futures exchanges may have position limit rules that limit the amount of futures contracts that any one party may hold in a particular commodity at any point in time. These position limit rules are designed to prevent any one participant from controlling a significant portion of the market.
Commodity-linked futures contracts are generally based upon commodities within six main commodity groups: (1) energy, which includes, among others, crude oil, brent crude oil, gas oil, natural gas, gasoline and heating oil; (2) livestock, which includes, among others, feeder cattle, live cattle and hogs; (3) agriculture, which includes, among others, wheat (Kansas wheat and Chicago wheat), corn and soybeans; (4) industrial metals, which includes, among others, aluminum, copper, lead, nickel and zinc; (5) precious metals, which includes, among others, gold and silver; and (6) softs, which includes cotton, coffee, sugar and
Statement of Additional Information – October 3, 2016 29

 

Table of Contents
cocoa. A Fund may purchase commodity futures contracts, swaps on commodity futures contracts, options on futures contracts and options and futures on commodity indices with respect to these six main commodity groups and the individual commodities within each group, as well as other types of commodities.
The price of a commodity futures contract will reflect the storage costs of purchasing the physical commodity. These storage costs include the time value of money invested in the physical commodity plus the actual costs of storing the commodity less any benefits from ownership of the physical commodity that are not obtained by the holder of a futures contract (this is sometimes referred to as the “convenience yield”). To the extent that these storage costs change for an underlying commodity while a Fund is long futures contracts on that commodity, the value of the futures contract may change proportionately.
In the commodity futures markets, if producers of the underlying commodity wish to hedge the price risk of selling the commodity, they will sell futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to take the corresponding long side of the same futures contract, the commodity producer must be willing to sell the futures contract at a price that is below the expected future spot price. Conversely, if the predominant hedgers in the futures market are the purchasers of the underlying commodity who purchase futures contracts to hedge against a rise in prices, then speculators will only take the short side of the futures contract if the futures price is greater than the expected future spot price of the commodity.
The changing nature of the hedgers and speculators in the commodity markets will influence whether futures contract prices are above or below the expected future spot price. This can have significant implications for a Fund when it is time to replace an existing contract with a new contract. If the nature of hedgers and speculators in futures markets has shifted such that commodity purchasers are the predominant hedgers in the market, a Fund might open the new futures position at a higher price or choose other related commodity-linked investments.
The values of commodities which underlie commodity futures contracts are subject to additional variables which may be less significant to the values of traditional securities such as stocks and bonds. Variables such as drought, floods, weather, livestock disease, embargoes and tariffs may have a larger impact on commodity prices and commodity-linked investments, including futures contracts, commodity-linked structured notes, commodity-linked options and commodity-linked swaps, than on traditional securities. These additional variables may create additional investment risks which subject a Fund’s commodity-linked investments to greater volatility than investments in traditional securities.
Options on Futures Contracts. A Fund may purchase and write call and put options on those futures contracts that it is permitted to buy or sell. A Fund may use such options on futures contracts in lieu of writing options directly on the underlying securities or other assets or purchasing and selling the underlying futures contracts. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. A futures option gives the holder, in return for the premium paid, the right, but not the obligation, to buy from (call) or sell to (put) the writer of the option a futures contract at a specified price at any time during the period of the option. Upon exercise, the writer of the option is obligated to pay the difference between the cash value of the futures contract and the exercise price. Like the buyer or seller of a futures contract, the holder or writer of an option has the right to terminate its position prior to the scheduled expiration of the option by selling or purchasing an option of the same series, at which time the person entering into the closing purchase transaction will realize a gain or loss. There is no guarantee that such closing purchase transactions can be effected.
A Fund will enter into written options on futures contracts only when, in compliance with regulatory requirements, it has designated cash or liquid securities at least equal in value to the underlying security’s or other asset’s value (less any applicable margin deposits). A Fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers’ requirements similar to those described above.
Options on Index Futures Contracts. A Fund may also purchase and sell options on index futures contracts. Options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put), at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin account, which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid.
Use by Tax-Exempt Funds of Interest Rate and U.S. Treasury Security Futures Contracts and Options. If a Fund invests in tax-exempt securities, it may purchase and sell futures contracts and related options on interest rate and U.S. Treasury securities when, in the opinion of a Fund’s portfolio manager, price movements in these security futures and related options will correlate closely with price movements in the tax-exempt securities which are the subject of the hedge. Interest rate and U.S. Treasury
Statement of Additional Information – October 3, 2016 30

 

Table of Contents
securities futures contracts require the seller to deliver, or the purchaser to take delivery of, the type of security called for in the contract at a specified date and price. Options on interest rate and U.S. Treasury security futures contracts give the purchaser the right in return for the premium paid to assume a position in a futures contract at the specified option exercise price at any time during the period of the option.
Eurodollar and Yankee Dollar Futures Contracts and Options Thereon. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A Fund may use Eurodollar futures contracts and options thereon to hedge against changes in the LIBOR, to which many interest rate swaps and fixed income instruments are linked.
Options
Options on Stocks, Stock Indices and Other Indices. A Fund may purchase and write ( i.e. , sell) put and call options. Such options may relate to particular stocks or stock indices, and may or may not be listed on a domestic or foreign securities exchange and may or may not be issued by the Options Clearing Corporation (OCC). Stock index options are put options and call options on various stock indices. In most respects, they are identical to listed options on common stocks.
There is a key difference between stock options and index options in connection with their exercise. In the case of stock options, the underlying security, common stock, is delivered. However, upon the exercise of an index option, settlement does not occur by delivery of the securities comprising the index. The option holder who exercises the index option receives an amount of cash if the closing level of the stock index upon which the option is based is greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the stock index and the exercise price of the option expressed in dollars times a specified multiple. A stock index fluctuates with changes in the market value of the securities included in the index. For example, some stock index options are based on a broad market index, such as the S&P 500 ® Index or a narrower market index, such as the S&P 100 ® Index. Indices may also be based on an industry or market segment.
A Fund may, for the purpose of hedging its portfolio, subject to applicable securities regulations, purchase and write put and call options on foreign stock indices listed on foreign and domestic stock exchanges.
As an alternative to purchasing call and put options on index futures, a Fund may purchase call and put options on the underlying indices themselves. Such options could be used in a manner identical to the use of options on index futures. Options involving securities indices provide the holder with the right to make or receive a cash settlement upon exercise of the option based on movements in the relevant index. Such options must be listed on a national securities exchange and issued by the OCC. Such options may relate to particular securities or to various stock indices, except that a Fund may not write covered options on an index.
Writing Covered Options. A Fund may write covered call options and covered put options on securities held in its portfolio. Call options written by a Fund give the purchaser the right to buy the underlying securities from a Fund at the stated exercise price at any time prior to the expiration date of the option, regardless of the security’s market price; put options give the purchaser the right to sell the underlying securities to a Fund at the stated exercise price at any time prior to the expiration date of the option, regardless of the security’s market price.
A Fund may write covered options, which means that, so long as a Fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges). In the case of put options, a Fund will hold liquid assets equal to the price to be paid if the option is exercised. In addition, a Fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. A Fund may write combinations of covered puts and calls (straddles) on the same underlying security.
A Fund will receive a premium from writing a put or call option, which increases a Fund’s return on the underlying security if the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, a Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. By writing a put option, a Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than the security’s then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.
A Fund’s obligation to sell an instrument subject to a call option written by it, or to purchase an instrument subject to a put option written by it, may be terminated prior to the expiration date of the option by a Fund’s execution of a closing purchase transaction, which is effected by purchasing on an exchange an offsetting option of the same series ( i.e. , same underlying instrument, exercise price and expiration date) as the option previously written. A closing purchase transaction will ordinarily be
Statement of Additional Information – October 3, 2016 31

 

Table of Contents
effected in order to realize a profit on an outstanding option, to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new option containing different terms on such underlying instrument. A Fund realizes a profit or loss from a closing purchase transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security.
If a Fund writes a call option but does not own the underlying security, and when it writes a put option, a Fund may be required to deposit cash or securities with its broker as “margin” or collateral for its obligation to buy or sell the underlying security. As the value of the underlying security varies, a Fund may also have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.
Purchasing Put Options. A Fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such hedge protection is provided during the life of the put option since a Fund, as holder of the put option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security’s market price. For a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, a Fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs.
Purchasing Call Options. A Fund may purchase call options, including call options to hedge against an increase in the price of securities that a Fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since a Fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security’s market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. These costs will reduce any profit a Fund might have realized had it bought the underlying security at the time it purchased the call option.
Over-the-Counter (OTC) Options. OTC options (options not traded on exchanges) are generally established through negotiation with the other party to the options contract. A Fund will enter into OTC options transactions only with primary dealers in U.S. Government securities and, in the case of OTC options written by a Fund, only pursuant to agreements that will assure that a Fund will at all times have the right to repurchase the option written by it from the dealer at a specified formula price. A Fund will treat the amount by which such formula price exceeds the amount, if any, by which the option may be “in-the-money” as an illiquid investment. It is the present policy of a Fund not to enter into any OTC option transaction if, as a result, more than 15% (10% in some cases; refer to your Fund’s prospectuses) of a Fund’s net assets would be invested in (i) illiquid investments (determined under the foregoing formula) relating to OTC options written by a Fund, (ii) OTC options purchased by a Fund, (iii) securities which are not readily marketable, and (iv) repurchase agreements maturing in more than seven days.
Swap Agreements
General . Swap agreements are derivative instruments that can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structure, swap agreements may increase or decrease a Fund’s exposure to long- or short-term interest rates, foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. A Fund may enter into a variety of swap agreements, including interest rate, index, commodity, commodity futures, equity, equity index, credit default, bond futures, total return, portfolio and currency exchange rate swap agreements, and other types of swap agreements such as caps, collars and floors. A Fund also may enter into swaptions, which are options to enter into a swap agreement.
Swap agreements are usually entered into without an upfront payment because the value of each party’s position is the same. The market values of the underlying commitments will change over time, resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one party or the other.
In a typical interest rate swap, one party agrees to make regular payments equal to a floating interest rate times a “notional principal amount,” in return for payments equal to a fixed rate times the same amount, for a specified period of time. If a swap agreement provides for payments in different currencies, the parties might agree to exchange notional principal amounts as well. In a total return swap agreement, the non-floating rate side of the swap is based on the total return of an individual security, a basket of securities, an index or another reference asset. Swaps may also depend on other prices or rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances, usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specified interest rate exceeds an agreed-upon level, while the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. Caps and floors have an effect similar to
Statement of Additional Information – October 3, 2016 32

 

Table of Contents
buying or writing options. A collar combines elements of buying a cap and selling a floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts.
Swap agreements will tend to shift a Fund’s investment exposure from one type of investment to another. For example, if a Fund agreed to pay fixed rates in exchange for floating rates while holding fixed-rate bonds, the swap would tend to decrease a Fund’s exposure to long-term interest rates. Another example is if a Fund agreed to exchange payments in dollars for payments in foreign currency. In that case, the swap agreement would tend to decrease a Fund’s exposure to U.S. interest rates and increase its exposure to foreign currency and interest rates.
Because swaps are two-party contracts that may be subject to contractual restrictions on transferability and termination and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. If a swap is not liquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses.
Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. When a counterparty’s obligations are not fully secured by collateral, then the Fund is essentially an unsecured creditor of the counterparty. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that a counterparty will be able to meet its obligations pursuant to such contracts or that, in the event of default, the Fund will succeed in enforcing contractual remedies. Counterparty risk still exists even if a counterparty’s obligations are secured by collateral because the Fund’s interest in collateral may not be perfected or additional collateral may not be promptly posted as required. Counterparty risk also may be more pronounced if a counterparty’s obligations exceed the amount of collateral held by the Fund (if any), the Fund is unable to exercise its interest in collateral upon default by the counterparty, or the termination value of the instrument varies significantly from the marked-to-market value of the instrument.
Counterparty risk with respect to derivatives will be affected by new rules and regulations affecting the derivatives market. Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivative transaction. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted and what impact an insolvency of a clearing house would have on the financial system. A clearing member is obligated by contract and by applicable regulation to segregate all funds received from customers with respect to cleared derivatives transactions from the clearing member’s proprietary assets. However, all funds and other property received by a clearing broker from its customers are generally held by the clearing broker on a commingled basis in an omnibus account, and the clearing member may invest those funds in certain instruments permitted under the applicable regulations. The assets of a Fund might not be fully protected in the event of the bankruptcy of a Fund’s clearing member, because the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing broker’s customers for a relevant account class. Also, the clearing member is required to transfer to the clearing organization the amount of margin required by the clearing organization for cleared derivatives, which amounts are generally held in an omnibus account at the clearing organization for all customers of the clearing member. Regulations promulgated by the CFTC require that the clearing member notify the clearing house of the amount of initial margin provided by the clearing member to the clearing organization that is attributable to each customer. However, if the clearing member does not provide accurate reporting, the Funds are subject to the risk that a clearing organization will use a Fund’s assets held in an omnibus account at the clearing organization to satisfy payment obligations of a defaulting customer of the clearing member to the clearing organization. In addition, clearing members generally provide to the clearing organization the net amount of variation margin required for cleared swaps for all of its customers in the aggregate, rather than the gross amount of each customer. The Funds are therefore subject to the risk that a clearing organization will not make variation margin payments owed to a Fund if another customer of the clearing member has suffered a loss and is in default, and the risk that a Fund will be required to provide additional variation margin to the clearing house before the clearing house will move the Fund’s cleared derivatives transactions to another clearing member. In addition, if a clearing member does not comply with the applicable regulations or its agreement with the Funds, or in the event of fraud or misappropriation of customer assets by a clearing member, a Fund could have only an unsecured creditor claim in an insolvency of the clearing member with respect to the margin held by the clearing member.
Interest Rate Swaps. Interest rate swap agreements are often used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. They are financial instruments that involve the exchange of one type of interest rate cash flow for another type of interest rate cash flow on specified dates in the future. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating interest rates on a predetermined specified (notional) amount. The swap agreement’s notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap
Statement of Additional Information – October 3, 2016 33

 

Table of Contents
agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps can be based on various measures of interest rates, including LIBOR, swap rates, Treasury rates and foreign interest rates.
Credit Default Swap Agreements. A Fund may enter into credit default swap agreements, which may have as reference obligations one or more securities or a basket of securities that are or are not currently held by a Fund. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the contract provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. A Fund may be either the buyer or seller in a credit default swap. If a Fund is a buyer and no credit event occurs, a Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, a Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap.
Credit default swap agreements may involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to risks relating to the reference obligation, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A Fund will enter into credit default swap agreements generally with counterparties that meet certain standards of creditworthiness. A buyer generally will lose its investment and recover nothing if no credit event occurs and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller.
A Fund’s obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the Fund). For bilateral credit default swaps (CDS) where the Fund is the seller of protection, the Fund will cover the full notional amount of the swap minus any collateral on deposit. In connection with credit default swaps in which a Fund is the buyer, the Fund will segregate or designate cash or other liquid assets in accordance with its policies and procedures. Such segregation or designation will ensure that a Fund has assets available to satisfy its obligations with respect to the transaction. Such segregation or designation will not limit a Fund’s exposure to loss.
Equity Swaps. A Fund may engage in equity swaps. Equity swaps allow the parties to the swap agreement to exchange components of return on one equity investment ( e.g. , a basket of equity securities or an index) for a component of return on another non-equity or equity investment, including an exchange of differential rates of return. Equity swaps may be used to invest in a market without owning or taking physical custody of securities in circumstances where direct investment may be restricted for legal reasons or is otherwise impractical. Equity swaps also may be used for other purposes, such as hedging or seeking to increase total return.
Total Return Swap Agreements. Total return swap agreements are contracts in which one party agrees to make periodic payments to another party based on the change in market value of the assets underlying the contract, which may include a specified security, basket of securities or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Total return swap agreements may effectively add leverage to a Fund’s portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap.
Total return swap agreements are subject to the risk that a counterparty will default on its payment obligations to a Fund thereunder, and conversely, that a Fund will not be able to meet its obligation to the counterparty. Generally, a Fund will enter into total return swaps on a net basis ( i.e. , the two payment streams are netted against one another with a Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of a Fund’s obligations over its entitlements with respect to each total return swap will be accrued on a daily basis, and an amount of liquid assets having an aggregate net asset value at least equal to the accrued excess will be designated by a Fund in its books and records. If the total return swap transaction is entered into on other than a net basis, the full amount of a Fund’s obligations will be accrued on a daily basis, and the full amount of a Fund’s obligations will be designated by a Fund in an amount equal to or greater than the market value of the liabilities under the total return swap agreement or the amount it would have cost a Fund initially to make an equivalent direct investment, plus or minus any amount a Fund is obligated to pay or is to receive under the total return swap agreement.
Statement of Additional Information – October 3, 2016 34

 

Table of Contents
Variance, Volatility and Correlation Swap Agreements. Variance and volatility swaps are contracts that provide exposure to increases or decreases in the volatility of certain referenced assets. Correlation swaps are contracts that provide exposure to increases or decreases in the correlation between the prices of different assets or different market rates.
Commodity-Linked Swaps. Commodity-linked swaps are two-party contracts in which the parties agree to exchange the return or interest rate on one instrument for the return of a particular commodity, commodity index or commodities futures or options contract. The payment streams are calculated by reference to an agreed upon notional amount. A one-period swap contract operates in a manner similar to a forward or futures contract because there is an agreement to swap a commodity for cash at only one forward date. A Fund may engage in swap transactions that have more than one period and therefore more than one exchange of commodities.
A Fund may invest in total return commodity swaps to gain exposure to the overall commodity markets. In a total return commodity swap, a Fund will receive the price appreciation of a commodity index, a portion of the index, or a single commodity in exchange for paying an agreed-upon fee. If the commodity swap is for one period, the Fund will pay a fixed fee, established at the outset of the swap. However, if the term of the commodity swap is more than one period, with interim swap payments, the Fund will pay an adjustable or floating fee. With a “floating” rate, the fee is pegged to a base rate such as LIBOR, and is adjusted each period. Therefore, if interest rates increase over the term of the swap contract, a Fund may be required to pay a higher fee at each swap reset date.
Cross Currency Swaps. Cross currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A Fund may enter into a cross currency swap when it has exposure to one currency and desires exposure to a different currency. Typically, the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and termination of the agreements, both sides will have to pay in full periodically based upon the currency they have borrowed. Changes in foreign exchange currency rates and changes in interest rates, as described above, may negatively affect currency swaps.
Contracts for Differences. Contracts for differences are swap arrangements in which the parties agree that their return (or loss) will be based on the relative performance of two different groups or baskets of securities. Often, one or both baskets will be an established securities index. A Fund’s return will be based on changes in value of theoretical long futures positions in the securities comprising one basket (with an aggregate face value equal to the notional amount of the contract for differences) and theoretical short futures positions in the securities comprising the other basket. A Fund also may use actual long and short futures positions and achieve similar market exposure by netting the payment obligations of the two contracts. A Fund typically enters into contracts for differences (and analogous futures positions) when its portfolio manager believes that the basket of securities constituting the long position will outperform the basket constituting the short position. If the short basket outperforms the long basket, a Fund will realize a loss — even in circumstances when the securities in both the long and short baskets appreciate in value.
Swaptions. A swaption is an options contract on a swap agreement. These transactions give a party the right (but not the obligation) to enter into new swap agreements or to shorten, extend, cancel or otherwise modify an existing swap agreement (which are described herein) at some designated future time on specified terms, in return for payment of the purchase price (the “premium”) of the option. A Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The writer of the contract receives the premium and bears the risk of unfavorable changes in the market value on the underlying swap agreement. Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars (which are described herein).
Many swaps are complex and often valued subjectively. Many over-the-counter derivatives are complex and their valuation often requires modeling and judgment, which increases the risk of mispricing or incorrect valuation. The pricing models used may not produce valuations that are consistent with the values the Fund realizes when it closes or sells an over-the-counter derivative. Valuation risk is more pronounced when the Fund enters into over-the-counter derivatives with specialized terms because the market value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. Incorrect valuations may result in increased cash payment requirements to counterparties, undercollateralization and/or errors in calculation of the Fund’s net asset value.
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established a framework for the regulation of OTC swap markets; the framework outlined the joint responsibility of the CFTC and the SEC in regulating swaps. The CFTC is responsible for the regulation of swaps, the SEC is responsible for the regulation of security-based swaps and they are both jointly responsible for the regulation of mixed swaps.
Statement of Additional Information – October 3, 2016 35

 

Table of Contents
Risk of Potential Governmental Regulation of Derivatives
It is possible that government regulation of various types of derivative instruments, including futures and swap agreements, may limit or prevent the Funds from using such instruments as a part of their investment strategy, and could ultimately prevent the Funds from being able to achieve their investment objectives. The effects of present or future legislation and regulation in this area are not known, but the effects could be substantial and adverse.
The futures markets are subject to comprehensive statutes, regulations, and margin requirements. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher margin requirements, the establishment of daily price limits and the suspension of trading.
The regulation of swaps and futures transactions in the U.S. is a rapidly changing area of law and is subject to modification by government and judicial action. There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in a Fund or the ability of a Fund to continue to implement its investment strategies. In particular, the Dodd-Frank Act, which was signed into law in July 2010, has changed the way in which the U.S. financial system is supervised and regulated. Title VII of the Dodd-Frank Act sets forth a new legislative framework for OTC derivatives, such as swaps, in which the Funds may invest. Title VII of the Dodd-Frank Act makes broad changes to the OTC derivatives market, grants significant new authority to the SEC and the CFTC to regulate OTC derivatives and market participants, and will require clearing of many OTC derivatives transactions.
Recent U.S. and non-U.S. legislative and regulatory reforms, including those related to the Dodd-Frank Act, have resulted in, and may in the future result in, new regulation of derivative instruments and the Fund's use of such instruments. New regulations could, among other things, restrict the Fund's ability to engage in derivative transactions (for example, by making certain types of derivative instruments or transactions no longer available to the Fund) and/or increase the costs of such transactions, and the Fund may as a result be unable to execute its investment strategies in a manner the Investment Manager might otherwise choose.
Additional Risk Factors in Cleared Derivatives Transactions
Under recently adopted rules and regulations, transactions in some types of swaps (including interest rate swaps and credit default swaps on North American and European indices) are required to be centrally cleared. In a transaction involving those swaps (“cleared derivatives”), a Fund’s counterparty is a clearing house, rather than a bank or broker. Since the Funds are not members of clearing houses and only members of a clearing house (“clearing members”) can participate directly in the clearing house, the Funds will hold cleared derivatives through accounts at clearing members. In a cleared derivatives transaction, the Funds will make payments (including margin payments) to and receive payments from a clearing house through their accounts at clearing members. Clearing members guarantee performance of their clients’ obligations to the clearing house.
In many ways, centrally cleared derivative arrangements are less favorable to open-end funds than bilateral arrangements. For example, the Funds may be required to provide greater amounts of margin for cleared derivatives positions than for bilateral derivatives transactions. Also, in contrast to a bilateral derivatives position, following a period of notice to a Fund, a clearing member generally can require termination of an existing cleared derivatives position at any time or increases in margin requirements above the margin that the clearing member required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing positions or to terminate those positions at any time. Any increase in margin requirements or termination of existing cleared derivatives positions by the clearing member or the clearing house could interfere with the ability of a Fund to pursue its investment strategy. Further, any increase in margin requirements by a clearing member could also expose a Fund to greater credit risk to its clearing member, because margin for cleared derivatives transactions in excess of clearing house’s margin requirements typically is held by the clearing member. Also, a Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or that the Investment Manager expects to be cleared), and no clearing member is willing or able to clear the transaction on the Fund’s behalf. While the documentation in place between the Funds and their clearing members generally provides that the clearing members will accept for clearing all transactions submitted for clearing that are within credit limits (specified in advance) for each Fund, the Funds are still subject to the risk that no clearing member will be willing or able to clear a transaction. In those cases, the position might have to be terminated, and the Fund could lose some or all of the benefit of the position, including loss of an increase in the value of the position and/or loss of hedging protection. In addition, the documentation governing the relationship between the Funds and clearing members is developed by the clearing members and generally is less favorable to the Funds than typical bilateral derivatives documentation. For example, documentation relating to cleared derivatives generally includes a one-way indemnity by the Funds in favor of the clearing member for losses the clearing member incurs as the Funds’ clearing member and typically does not provide the Funds any remedies if the clearing member defaults or becomes insolvent. While futures contracts entail similar risks, the risks likely are more pronounced for cleared swaps due to their more limited liquidity and market history.
Some types of cleared derivatives are required to be executed on an exchange or on a swap execution facility. A swap execution facility is a trading platform where multiple market participants can execute derivatives by accepting bids and offers made by multiple other participants in the platform. While this execution requirement is designed to increase transparency and liquidity in
Statement of Additional Information – October 3, 2016 36

 

Table of Contents
the cleared derivatives market, trading on a swap execution facility can create additional costs and risks for the Funds. For example, swap execution facilities typically charge fees, and if a Fund executes derivatives on a swap execution facility through a broker intermediary, the intermediary may impose fees as well. Also, a Fund may indemnify a swap execution facility, or a broker intermediary who executes cleared derivatives on a swap execution facility on the Fund’s behalf, against any losses or costs that may be incurred as a result of the Fund’s transactions on the swap execution facility.
These and other new rules and regulations could, among other things, further restrict a Fund’s ability to engage in, or increase the cost to the Fund of, derivatives transactions, for example, by making some types of derivatives no longer available to the Fund, increasing margin or capital requirements, or otherwise limiting liquidity or increasing transaction costs. These regulations are new and evolving, so their potential impact on the Funds and the financial system are not yet known. While the new regulations and the central clearing of some derivatives transactions are designed to reduce systemic risk ( i.e. , the risk that the interdependence of large derivatives dealers could cause a number of those dealers to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that the new clearing mechanisms will achieve that result, and in the meantime, as noted above, central clearing and related requirements expose the Funds to new kinds of risks and costs.
CFTC Regulation
Pursuant to Rule 4.5 under the Commodity Exchange Act (CEA), each of Alternative Beta Fund, AP – Alternatives Fund, AP - Directional Alternatives Fund, Adaptive Risk Allocation Fund and Diversified Absolute Return Fund do not qualify for an exclusion from the definition of a commodity pool. Accordingly, each of these Funds is registered as a "commodity pool" and the Investment Manager is registered as a "commodity pool operator" with respect to these Funds under the CEA.
Each of the other Funds listed on the cover of this SAI qualifies for an exclusion from the definition of a commodity pool under the CEA and has on file a notice of exclusion under CFTC Rule 4.5. Accordingly, the Investment Manager is not subject to registration or regulation as a “commodity pool operator” under the CEA with respect to these Funds, although the Investment Manager is a registered “commodity pool operator” and “commodity trading advisor”. To remain eligible for the exclusion, each of these Funds is limited in its ability to use certain financial instruments regulated under the CEA (“commodity interests”), including futures and options on futures and certain swaps transactions. In the event that a Fund’s investments in commodity interests are not within the thresholds set forth in the exclusion, one or more Funds not currently registered as a “commodity pool” may be required to register as such, which could increase Fund expenses, adversely affecting the Fund’s total return.
Dollar Rolls
Dollar rolls involve selling securities ( e.g. , mortgage-backed securities or U.S. Treasury securities) and simultaneously entering into a commitment to purchase those or similar securities on a specified future date and price from the same party. Mortgage dollar rolls and U.S. Treasury rolls are types of dollar rolls. A Fund foregoes principal and interest paid on the securities during the “roll” period. A Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase of the securities, as well as the interest earned on the cash proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Dollar roll transactions may result in higher transaction costs for a Fund.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with mortgage dollar rolls include: Counterparty Risk, Credit Risk and Interest Rate Risk.
Exchange-traded notes (ETNs)
ETNs are instruments that combine aspects of bonds and exchange-traded funds (ETFs) and are designed to provide investors with access to the returns, less investor fees and expenses, of various market benchmarks or strategies to which they are usually linked. When an investor buys an ETN, the issuer, typically an underwriting bank, promises to pay upon maturity the amount reflected in the benchmark or strategy (minus fees and expenses). Some ETNs make periodic coupon payments. Like ETFs, ETNs are traded on an exchange, but ETNs have additional risks compared to ETFs, including the risk that if the credit of the ETN issuer becomes suspect, the investment might lose some or all of its value. Though linked to the performance, for example, of a market benchmark, ETNs are not equities or index funds, but they do share several characteristics. Similar to equities, ETNs are traded on an exchange and can be sold short. Similar to index funds, ETNs may be linked to the return of a benchmark or strategy, but ETNs don't have an ownership interest in the instruments underlying the benchmark or strategy the ETN is tracking.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with exchange-traded notes include: Counterparty Risk, Credit Risk and Market Risk.
Foreign Currency Transactions
Because investments in foreign securities usually involve currencies of foreign countries and because a Fund may hold cash and cash equivalent investments in foreign currencies, the value of a Fund’s assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, a Fund may incur costs
Statement of Additional Information – October 3, 2016 37

 

Table of Contents
in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time, causing a Fund’s NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments.
Spot Rates and Derivative Instruments . A Fund may conduct its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward foreign currency exchange contracts (forward contracts). (See Types of Investments – Derivatives .) These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, a Fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots.
A Fund may enter into forward contracts for a variety of reasons, including for risk management (hedging) or for investment purposes.
When a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment, usually in U.S. dollars, although it could desire to lock in the price of the security in another currency. By entering into a forward contract, a Fund would be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received.
A Fund may enter into forward contracts when management of the Fund believes the currency of a particular foreign country may decline in value relative to another currency. When selling currencies forward in this fashion, a Fund may seek to hedge the value of foreign securities it holds against an adverse move in exchange rates. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain.
This method of protecting the value of a Fund’s securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts can be used to minimize the risk of loss due to a decline in value of hedged currency, they will also limit any potential gain that might result should the value of such currency increase.
A Fund may also enter into forward contracts when the Fund’s portfolio manager believes the currency of a particular country will increase in value relative to another currency. A Fund may buy currencies forward to gain exposure to a currency without incurring the additional costs of purchasing securities denominated in that currency.
For example, the combination of U.S. dollar-denominated instruments with long forward currency exchange contracts creates a position economically equivalent to a position in the foreign currency, in anticipation of an increase in the value of the foreign currency against the U.S. dollar. Conversely, the combination of U.S. dollar-denominated instruments with short forward currency exchange contracts is economically equivalent to borrowing the foreign currency for delivery at a specified date in the future, in anticipation of a decrease in the value of the foreign currency against the U.S. dollar.
Unanticipated changes in the currency exchange results could result in poorer performance for Funds that enter into these types of transactions.
A Fund may designate cash or securities in an amount equal to the value of the Fund’s total assets committed to consummating forward contracts entered into under the circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the Fund’s commitments on such contracts.
At maturity of a forward contract, a Fund may either deliver (if a contract to sell) or take delivery of (if a contract to buy) the foreign currency or terminate its contractual obligation by entering into an offsetting contract with the same currency trader, having the same maturity date, and covering the same amount of foreign currency.
If a Fund engages in an offsetting transaction, it will incur a gain or loss to the extent there has been movement in forward contract prices. If a Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to buy or sell the foreign currency.
Statement of Additional Information – October 3, 2016 38

 

Table of Contents
Although a Fund values its assets each business day in terms of U.S. dollars, it may not intend to convert its foreign currencies into U.S. dollars on a daily basis. However, it will do so from time to time, and such conversions involve certain currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange should a Fund desire to resell that currency to the dealer.
It is possible, under certain circumstances, including entering into forward currency contracts for investment purposes, that a Fund will be required to limit or restructure its forward contract currency transactions to qualify as a “regulated investment company” under the Internal Revenue Code.
Options on Foreign Currencies. A Fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes and to gain exposure to foreign currencies. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, a Fund may buy put options on the foreign currency. If the value of the currency does decline, a Fund would have the right to sell the currency for a fixed amount in dollars and would thereby offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted.
Conversely, where a change in the dollar value of a currency would increase the cost of securities a Fund plans to buy, or where a Fund would benefit from increased exposure to the currency, a Fund may buy call options on the foreign currency, giving it the right to purchase the currency for a fixed amount in dollars. The purchase of the options could offset, at least partially, the changes in exchange rates.
As in the case of other types of options, however, the benefit to a Fund derived from purchases of foreign currency options would be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a Fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates.
A Fund may write options on foreign currencies for similar purposes. For example, when a Fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates, it could, instead of purchasing a put option, write a call option on the relevant currency, giving the option holder the right to purchase that currency from the Fund for a fixed amount in dollars. If the expected decline occurs, the option would most likely not be exercised and the diminution in value of securities would be offset, at least partially, by the amount of the premium received.
Similarly, instead of purchasing a call option when a foreign currency is expected to appreciate, a Fund could write a put option on the relevant currency, giving the option holder the right to that currency from the Fund for a fixed amount in dollars. If rates move in the manner projected, the put option would expire unexercised and allow the Fund to hedge increased cost up to the amount of the premium.
As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates.
An option written on foreign currencies is covered if a Fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions.
Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost.
Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the OCC, thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements.
Statement of Additional Information – October 3, 2016 39

 

Table of Contents
Foreign Currency Futures and Related Options. A Fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. A Fund may use currency futures for the same purposes as currency forward contracts, subject to CFTC limitations.
Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the Fund’s investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect a Fund against price decline if the issuer’s creditworthiness deteriorates. Because the value of a Fund’s investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of a Fund’s investments denominated in that currency over time.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with foreign currency transactions include: Foreign Currency Risk, Derivatives Risk, Interest Rate Risk, and Liquidity Risk.
Foreign Securities
Unless otherwise stated in a Fund’s prospectus, stocks, bonds and other securities or investments are deemed to be “foreign” based primarily on the issuer’s place of organization/incorporation, but the Fund may also consider the issuer’s domicile, its principal place of business, its primary stock exchange listing, the source of its revenue or other factors. A Fund’s investments in foreign markets, may include issuers in emerging markets, as well as frontier markets, each of which carry heightened risks as compared with investments in other typical foreign markets. Unless otherwise stated in a Fund’s prospectus, emerging market countries are generally those either defined by World Bank-defined per capita income brackets or determined to be an emerging market based on the Fund portfolio manager’s qualitative judgments about a country’s level of economic and institutional development, among other factors. Frontier market countries generally have smaller economies and even less developed capital markets than typical emerging market countries (which themselves have increased investment risk relative to investing in more developed markets) and, as a result, the risks of investing in emerging market countries are magnified in frontier market countries. Foreign securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. See Types of Investments — Variable- and Floating-Rate Obligations, — Debt Obligations — Zero-Coupon, Pay-in-Kind and Step-Coupon Securities and — Private Placement and Other Restricted Securities for more information.
Due to the potential for foreign withholding taxes, MSCI publishes two versions of its indices reflecting the reinvestment of dividends using two different methodologies: gross dividends and net dividends. While both versions reflect reinvested dividends, they differ with respect to the manner in which taxes associated with dividend payments are treated. In calculating the net dividends version, MSCI incorporates reinvested dividends applying the withholding tax rate applicable to foreign non-resident institutional investors that do not benefit from double taxation treaties. The Investment Manager believes that the net dividends version of MSCI indices better reflects the returns U.S. investors might expect were they to invest directly in the component securities of an MSCI index.
There is a practice in certain foreign markets under which an issuer’s securities are blocked from trading at the custodian or sub-custodian level for a specified number of days before and, in certain instances, after a shareholder meeting where such shares are voted. This is referred to as “share blocking.” The blocking period can last up to several weeks. Share blocking may prevent a Fund from buying or selling securities during this period, because during the time shares are blocked, trades in such securities will not settle. It may be difficult or impossible to lift blocking restrictions, with the particular requirements varying widely by country. As a consequence of these restrictions, the Investment Manager, on behalf of a Fund, may abstain from voting proxies in markets that require share blocking.
Foreign securities may include depositary receipts, such as American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs). ADRs are U.S. dollar-denominated receipts issued in registered form by a domestic bank or trust company that evidence ownership of underlying securities issued by a foreign issuer. EDRs are foreign currency-denominated receipts issued in Europe, typically by foreign banks or trust companies and foreign branches of domestic banks, that evidence ownership of foreign or domestic securities. GDRs are receipts structured similarly to ADRs and EDRs and are marketed globally. Depositary receipts will not necessarily be denominated in the same currency as their underlying securities. In general, ADRs, in registered form, are designed for use in the U.S. securities markets, and EDRs, in bearer form, are designed for use in European securities markets. GDRs are tradable both in the United States and in Europe and are designed for use throughout the world. A Fund may invest in depositary receipts through “sponsored” or “unsponsored” facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depositary, whereas a depositary may establish an unsponsored facility without participation by the issuer of the deposited security. Holders of unsponsored depositary receipts generally bear all the costs of such facilities and the depositary of an unsponsored facility frequently is under no obligation to distribute interest holder communications received from the issuer of the deposited security
Statement of Additional Information – October 3, 2016 40

 

Table of Contents
or to pass through voting rights to the holders of such receipts in respect of the deposited securities. The issuers of unsponsored depositary receipts are not obligated to disclose material information in the United States, and, therefore, there may be limited information available regarding such issuers and/or limited correlation between available information and the market value of the depositary receipts.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with foreign securities include: Emerging Markets Securities Risk, Foreign Currency Risk, Foreign Securities Risk, Frontier Market Risk, Geographic Focus Risk, Issuer Risk and Market Risk.
Guaranteed Investment Contracts (Funding Agreements)
Guaranteed investment contracts, or funding agreements, are short-term, privately placed debt instruments issued by insurance companies. Pursuant to such contracts, a Fund may make cash contributions to a deposit fund of the insurance company’s general account. The insurance company then credits to a Fund payments at negotiated, floating or fixed interest rates. A Fund will purchase guaranteed investment contracts only from issuers that, at the time of purchase, meet certain credit and quality standards. In general, guaranteed investment contracts are not assignable or transferable without the permission of the issuing insurance companies, and an active secondary market does not exist for these investments. In addition, the issuer may not be able to pay the principal amount to a Fund on seven days’ notice or less, at which time the investment may be considered illiquid under applicable SEC regulatory guidance and subject to certain restrictions. See Types of Investments – Illiquid Securities .
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with guaranteed investment contracts (funding agreements) include: Credit Risk and Liquidity Risk.
High-Yield Securities
High-yield, or low and below investment grade securities (below investment grade securities are also known as “junk bonds”) are debt securities with the lowest investment grade rating ( e.g. , BBB by S&P and Fitch or Baa by Moody’s), that are below investment grade ( e.g. , lower than BBB by S&P and Fitch or Baa by Moody’s) or that are unrated but determined by a Fund’s portfolio manager to be of comparable quality. These types of securities may be issued to fund corporate transactions or restructurings, such as leveraged buyouts, mergers, acquisitions, debt reclassifications or similar events, are more speculative in nature than securities with higher ratings and tend to be more sensitive to credit risk, particularly during a downturn in the economy. These types of securities generally are issued by unseasoned companies without long track records of sales and earnings, or by companies or municipalities that have questionable credit strength. High-yield securities and comparable unrated securities: (i) likely will have some quality and protective characteristics that, in the judgment of one or more NRSROs, are outweighed by large uncertainties or major risk exposures to adverse conditions; (ii) are speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligation; and (iii) may have a less liquid secondary market, potentially making it difficult to value or sell such securities. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. High-yield securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. See Types of Investments – Variable- and Floating-Rate Obligations, – Debt Obligations – Zero-Coupon, Pay-in-Kind and Step-Coupon Securities and – Private Placement and Other Restricted Securities for more information.
The rates of return on these types of securities generally are higher than the rates of return available on more highly rated securities, but generally involve greater volatility of price and risk of loss of principal and income, including the possibility of default by or insolvency of the issuers of such securities. Accordingly, a Fund may be more dependent on the Investment Manager’s (or, if applicable, a subadviser’s) credit analysis with respect to these types of securities than is the case for more highly rated securities.
The market values of certain high-yield securities and comparable unrated securities tend to be more sensitive to individual corporate developments and changes in economic conditions than are the market values of more highly rated securities. In addition, issuers of high-yield and comparable unrated securities often are highly leveraged and may not have more traditional methods of financing available to them, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default is greater for high-yield and comparable unrated securities than it is for higher rated securities because high-yield securities and comparable unrated securities generally are unsecured and frequently are subordinated to more senior indebtedness. A Fund may incur additional expenses to the extent that it is required to seek recovery upon a default in the payment of principal or interest on its holdings of such securities. The existence of limited markets for lower-rated debt
Statement of Additional Information – October 3, 2016 41

 

Table of Contents
securities may diminish a Fund’s ability to: (i) obtain accurate market quotations for purposes of valuing such securities and calculating portfolio net asset value; and (ii) sell the securities at fair market value either to meet redemption requests or to respond to changes in the economy or in financial markets.
Many lower-rated securities are not registered for offer and sale to the public under the 1933 Act. Investments in these restricted securities may be determined to be liquid (able to be sold within seven days at approximately the price at which they are valued by a Fund) pursuant to policies approved by the Fund’s Trustees. Investments in illiquid securities, including restricted securities that have not been determined to be liquid, may not exceed 15% of a Fund’s net assets. A Fund is not otherwise subject to any limitation on its ability to invest in restricted securities. Restricted securities may be less liquid than other lower-rated securities, potentially making it difficult to value or sell such securities.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with high-yield securities include: Credit Risk, Interest Rate Risk, High-Yield Securities Risk and Prepayment and Extension Risk.
Illiquid Securities
Illiquid securities are defined by a Fund consistent with the SEC staff’s current guidance and interpretations which provide that an illiquid security is an asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which a Fund has valued the investment on its books. Some securities, such as those not registered under U.S. securities laws, cannot be sold in public transactions. Some securities are deemed to be illiquid because they are subject to contractual or legal restrictions on resale. Subject to its investment policies, a Fund may invest in illiquid investments and may invest in certain restricted securities that are deemed to be illiquid securities at the time of purchase.
Although one or more of the other risks described in this SAI may also apply, the risk typically associated with illiquid securities include: Liquidity Risk.
Inflation-Protected Securities
Inflation is a general rise in prices of goods and services. Inflation erodes the purchasing power of an investor’s assets. For example, if an investment provides a total return of 7% in a given year and inflation is 3% during that period, the inflation-adjusted, or real, return is 4%. Inflation-protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. One type of inflation-protected debt security is issued by the U.S. Treasury. The principal of these securities is adjusted for inflation as indicated by the Consumer Price Index (CPI) for urban consumers and interest is paid on the adjusted amount. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy.
If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond’s inflation measure.
Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. Similarly, a Fund treated as a regulated investment company (RIC) under the Code that holds these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with inflation-protected securities include: Inflation-Protected Securities Risk, Interest Rate Risk and Market Risk. In addition, inflation-protected securities issued by non-U.S. government agencies or instrumentalities are subject to Credit Risk.
Statement of Additional Information – October 3, 2016 42

 

Table of Contents
Initial Public Offerings
A Fund may invest in initial public offerings (IPOs) of common stock or other primary or secondary syndicated offerings of equity or debt securities issued by a corporate issuer. Fixed income funds frequently invest in these types of offerings of debt securities. A purchase of IPO securities often involves higher transaction costs than those associated with the purchase of securities already traded on exchanges or markets. A Fund may hold IPO securities for a period of time, or may sell them soon after the purchase. Investments in IPOs could have a magnified impact — either positive or negative — on a Fund’s performance while the Fund’s assets are relatively small. The impact of an IPO on a Fund’s performance may tend to diminish as the Fund’s assets grow. In circumstances when investments in IPOs make a significant contribution to a Fund’s performance, there can be no assurance that similar contributions from IPOs will continue in the future.
Although one or more risks described in this SAI may also apply, the risks typically associated with IPOs include: IPO Risk, Issuer Risk, Liquidity Risk, Market Risk and Small Company Securities Risk.
Inverse Floaters
See Types of Investments – Derivatives – Indexed or Linked Securities (Structured Products) above.
Investments in Other Investment Companies (Including ETFs)
Investing in other investment companies may be a means by which a Fund seeks to achieve its investment objective. A Fund may invest in securities issued by other investment companies within the limits prescribed by the 1940 Act, the rules and regulations thereunder and any exemptive relief currently or in the future available to a Fund. These securities include shares of other open-end investment companies ( i.e. , mutual funds), closed-end funds, exchange-traded funds (ETFs), UCITS funds (pooled investment vehicles established in accordance with the Undertaking for Collective Investment in Transferable Securities adopted by European Union member states) and business development companies.
Except with respect to funds structured as funds-of-funds or so-called master/feeder funds or other funds whose strategies otherwise allow such investments, the 1940 Act generally requires that a fund limit its investments in another investment company or series thereof so that, as determined at the time a securities purchase is made: (i) no more than 5% of the value of its total assets will be invested in the securities of any one investment company; (ii) no more than 10% of the value of its total assets will be invested in the aggregate in securities of other investment companies; and (iii) no more than 3% of the outstanding voting stock of any one investment company or series thereof will be owned by a fund or by companies controlled by a fund. Such other investment companies may include ETFs, which are shares of publicly traded unit investment trusts, open-end funds or depositary receipts that may be passively managed ( e.g. , they seek to track the performance of specific indexes or companies in related industries) or they may be actively managed. The SEC has granted orders for exemptive relief to certain ETFs that permit investments in those ETFs by certain other registered investment companies in excess of these limits.
ETFs are listed on an exchange and trade in the secondary market on a per-share basis, which allows investors to purchase and sell ETF shares at their market price throughout the day. Certain ETFs, such as passively managed ETFs, hold portfolios of securities that are designed to replicate, as closely as possible before expenses, the price and yield of a specified market index. The performance results of these ETFs will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers borne by ETFs. ETF shares are sold and redeemed at net asset value only in large blocks called creation units. The Funds’ ability to redeem creation units may be limited by the 1940 Act, which provides that ETFs will not be obligated to redeem shares held by the Funds in an amount exceeding one percent of their total outstanding securities during any period of less than 30 days.
Although a Fund may derive certain advantages from being able to invest in shares of other investment companies, such as to be fully invested, there may be potential disadvantages. Investing in other investment companies may result in higher fees and expenses for a Fund and its shareholders. A shareholder may be charged fees not only on Fund shares held directly but also on the investment company shares that a Fund purchases. Because these investment companies may invest in other securities, they are also subject to the risks associated with a variety of investment instruments as described in this SAI.
Under the 1940 Act and rules and regulations thereunder, a Fund may purchase shares of affiliated funds, subject to certain conditions. Investing in affiliated funds may present certain actual or potential conflicts of interest. For more information about such actual and potential conflicts of interest, see Investment Management and Other Services – Other Roles and Relationships of Ameriprise Financial and its Affiliates – Certain Conflicts of Interest .
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with the securities of other investment companies include: Exchange-Traded Fund (ETF) Risk, Investing in Other Funds Risk, Issuer Risk and Market Risk.
Statement of Additional Information – October 3, 2016 43

 

Table of Contents
Listed Private Equity Funds
A Fund may invest directly in listed private equity funds, which may include, among others, business development companies, investment holding companies, publicly traded limited partnership interests (common units), publicly traded venture capital funds, publicly traded venture capital trusts, publicly traded private equity funds, publicly traded private equity investment trusts, publicly traded closed-end funds, publicly traded financial institutions that lend to or invest in privately held companies and any other publicly traded vehicle whose purpose is to invest in privately held companies.
A Fund may invest in listed private equity funds that hold investments in a wide array of businesses and industries at various stages of development, from early stage to later stage to fully mature businesses. A Fund may invest in listed private equity funds that emphasize making equity and equity-like (preferred stock, convertible stock and warrants) investments in later stage to mature businesses, or may invest in listed private equity funds making debt investments or investments in companies at other stages of development. In addition, a Fund may invest in the common stock of closed-end management investment companies, including business development companies that invest in securities of listed private equity companies.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with investment in listed private equity funds include: Credit Risk, Liquidity Risk, Market Risk, Sector Risk, and Valuation Risk.
Money Market Instruments
Money market instruments include cash equivalents and short-term debt obligations which include: (i) bank obligations, including certificates of deposit (CDs), time deposits and bankers’ acceptances, and letters of credit of banks or savings and loan associations having capital surplus and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment; (ii) funding agreements; (iii) repurchase agreements; (iv) obligations of the United States, foreign countries and supranational entities, and each of their subdivisions, agencies and instrumentalities; (v) certain corporate debt securities, such as commercial paper, short-term corporate obligations and extendible commercial notes; (vi) participation interests; and (vii) municipal securities. Money market instruments may be structured as fixed-, variable- or floating-rate obligations and may be privately placed or publicly offered. A Fund may also invest in affiliated and unaffiliated money market mutual funds, which invest primarily in money market instruments. See Types of Investments — Variable- and Floating-Rate Obligations and — Private Placement and Other Restricted Securities for more information.
With respect to money market securities, certain U.S. Government obligations are backed or insured by the U.S. Government, its agencies or its instrumentalities. Other money market securities are backed only by the claims paying ability or creditworthiness of the issuer.
Bankers’ acceptances are marketable short-term credit instruments used to finance the import, export, transfer or storage of goods. They are termed “accepted” when a bank unconditionally guarantees their payment at maturity.
A Fund may invest its daily cash balance in Columbia Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the Columbia Fund Complex and other institutional clients of the Investment Manager.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with money market instruments include: Credit Risk, Inflation Risk, Interest Rate Risk, Issuer Risk and Money Market Fund Risk.
Mortgage-Backed Securities
Mortgage-backed securities are a type of asset-backed security that represent interests in, or debt instruments backed by, pools of underlying mortgages. In some cases, these underlying mortgages may be insured or guaranteed by the U.S. Government or its agencies. Mortgage-backed securities entitle the security holders to receive distributions that are tied to the payments made on the underlying mortgage collateral (less fees paid to the originator, servicer, or other parties, and fees paid for credit enhancement), so that the payments made on the underlying mortgage collateral effectively pass through to such security holders. Mortgage-backed securities are created when mortgage originators (or mortgage loan sellers who have purchased mortgage loans from mortgage loan originators) sell the underlying mortgages to a special purpose entity in a process called a securitization. The special purpose entity issues securities that are backed by the payments on the underlying mortgage loans, and have a minimum denomination and specific term. Mortgage-backed securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. See Types of Investments — Variable- and Floating-Rate Obligations, — Debt Obligations — Zero-Coupon, Pay-in-Kind and Step-Coupon Securities and — Private Placement and Other Restricted Securities for more information.
Mortgage-backed securities may be issued or guaranteed by GNMA (also known as Ginnie Mae), FNMA (also known as Fannie Mae), or FHLMC (also known as Freddie Mac), but also may be issued or guaranteed by other issuers, including private companies. GNMA is a government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. It guarantees, with the full faith and credit of the United States, full and timely payment of all monthly principal and interest on its mortgage-backed securities. Until recently, FNMA and FHLMC were government-sponsored corporations
Statement of Additional Information – October 3, 2016 44

 

Table of Contents
owned entirely by private stockholders. Both issue mortgage-related securities that contain guarantees as to timely payment of interest and principal but that are not backed by the full faith and credit of the U.S. Government. The value of the companies’ securities fell sharply in 2008 due to concerns that the firms did not have sufficient capital to offset losses. The U.S. Treasury has historically had the authority to purchase obligations of Fannie Mae and Freddie Mac. In addition, in 2008, due to capitalization concerns, Congress provided the U.S. Treasury with additional authority to lend Fannie Mae and Freddie Mac emergency funds and to purchase the companies’ stock, as described below. In September 2008, the U.S. Treasury and the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac had been placed in conservatorship.
In the past Fannie Mae and Freddie Mac have received significant capital support through U.S. Treasury preferred stock purchases and Federal Reserve purchases of their mortgage-backed securities. There can be no assurance that these or other agencies of the government will provide such support in the future. The future status of Fannie Mae or Freddie Mac could be impacted by, among other things, the actions taken and restrictions placed on Fannie Mae or Freddie Mac by the FHFA in its role as conservator, the restrictions placed on Fannie Mae’s or Freddie Mac’s operations and activities under the senior stock purchase agreements, market responses to developments at Fannie Mae or Freddie Mac, and future legislative and regulatory action that alters the operations, ownership structure and/or mission of Fannie Mae or Freddie Mac, each of which may, in turn, impact the value of, and cash flows on, any securities guaranteed by Fannie Mae and Freddie Mac.
Stripped mortgage-backed securities are a type of mortgage-backed security that receives differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. See Types of Investments — Debt Obligations — Stripped Securities for more information.
Collateralized Mortgage Obligations (CMOs) are hybrid mortgage-related instruments issued by special purpose entities secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass-through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as “tranches,” with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Interest is paid or accrues on all classes of the CMOs on a periodic basis. The principal and interest payments on the underlying mortgage assets may be allocated among the various classes of CMOs in several ways. Typically, payments of principal, including any prepayments, on the underlying mortgage assets are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.
Commercial mortgage-backed securities (CMBS) are a specific type of mortgage-backed security collateralized by a pool of mortgages on commercial real estate.
CMO residuals are mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing. The cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses and any management fee of the issuer. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and the pre-payment experience on the mortgage assets. In particular, the yield to maturity on CMO residuals is extremely sensitive to pre-payments on the related underlying mortgage assets, in the same manner as an interest-only (“IO”) class of stripped mortgage-backed securities. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped mortgage-backed securities, in certain circumstances an ETF may fail to recoup fully its initial investment in a CMO residual. CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. Transactions in CMO residuals are generally completed only after careful review of the characteristics of the securities in question. In addition, CMO residuals may, or pursuant to an exemption therefrom, may not have been registered under the 1933 Act. CMO residuals, whether or not registered under the 1933 Act, may be subject to certain restrictions on transferability, and may be deemed “illiquid” and subject to a Fund’s limitations on investment in illiquid securities.
Statement of Additional Information – October 3, 2016 45

 

Table of Contents
Mortgage pass-through securities are interests in pools of mortgage-related securities that differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-related securities (such as securities issued by the GNMA) are described as “modified pass-through.” These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.
REMICs are entities that own mortgages and elect REMIC status under the Code and, like CMOs, issue debt obligations collateralized by underlying mortgage assets that have characteristics similar to those issued by CMOs.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with mortgage- and asset-backed securities include: Credit Risk, Interest Rate Risk, Issuer Risk, Liquidity Risk, Mortgage- and Other Asset-Backed Securities Risk, Prepayment and Extension Risk and Reinvestment Risk.
Municipal Securities
Municipal securities include debt obligations issued by governmental entities, including states, political subdivisions, agencies, instrumentalities, and authorities, as well as U.S. territories (such as Guam and Puerto Rico) and their political subdivisions, agencies, instrumentalities, and authorities, to obtain funds for various public purposes, including the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to public institutions and facilities.
Municipal securities may include municipal bonds, municipal notes and municipal leases, which are described below. Municipal bonds are debt obligations of a governmental entity that obligate the municipality to pay the holder a specified sum of money at specified intervals and to repay the principal amount of the loan at maturity. Municipal securities can be classified into two principal categories, including “general obligation” bonds and other securities and “revenue” bonds and other securities. General obligation bonds are secured by the issuer’s full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source, such as the user of the facility being financed. Municipal securities also may include “moral obligation” securities, which normally are issued by special purpose public authorities. If the issuer of moral obligation securities is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the governmental entity that created the special purpose public authority. Municipal securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in-kind and step-coupon securities and may be privately placed or publicly offered. See Types of Investments – Variable- and Floating-Rate Obligations, – Debt Obligations – Zero-Coupon, Pay-in-Kind and Step-Coupon Securities and – Private Placement and Other Restricted Securities for more information.
Municipal notes may be issued by governmental entities and other tax-exempt issuers in order to finance short-term cash needs or, occasionally, to finance construction. Most municipal notes are general obligations of the issuing entity payable from taxes or designated revenues expected to be received within the relevant fiscal period. Municipal notes generally have maturities of one year or less. Municipal notes can be subdivided into two sub-categories: (i) municipal commercial paper and (ii) municipal demand obligations.
Municipal commercial paper typically consists of very short-term unsecured negotiable promissory notes that are sold, for example, to meet seasonal working capital or interim construction financing needs of a governmental entity or agency. While these obligations are intended to be paid from general revenues or refinanced with long-term debt, they frequently are backed by letters of credit, lending agreements, note repurchase agreements or other credit facility agreements offered by banks or institutions. See Types of Investments – Commercial Paper for more information.
Municipal demand obligations can be subdivided into two general types: variable rate demand notes and master demand obligations. Variable rate demand notes are tax-exempt municipal obligations or participation interests that provide for a periodic adjustment in the interest rate paid on the notes. They permit the holder to demand payment of the notes, or to demand purchase of the notes at a purchase price equal to the unpaid principal balance, plus accrued interest either directly by the issuer or by drawing on a bank letter of credit or guaranty issued with respect to such note. The issuer of the municipal obligation may have a corresponding right to prepay at its discretion the outstanding principal of the note plus accrued interest upon notice comparable to that required for the holder to demand payment. The variable rate demand notes in which a Fund may invest are payable, or are subject to purchase, on demand, usually on notice of seven calendar days or less. The terms of the notes generally provide that interest rates are adjustable at intervals ranging from daily to six months.
Statement of Additional Information – October 3, 2016 46

 

Table of Contents
Master demand obligations are tax-exempt municipal obligations that provide for a periodic adjustment in the interest rate paid and permit daily changes in the amount borrowed. The interest on such obligations is, in the opinion of counsel for the borrower, excluded from gross income for U.S. federal income tax purposes (but not necessarily for alternative minimum tax purposes). Although there is no secondary market for master demand obligations, such obligations are considered by a Fund to be liquid because they are payable upon demand.
Municipal lease obligations are participations in privately arranged loans to state or local government borrowers and may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. In general, municipal lease obligations are unrated, in which case they will be determined by a Fund’s portfolio manager to be of comparable quality at the time of purchase to rated instruments that may be acquired by a Fund. Frequently, privately arranged loans have variable interest rates and may be backed by a bank letter of credit. In other cases, they may be unsecured or may be secured by assets not easily liquidated.
Moreover, such loans in most cases are not backed by the taxing authority of the issuers and may have limited marketability or may be marketable only by virtue of a provision requiring repayment following demand by the lender.
Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year.
Although lease obligations do not constitute general obligations of the municipal issuer to which the government’s taxing power is pledged, a lease obligation ordinarily is backed by the government’s covenant to budget for, appropriate, and make the payments due under the lease obligation. However, certain lease obligations contain “non-appropriation” clauses that provide that the government has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a periodic basis. In the case of a “non-appropriation” lease, a Fund’s ability to recover under the lease in the event of non-appropriation or default likely will be limited to the repossession of the leased property in the event that foreclosure proves difficult.
Tender option bonds are municipal securities having relatively long maturities and bearing interest at a fixed interest rate substantially higher than prevailing short-term tax-exempt rates that is coupled with the agreement of a third party, such as a bank, broker-dealer or other financial institution, to grant the security holders the option, at periodic intervals, to tender their securities to the institution and receive the face value thereof. The financial institution receives periodic fees equal to the difference between the municipal security’s coupon rate and the rate that would cause the security to trade at face value on the date of determination.
There are variations in the quality of municipal securities, both within a particular classification and between classifications, and the rates of return on municipal securities can depend on a variety of factors, including general money market conditions, the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The ratings of NRSROs represent their opinions as to the quality of municipal securities. It should be emphasized, however, that these ratings are general and are not absolute standards of quality, and municipal securities with the same maturity, interest rate, and rating may have different rates of return while municipal securities of the same maturity and interest rate with different ratings may have the same rate of return. The municipal bond market is characterized by a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than for other security markets. See Appendix A for a discussion of securities ratings. (See Types of Investments – Debt Obligations .)
Standby Commitments. Standby commitments are securities under which a purchaser, usually a bank or broker-dealer, agrees to purchase, for a fee, an amount of a Fund’s municipal obligations. The amount payable by a bank or broker-dealer to purchase securities subject to a standby commitment typically will be substantially the same as the value of the underlying municipal securities. A Fund may pay for standby commitments either separately in cash or by paying a higher price for portfolio securities that are acquired subject to such a commitment.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with standby commitments include: Counterparty Risk, Market Risk and Municipal Securities Risk.
Taxable Municipal Obligations. Interest or other investment return is subject to federal income tax for certain types of municipal obligations for a variety of reasons. These municipal obligations do not qualify for the federal income tax exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities,
Statement of Additional Information – October 3, 2016 47

 

Table of Contents
(b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality’s underfunded pension plan.
For more information about the key risks associated with investments in municipal securities of particular states, see Appendix C. See Appendix A for a discussion of securities ratings. (See Types of Investments – Debt Obligations .)
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with municipal securities include: Credit Risk, Inflation Risk, Interest Rate Risk, Market Risk and Municipal Securities Risk.
Participation Interests
Participation interests (also called pass-through certificates or securities) represent an interest in a pool of debt obligations, such as municipal bonds or notes that have been “packaged” by an intermediary, such as a bank or broker-dealer. Participation interests typically are issued by partnerships or trusts through which a Fund receives principal and interest payments that are passed through to the holder of the participation interest from the payments made on the underlying debt obligations. The purchaser of a participation interest receives an undivided interest in the underlying debt obligations. The issuers of the underlying debt obligations make interest and principal payments to the intermediary, as an initial purchaser, which are passed through to purchasers in the secondary market, such as a Fund. Mortgage-backed securities are a common type of participation interest. Participation interests may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, pay-in- kind and step-coupon securities and may be privately placed or publicly offered. See Types of Investments – Variable- and Floating-Rate Obligations, – Debt Obligations – Zero-Coupon, Pay-in-Kind and Step-Coupon Securities and – Private Placement and Other Restricted Securities for more information.
Loan participations also are a type of participation interest. Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies).
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with loan participations include: Confidential Information Access Risk, Credit Risk and Interest Rate Risk.
Partnership Securities
The Fund may invest in securities issued by publicly traded partnerships or master limited partnerships or limited liability companies (together referred to as “PTPs/MLPs”). These entities are limited partnerships or limited liability companies that may be publicly traded on stock exchanges or markets such as the NYSE, the NYSE Alternext US LLC (“NYSE Alternext”) (formerly the American Stock Exchange) and NASDAQ. PTPs/MLPs often own businesses or properties relating to energy, natural resources or real estate, or may be involved in the film industry or research and development activities. Generally PTPs/MLPs are operated under the supervision of one or more managing partners or members. Limited partners, unit holders, or members (such as a fund that invests in a partnership) are not involved in the day-to-day management of the company. Limited partners, unit holders, or members are allocated income and capital gains associated with the partnership project in accordance with the terms of the partnership or limited liability company agreement.
At times PTPs/MLPs may potentially offer relatively high yields compared to common stocks. Because PTPs/MLPs are generally treated as partnerships or similar limited liability “pass-through” entities for tax purposes, they do not ordinarily pay income taxes, but pass their earnings on to unit holders (except in the case of some publicly traded firms that may be taxed as corporations). For tax purposes, unit holders may initially be deemed to receive only a portion of the distributions attributed to them because certain other portions may be attributed to the repayment of initial investments and may thereby lower the cost basis of the units or shares owned by unit holders. As a result, unit holders may effectively defer taxation on the receipt of some distributions until they sell their units. These tax consequences may differ for different types of entities.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with partnership securities include: Interest Rate Risk, Issuer Risk, Liquidity Risk and Market Risk.
Preferred Stock
Preferred stock represents units of ownership of a corporation that frequently have dividends that are set at a specified rate. Preferred stock has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock shares some of the characteristics of both debt and equity. Preferred stock ordinarily does not carry voting rights. Most preferred stock is cumulative; if dividends are passed ( i.e. , not paid for any reason), they accumulate and must be paid before common stock dividends. Participating preferred stock entitles its holders to share in profits above and beyond the declared dividend, along with common shareholders, as distinguished from nonparticipating preferred stock, which is limited to the stipulated dividend. Convertible preferred stock is exchangeable for a given number of shares of common stock and thus tends to be more volatile than nonconvertible preferred stock, which generally behaves more like a fixed income bond. Preferred stock may be
Statement of Additional Information – October 3, 2016 48

 

Table of Contents
privately placed or publicly offered. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. See Types of Investments – Private Placement and Other Restricted Securities for more information.
Auction preferred stock (APS) is a type of adjustable-rate preferred stock with a dividend determined periodically in a Dutch auction process by corporate bidders. An APS is distinguished from standard preferred stock because its dividends change from time to time. Shares typically are bought and sold at face values generally ranging from $100,000 to $500,000 per share. Holders of APS may not be able to sell their shares if an auction fails, such as when there are more shares of APS for sale at an auction than there are purchase bids.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with preferred stock include: Convertible Securities Risk, Issuer Risk, Liquidity Risk and Market Risk.
Trust-Preferred Securities. Trust-preferred securities, also known as trust-issued securities, are securities that have characteristics of both debt and equity instruments and are typically treated by the Funds as debt investments.
Generally, trust-preferred securities are cumulative preferred stocks issued by a trust that is created by a financial institution, such as a bank holding company. The financial institution typically creates the trust with the objective of increasing its capital by issuing subordinated debt to the trust in return for cash proceeds that are reflected on the financial institutions balance sheet.
The primary asset owned by the trust is the subordinated debt issued to the trust by the financial institution. The financial institution makes periodic interest payments on the debt as discussed further below. The financial institution will subsequently own the trust’s common securities, which may typically represent a small percentage of the trust’s capital structure. The remainder of the trust’s capital structure typically consists of trust-preferred securities which are sold to investors. The trust uses the sales proceeds to purchase the subordinated debt issued by the financial institution. The financial institution uses the proceeds from the subordinated debt sale to increase its capital while the trust receives periodic interest payments from the financial institution for holding the subordinated debt.
The trust uses the interest received to make dividend payments to the holders of the trust-preferred securities. The dividends are generally paid on a quarterly basis and are often higher than other dividends potentially available on the financial institution’s common stocks. The interests of the holders of the trust-preferred securities are senior to those of common stockholders in the event that the financial institution is liquidated, although their interests are typically subordinated to those of other holders of other debt issued by the institution.
The primary benefit for the financial institution in using this particular structure is that the trust-preferred securities issued by the trust are treated by the financial institution as debt securities for tax purposes (as a consequence of which the expense of paying interest on the securities is tax deductible), but are treated as more desirable equity securities for purposes of the calculation of capital requirements.
In certain instances, the structure involves more than one financial institution and thus, more than one trust. In such a pooled offering, an additional separate trust may be created. This trust will issue securities to investors and use the proceeds to purchase the trust-preferred securities issued by other trust subsidiaries of the participating financial institutions. In such a structure, the trust-preferred securities held by the investors are backed by other trust-preferred securities issued by the trust subsidiaries.
If a financial institution is financially unsound and defaults on interest payments to the trust, the trust will not be able to make dividend payments to holders of the trust-preferred securities such as the Fund, as the trust typically has no business operations other than holding the subordinated debt issued by the financial institution(s) and issuing the trust-preferred securities and common stock backed by the subordinated debt.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with trust-preferred securities include: Credit Risk, Interest Rate Risk, Liquidity Risk and Prepayment and Extension Risk.
Private Placement and Other Restricted Securities
Private placement securities are securities that have been privately placed and are not registered under the 1933 Act. They are generally eligible for sale only to certain eligible investors. Private placements often may offer attractive opportunities for investment not otherwise available on the open market. Private placement and other “restricted” securities often cannot be sold to the public without registration under the 1933 Act or the availability of an exemption from registration (such as Rules 144 or 144A), or they are “not readily marketable” because they are subject to other legal or contractual delays in or restrictions on resale. Asset-backed securities, common stock, convertible securities, corporate debt securities, foreign securities, high-yield securities, money market instruments, mortgage-backed securities, municipal securities, participation interests, preferred stock and other types of equity and debt instruments may be privately placed or restricted securities.
Statement of Additional Information – October 3, 2016 49

 

Table of Contents
Private placements typically may be sold only to qualified institutional buyers or, in the case of the initial sale of certain securities, such as those issued in collateralized debt obligations or collateralized loan obligations, to accredited investors (as defined in Rule 501(a) under the 1933 Act), or in a privately negotiated transaction or to a limited number of qualified purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with private placement and other restricted securities include: Issuer Risk, Liquidity Risk, Market Risk and Confidential Information Access Risk.
Real Estate Investment Trusts
Real estate investment trusts (REITs) are pooled investment vehicles that manage a portfolio of real estate or real estate related loans to earn profits for their shareholders. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property, such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels, and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions.
Partnership units of real estate and other types of companies sometimes are organized as master limited partnerships in which ownership interests are publicly traded.
Similar to regulated investment companies, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the Code. The failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. A Fund will indirectly bear its proportionate share of any expenses paid by a REIT in which it invests. REITs often do not provide complete tax information until after the calendar year-end. Consequently, because of the delay, it may be necessary for a Fund investing in REITs to request permission to extend the deadline for issuance of Forms 1099-DIV beyond January 31. In the alternative, amended Forms 1099-DIV may be sent.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with REITs include: Interest Rate Risk, Issuer Risk, Market Risk and Real Estate-Related Investment Risk.
Repurchase Agreements
Repurchase agreements are agreements under which a Fund acquires a security for a relatively short period of time (usually within seven days) subject to the obligation of a seller to repurchase and a Fund to resell such security at a fixed time and price (representing the Fund’s cost plus interest). The repurchase agreement specifies the yield during the purchaser’s holding period. Repurchase agreements also may be viewed as loans made by a Fund that are collateralized by the securities subject to repurchase, which may consist of a variety of security types. A Fund typically will enter into repurchase agreements only with commercial banks, registered broker-dealers and the Fixed Income Clearing Corporation. Such transactions are monitored to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including any accrued interest.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with repurchase agreements include: Counterparty Risk, Credit Risk, Issuer Risk, Market Risk and Repurchase Agreements Risk.
Reverse Repurchase Agreements
Reverse repurchase agreements are agreements under which a Fund temporarily transfers possession of a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash. At the same time, the Fund agrees to repurchase the instrument at an agreed-upon time (normally within 7 days) and price which reflects an interest payment. A Fund generally retains the right to interest and principal payments on the security. Reverse repurchase agreements also may be viewed as borrowings made by a Fund.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, Issuer Risk, Leverage Risk, Market Risk and Reverse Repurchase Agreements Risk.
Short Sales
A Fund may sometimes sell securities short when it owns an equal amount of the securities sold short. This is a technique known as selling short “against the box.” If a Fund makes a short sale “against the box,” it would not immediately deliver the securities sold and would not receive the proceeds from the sale. The seller is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. To secure its obligation to deliver securities sold
Statement of Additional Information – October 3, 2016 50

 

Table of Contents
short, a Fund will deposit in escrow in a separate account with the custodian an equal amount of the securities sold short or securities convertible into or exchangeable for such securities. A Fund can close out its short position by purchasing and delivering an equal amount of the securities sold short, rather than by delivering securities already held by a Fund, because a Fund might want to continue to receive interest and dividend payments on securities in its portfolio that are convertible into the securities sold short.
Short sales “against the box” entail many of the same risks and considerations described below regarding short sales not “against the box.” However, when a Fund sells short “against the box” it typically limits the amount of its effective leverage. A Fund’s decision to make a short sale “against the box” may be a technique to hedge against market risks when a Fund’s portfolio manager believes that the price of a security may decline, causing a decline in the value of a security owned by a Fund or a security convertible into or exchangeable for such security. In such case, any future losses in a Fund’s long position would be reduced by a gain in the short position. The extent to which such gains or losses in the long position are reduced will depend upon the amount of securities sold short relative to the amount of the securities a Fund owns, either directly or indirectly, and, in the case where a Fund owns convertible securities, changes in the investment values or conversion premiums of such securities. Short sales may have adverse tax consequences to a Fund and its shareholders.
Subject to its fundamental and non-fundamental investment policies, a Fund may engage in short sales that are not “against the box,” which are sales by a Fund of securities, contracts or instruments that it does not own in hopes of purchasing the same security, contract or instrument at a later date at a lower price. The technique is also used to protect a profit in a long-term position in a security, commodity futures contract or other instrument. To make delivery to the buyer, a Fund must borrow or purchase the security. If borrowed, a Fund is then obligated to replace the security borrowed from the third party, so a Fund must purchase the security at the market price at a later time. If the price of the security has increased during this time, then a Fund will incur a loss equal to the increase in price of the security from the time of the short sale plus any premiums and interest paid to the third party. (Until the security is replaced, a Fund is required to pay to the lender amounts equal to any dividends or interest which accrue during the period of the loan. To borrow the security, a Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet the margin requirements, until the short position is closed out.) Short sales of forward commitments and derivatives do not involve borrowing a security. These types of short sales may include futures, options, contracts for differences, forward contracts on financial instruments and options such as contracts, credit-linked instruments, and swap contracts.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with short sales include: Leverage Risk, Market Risk and Short Positions Risk.
Sovereign Debt
Sovereign debt obligations are issued or guaranteed by foreign governments or their agencies. It may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Types of Investments – Foreign Securities .) In addition, there may be no legal recourse against a sovereign debtor in the event of a default.
Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with sovereign debt include: Credit Risk, Emerging Markets Securities Risk, Foreign Securities Risk, Issuer Risk and Market Risk.
Standby Commitments
See Types of Investments – Municipal Securities above.
U.S. Government and Related Obligations
U.S. Government obligations include U.S. Treasury obligations and securities issued or guaranteed by various agencies of the U.S. Government or by various agencies or instrumentalities established or sponsored by the U.S. Government. U.S. Treasury obligations and securities issued or guaranteed by various agencies or instrumentalities of the U.S. Government differ in their interest rates, maturities and time of issuance, as well as with respect to whether they are guaranteed by the U.S. Government. U.S. Government and related obligations may be structured as fixed-, variable- or floating-rate obligations. See Types of Investments – Variable- and Floating-Rate Obligations for more information.
Statement of Additional Information – October 3, 2016 51

 

Table of Contents
Investing in U.S. Government and related obligations is subject to certain risks. While U.S. Treasury obligations are backed by the “full faith and credit” of the U.S. Government, such securities are nonetheless subject to credit risk ( i.e. , the risk that the U.S. Government may be, or be perceived to be, unable or unwilling to honor its financial obligations, such as making payments). Securities issued or guaranteed by federal agencies and U.S. Government-sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. Government. These securities may be supported by the ability to borrow from the U.S. Treasury or only by the credit of the issuing agency or instrumentality and, as a result, may be subject to greater credit risk than securities issued or guaranteed by the U.S. Treasury. Obligations of U.S. Government agencies, authorities, instrumentalities and sponsored enterprises historically have involved limited risk of loss of principal if held to maturity. However, no assurance can be given that the U.S. Government would provide financial support to any of these entities if it is not obligated to do so by law.
Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Fannie Mae, Freddie Mac, Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. On September 7, 2008, the Federal Housing Finance Agency (FHFA), an agency of the U.S. Government, placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate the enterprises until they are stabilized.
On August 5, 2011, S& P lowered its long-term sovereign credit rating for the United States of America to “AA+” from “AAA”. Because a Fund may invest in U.S. Government obligations, the value of its shares may be adversely affected by S&P’s downgrade or any future downgrades of the U.S. Government’s credit rating. The long-term impact of the downgrade is uncertain. See Appendix A for a description of securities ratings.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with U.S. Government and related obligations include: Credit Risk, Inflation Risk, Interest Rate Risk, Prepayment and Extension Risk, Reinvestment Risk and U.S. Government Obligations Risk.
Variable- and Floating-Rate Obligations
Variable- and floating-rate obligations are debt instruments that provide for periodic adjustments in the interest rate and, under certain circumstances, varying principal amounts. Unlike a fixed interest rate, a variable, or floating, rate is one that rises and declines based on the movement of an underlying index of interest rates and may pay interest at rates that are adjusted periodically according to a specified formula. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the investor to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the investor (as lender), and the borrower. The interest rates on these notes fluctuate. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days’ notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the lender’s right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Asset-backed securities, bank obligations, convertible securities, corporate debt securities, foreign securities, high-yield securities, money market instruments, mortgage-backed securities, municipal securities, participation interests, stripped securities, U.S. Government and related obligations and other types of debt instruments may be structured as variable- and floating-rate obligations.
Most floating rate loans are acquired directly from the agent bank or from another holder of the loan by assignment. Most such loans are secured, and most impose restrictive covenants on the borrower. These loans are typically made by a syndicate of banks and institutional investors, represented by an agent bank which has negotiated and structured the loan and which is responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate, and for enforcing its rights and the rights of the syndicate against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan. Floating rate loans may include delayed draw term loans and prefunded or synthetic letters of credit.
A Fund’s ability to receive payments of principal and interest and other amounts in connection with loans held by it will depend primarily on the financial condition of the borrower. The failure by the Fund to receive scheduled interest or principal payments on a loan would adversely affect the income of the Fund and would likely reduce the value of its assets, which would be reflected
Statement of Additional Information – October 3, 2016 52

 

Table of Contents
in a reduction in the Fund’s NAV. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a loan or purchasing an assignment in a loan. In selecting the loans in which the Fund will invest, however, the Investment Manager will not rely on that credit analysis of the agent bank, but will perform its own investment analysis of the borrowers. The Investment Manager’s analysis may include consideration of the borrower’s financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. Investments in loans may be of any quality, including “distressed” loans, and will be subject to the Fund’s credit quality policy.
Loans may be structured in different forms, including assignments and participations. In an assignment, a Fund purchases an assignment of a portion of a lender’s interest in a loan. In this case, the Fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank’s rights in the loan.
The borrower of a loan may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that a Fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan.
Corporate loans in which a Fund may purchase a loan assignment are made generally to finance internal growth, mergers, acquisitions, recapitalizations, stock repurchases, leveraged buy-outs, dividend payments to sponsors and other corporate activities. The highly leveraged capital structure of certain borrowers may make such loans especially vulnerable to adverse changes in economic or market conditions. The Fund may hold investments in loans for a very short period of time when opportunities to resell the investments that a Fund’s Portfolio Manager believes are attractive arise.
Certain of the loans acquired by a Fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the Fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan assignment. To the extent that the Fund is committed to make additional loans under such an assignment, it will at all times designate cash or securities in an amount sufficient to meet such commitments.
Notwithstanding its intention in certain situations to not receive material, non-public information with respect to its management of investments in floating rate loans, the Investment Manager may from time to time come into possession of material, non-public information about the issuers of loans that may be held in a Fund’s portfolio. Possession of such information may in some instances occur despite the Investment Manager’s efforts to avoid such possession, but in other instances the Investment Manager may choose to receive such information (for example, in connection with participation in a creditors’ committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, the Investment Manager’s ability to trade in these loans for the account of the Fund could potentially be limited by its possession of such information. Such limitations on the Investment Manager’s ability to trade could have an adverse effect on the Fund by, for example, preventing the Fund from selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time.
In some instances, other accounts managed by the Investment Manager may hold other securities issued by borrowers whose floating rate loans may be held in a Fund’s portfolio. These other securities may include, for example, debt securities that are subordinate to the floating rate loans held in the Fund’s portfolio, convertible debt or common or preferred equity securities.
In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuer’s floating rate loans. In such cases, the Investment Manager may owe conflicting fiduciary duties to the Fund and other client accounts. The Investment Manager will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a result of these conflicting client interests, than if the Investment Manager’s client accounts collectively held only a single category of the issuer’s securities.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with variable- or floating-rate obligations include: Counterparty Risk, Credit Risk, Interest Rate Risk, Liquidity Risk and Prepayment and Extension Risk.
Warrants and Rights
Warrants and rights are types of securities that give a holder a right to purchase shares of common stock. Warrants usually are issued together with a bond or preferred stock and entitle a holder to purchase a specified amount of common stock at a specified price typically for a period of years. Rights usually have a specified purchase price that is lower than the current market price and entitle a holder to purchase a specified amount of common stock typically for a period of only weeks. Warrants may be used to enhance the marketability of a bond or preferred stock. Warrants do not carry with them the right to dividends or
Statement of Additional Information – October 3, 2016 53

 

Table of Contents
voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date, if any.
The potential exercise price of warrants or rights may exceed their market price, such as when there is no movement in the market price or the market price of the common stock declines.
Although one or more of the other risks described in this SAI may also apply, the risks typically associated with warrants and rights include: Convertible Securities Risk, Counterparty Risk, Credit Risk, Issuer Risk and Market Risk.
Information Regarding Risks
The following is a summary of risks of investing in the Funds and the risk characteristics associated with the various investment instruments available to the Funds for investment. A Fund’s risk profile is largely defined by the Fund’s primary portfolio holdings and principal investment strategies (for the description of a Fund’s principal investment strategies and principal risks, please see that Fund’s prospectus). However, the Funds are allowed to use securities, instruments, other assets and investments, strategies and techniques other than those described in the Fund’s principal investment strategies, subjecting the Fund to the risks associated with these securities, instruments, other assets and investments, strategies and techniques.
An investment in the Funds is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. One or more of the following risks may be associated with an investment in a Fund at any time:
Active Management Risk. The Fund is actively managed and its performance therefore will reflect, in part, the ability of the portfolio managers to make investment decisions that will achieve the Fund’s investment objective. Due to its active management, the Fund could underperform its benchmark index and/or other funds with similar investment objectives and/or strategies.
Activist Strategies Risk. The Fund may purchase securities of a company that is the subject of a proxy contest or which activist investors are attempting to influence, in the expectation that new management or a change in business strategies will cause the price of the company’s securities to increase. If the proxy contest, or the new management, is not successful, the market price of the company’s securities will typically fall.
In addition, where an acquisition or restructuring transaction or proxy fight is opposed by the subject company’s management, the transaction often becomes the subject of litigation. Such litigation involves substantial uncertainties and may impose substantial cost and expense on the Fund.
Allocation Risk. For any Fund that uses an asset allocation strategy in pursuit of its investment objective, there is a risk that the Fund's allocation among asset classes, investments, managers, strategies and/or investment styles will cause the Fund's shares to lose value or cause the Fund to underperform other funds with similar investment objectives and/or strategies, or that the investments themselves will not produce the returns expected.
Alternative Strategies Investment Risk. An investment in alternative investment strategies (Alternative Strategies), whether through direct investment or through one or more underlying funds that use Alternative Strategies, involves risks, which may be significant. Alternative Strategies may include strategies, instruments or other assets, such as derivatives, that seek investment returns uncorrelated with the broad equity and fixed income/debt markets, as well as those providing exposure to other markets (such as commodity markets), including but not limited to absolute (positive) return strategies. Alternative Strategies may fail to achieve their desired performance, market or other exposure, or their returns (or lack thereof) may be more correlated with the broad equity and/or fixed income/debt markets than was anticipated, and the Fund may lose money. Some Alternative Strategies may be considered speculative.
To the extent that an underlying fund is charged a performance (or incentive) fee (which would indirectly be borne by the Fund’s shareholders), such fees may create incentives for the underlying fund’s manager to make investments that are riskier or more speculative than in the absence of these fees. Because these fees are often based on both realized and unrealized appreciation, the fee may be greater than if it were based only on realized gains. In addition, underlying fund managers may receive compensation for relative performance of the underlying fund even if the underlying fund’s overall returns are negative.
Arbitrage Strategies Risk. The Fund may purchase securities at prices only slightly below the anticipated value to be paid or exchanged for such securities in a merger, exchange offer or cash tender offer, and substantially above the prices at which such securities traded immediately prior to announcement of the transaction. If there is a perception that the proposed transaction will not be consummated or will be delayed, the market price of the security may decline sharply, which would result in a loss to the Fund. In addition, if the manager determines that the offer is likely to be increased, either by the original bidder or by another party, the Fund may purchase securities above the offer price; such purchases are subject to a high degree of risk.
Statement of Additional Information – October 3, 2016 54

 

Table of Contents
The consummation of mergers and tender and exchange offers can be prevented or delayed by a variety of factors, including opposition by the management or shareholders of the target company, private litigation or litigation involving regulatory agencies, and approval or non-action of regulatory agencies. The likelihood of occurrence of these and other factors, and their impact on an investment, can be very difficult to evaluate.
Asset-Backed Securities Risk. The value of the Fund's asset-backed securities may be affected by, among other things, changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the receivables, the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements, or the market's assessment of the quality of underlying assets. Asset-backed securities represent interests in, or are backed by, pools of receivables such as credit card, auto, student and home equity loans. They may also be backed by securities backed by these types of loans and others, such as mortgage loans. Asset-backed securities can have a fixed or an adjustable rate. Most asset-backed securities are subject to prepayment risk, which is the possibility that the underlying debt may be refinanced or prepaid prior to maturity during periods of declining or low interest rates, causing the Fund to have to reinvest the money received in securities that have lower yields. In addition, the impact of prepayments on the value of asset-backed securities may be difficult to predict and may result in greater volatility. Rising or high interest rates tend to extend the duration of asset-backed securities, resulting in valuations that are volatile and sensitive to changes in interest rates.
Bankruptcy Process and Trade Claims Risk. The Fund may purchase bankruptcy claims. There are a number of significant risks inherent in the bankruptcy process. The effect of a bankruptcy filing on a company may adversely and permanently affect the company and cause it to be incapable of restoring itself as a viable business. Many events in a bankruptcy are the product of contested matters and adversarial proceedings. The duration of a bankruptcy proceeding is difficult to predict and a creditor’s return on investment can be adversely affected by delays while the plan of reorganization is being finalized. The administrative costs in connection with a bankruptcy proceeding are frequently high and are paid out of the debtor’s estate before any return to creditors. The Fund may also purchase trade claims against companies, including companies in bankruptcy or reorganization proceedings, which include claims of suppliers for unpaid goods delivered, claims for unpaid services rendered, claims for contract rejection damages and claims related to litigation. An investment in trade claims is very speculative, illiquid, and carries a high degree of risk. The markets in trade claims are generally not regulated by U.S. federal securities laws or the SEC.
Changing Distribution Level Risk. Depending upon its investments, the Fund will normally receive income which may include interest, dividends and/or capital gains. The amount of the distributions paid by the Fund will vary and generally depends on the amount of income received (less expenses) by the Fund on the loans and securities it holds. If the Fund does not receive any such income, the Fund may not be in a position to make distributions to shareholders. If the income the Fund receives from its investments declines, the Fund may have to reduce its distribution level.
Closed-End Investment Company Risk. Closed-end investment companies frequently trade at a discount to their net asset value, which may affect whether the Fund will realize gain or loss upon its sale of the closed-end investment company’s shares. Closed-end investment companies may employ leverage, which also subjects the closed-end investment company to increased risks such as increased volatility.
Commodity-related Investment Risk. The value of commodities investments will generally be affected by overall market movements and factors specific to a particular industry or commodity, which may include demand for the commodity, weather, embargoes, tariffs, and economic health, political, international, regulatory and other developments. Economic and other events (whether real or perceived) can reduce the demand for commodities, which may, in turn, reduce market prices and cause the value of Fund shares to fall. The frequency and magnitude of such changes cannot be predicted. Exposure to commodities and commodities markets may subject the value of the Fund's investments to greater volatility than other types of investments. No, or limited, active trading market may exist for certain commodities investments, which may impair the ability to sell or to realize the full value of such investments in the event of the need to liquidate such investments. In addition, adverse market conditions may impair the liquidity of actively traded commodities investments. Certain types of commodities instruments are subject to the risk that the counterparty to the instrument may not perform or be unable to perform in accordance with the terms of the instrument. The Fund may make commodity-related investments through, and may invest in one or more underlying funds that make commodity-related investments through, one or more wholly-owned subsidiaries organized outside the U.S. that are generally not subject to U.S. laws (including securities laws) and their protections. However, any such subsidiary is wholly owned and controlled by the Fund and any underlying fund subsidiary is wholly-owned and controlled by the underlying fund, making it unlikely that the subsidiary will take action contrary to the interests of the Fund or the underlying fund and their shareholders. Further, any such subsidiaries will be subject to the laws of a foreign jurisdiction, and can be adversely affected by developments in that jurisdiction.
Concentration Risk. To the extent that the Fund concentrates its investment in particular issuers, countries, geographic regions, industries or sectors, the Fund may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of issuers, countries, geographic regions, industries, sectors or investments.
Statement of Additional Information – October 3, 2016 55

 

Table of Contents
Confidential Information Access Risk. In many instances, issuers of floating rate loans offer to furnish material, non-public information (Confidential Information) to prospective purchasers or holders of the issuer’s floating rate loans to help potential investors assess the value of the loan. Portfolio managers may avoid the receipt of Confidential Information about the issuers of floating rate loans being considered for acquisition by the Fund, or held in the Fund. A decision not to receive Confidential Information from these issuers may disadvantage the Fund as compared to other floating rate loan investors, and may adversely affect the price the Fund pays for the loans it purchases, or the price at which the Fund sells the loans. Further, in situations when holders of floating rate loans are asked, for example, to grant consents, waivers or amendments, the ability to assess the desirability of such consents, waivers or amendments may be compromised. For these and other reasons, it is possible that the decision not to receive Confidential Information could adversely affect the Fund’s performance.
Convertible Securities Risk. Convertible securities are subject to the usual risks associated with debt instruments, such as interest rate risk (the risk of losses attributable to changes in interest rates) and credit risk (the risk that the issuer of a debt instrument will default or otherwise become unable, or be perceived to be unable or unwilling, to honor a financial obligation, such as making payments to the Fund when due). Convertible securities also react to changes in the value of the common stock into which they convert, and are thus subject to market risk (the risk that the market values of securities or other investments that the Fund holds will fall, sometimes rapidly or unpredictably, or fail to rise). Because the value of a convertible security can be influenced by both interest rates and the common stock's market movements, a convertible security generally is not as sensitive to interest rates as a similar debt instrument, and generally will not vary in value in response to other factors to the same extent as the underlying common stock. In the event of a liquidation of the issuing company, holders of convertible securities would typically be paid before the company's common stockholders but after holders of any senior debt obligations of the company. The Fund may be forced to convert a convertible security before it otherwise would choose to do so, which may decrease the Fund's return.
Counterparty Risk. The risk exists that a counterparty to a financial instrument held by the Fund or by a special purpose or structured vehicle in which the Fund invests may become insolvent or otherwise fail to perform its obligations due to financial difficulties, including making payments to the Fund. The Fund may obtain no or limited recovery in a bankruptcy or other organizational proceedings, and any recovery may be significantly delayed. Transactions that the Fund enters into may involve counterparties in the financial services sector and, as a result, events affecting the financial services sector may cause the Fund’s share value to fluctuate.
Credit Risk. Credit risk is the risk that the value of loans or other debt instruments may decline if the borrower or the issuer thereof defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations, such as making payments to the Fund when due. Various factors could affect the actual or perceived willingness or ability of the borrower or the issuer to make timely interest or principal payments, including changes in the financial condition of the borrower or the issuer or in general economic conditions. Fixed-income securities backed by an issuer's taxing authority may be subject to legal limits on the issuer's power to increase taxes or otherwise to raise revenue, or may be dependent on legislative appropriation or government aid. Certain fixed-income securities are backed only by revenues derived from a particular project or source, rather than by an issuer's taxing authority, and thus may have a greater risk of default. Rating agencies assign credit ratings to certain loans and fixed-income instruments to indicate their credit risk. Lower quality or unrated loans or securities held by the Fund may present increased credit risk as compared to higher-rated loans or securities. Non-investment grade loans or fixed-income instruments (commonly called “high-yield” or “junk”) may be subject to greater price fluctuations and are more likely to experience a default than investment grade loans or fixed-income instruments and therefore may expose the Fund to increased credit risk. If the Fund purchases unrated loans or fixed-income securities, or if the ratings of such investments held by the Fund are lowered after purchase, the Fund will depend on analysis of credit risk more heavily than usual. If the issuer of a loan declares bankruptcy or is declared bankrupt, there may be a delay before the Fund can act on the collateral securing the loan, which may adversely affect the Fund. Further, there is a risk that a court could take action with respect to a loan that is adverse to the holders of the loan. Such actions may include invalidating the loan, the lien on the collateral, the priority status of the loan, or ordering the refund of interest previously paid by the borrower. Any such actions by a court could adversely affect the Fund’s performance. A default or expected default of a loan could also make it difficult for the Fund to sell the loan at a price approximating the value previously placed on it. In order to enforce its rights in the event of a default, bankruptcy or similar situation, the Fund may be required to retain legal or similar counsel. This may increase the Fund’s operating expenses and adversely affect its NAV. Loans that have a lower priority for repayment in an issuer’s capital structure may involve a higher degree of overall risk than more senior loans of the same borrower.
Cybersecurity Breaches and Technology and Related Systems Failure Risk. The Funds and their service providers, including but not limited to the Investment Manager (in its role as investment adviser and/or administrator to the Funds), Ameriprise Financial (the Investment Manager’s parent company), any investment subadvisers, the Distributor, the Transfer Agent, the Custodian, and other service providers, as well as their underlying service providers (collectively, the Service Providers), are heavily dependent on proprietary and third-party technology and infrastructure and related operational and information systems, networks, computers, devices, programs, applications, data and functions (collectively, Systems) to perform necessary business
Statement of Additional Information – October 3, 2016 56

 

Table of Contents
activities. The Systems that the Funds and the Service Providers (referred to herein as we, us and our) rely upon may be vulnerable to many threats, breaches and failures, some of which may be outside of our control, including significant damage and disruption arising from Systems failures or cybersecurity breaches. Systems failures include malfunctions, user error, conduct (or misconduct) of or arising from employees and agents, and failures arising from cybersecurity breaches, natural disasters, or other actions or events (whether foreseeable or unforeseeable). Cybersecurity breaches include intentional (e.g., cyber-attacks, hacking, phishing scams, unauthorized payment requests) and unintentional events or activity (e.g., user errors arising from or caused by us or our agents). Systems failures and cybersecurity breaches may result in (i) proprietary or confidential information or data being lost, misused, destroyed, stolen, released, corrupted or rendered unavailable, including personal investor information (and that of beneficial owners of investors), (ii) unauthorized access to Systems and loss of operational capacity, including from, for example, denial-of-service attacks (i.e., efforts to make network services unavailable to intended users), and (iii) the misappropriation of Fund or investor assets or sensitive information. Any such events could negatively impact our Systems and may have significant adverse impacts on the Funds and their shareholders.
Systems failures and cybersecurity breaches may cause delays or mistakes in materials provided to shareholders and may also interfere with or negatively impact the processing of Fund investor transactions, pricing of Fund investments, calculating Fund NAVs, and trading within a Fund’s portfolio, while causing or subjecting us to reputational damage, violations of law, legal claims, regulatory fines, penalties, financial losses and reimbursement, expenses or other compensation and remediation costs, as well as additional compliance, legal, and operational costs. Such events could negatively impact the Fund, its shareholders and affect our business, financial condition and performance or results of operations.
The trend toward broad consumer and general public notification of Systems failures and cybersecurity breaches could exacerbate the harm to the Fund, its shareholders and our business, financial condition and performance or results of operations. Even if we successfully protect our Systems from failures or cybersecurity breaches, we may incur significant expenses in connection with our responses to any such events, as well as the need for adoption, implementation and maintenance of appropriate security measures. We could also suffer harm to our business and reputation if attempted or actual cybersecurity breaches are publicized. We cannot be certain that evolving threats from cyber-criminals and other cyber-threat actors, exploitation of new vulnerabilities in our Systems, or other developments, or data thefts, System break-ins or inappropriate access will not compromise or breach the technology or other security measures protecting our Systems.
To date, we have not experienced any material Systems failures or cybersecurity breaches, however, we routinely encounter and address such threats. For example, in 2015 the then-available Columbia ETFs were for a period unable to price their portfolios due to a technology issue impacting the ETFs’ third-party administrator. In another case, in 2014, Ameriprise Financial and other financial institutions experienced distributed denial-of-service attacks intended to disrupt clients’ online access. While Ameriprise Financial was able to detect and respond to this incident without loss of client assets or information, Ameriprise Financial has since enhanced its security capabilities and will continue to assess its ability to monitor and respond to such threats. In addition to the foregoing, the experiences of Ameriprise Financial and its affiliates with Systems failures, cybersecurity breaches and technology threats have included, as examples, phishing scams, introductions of malware, attempts at electronic break-ins, and unauthorized payment requests. Systems failures and cybersecurity breaches may be difficult to detect, may go undetected for long periods or may never be detected. The impact of such events may be compounded over time. Although the Funds and the Service Providers evaluate the materiality of Systems failures and cybersecurity breaches that it detects, the Funds and the Service Providers may conclude that some such events are not material and may choose not to address them. Such conclusions may not prove to be correct.
Although we have established business continuity/disaster recovery plans and systems (Continuity and Recovery Plans) designed to prevent or mitigate the effects of Systems failures and cybersecurity breaches, there are inherent limitations in Continuity and Recovery Plans. These limitations include the possibility that certain risks have not been identified or that Continuity and Recovery Plans might not – despite testing and monitoring – operate as designed, be sufficient to stop or mitigate losses or otherwise be unable to achieve their objectives. The Funds and their shareholders could be negatively impacted as a result. In addition, the Fund cannot control the Continuity and Recovery Plans of the Service Providers. As a result, there can be no assurance that the Funds will not suffer losses relating to Systems failures or cybersecurity breaches affecting us in the future, particularly third-party service providers, as the Funds cannot control any Continuity and Recovery Plans or cybersecurity defenses implemented by such parties.
Systems failures and cybersecurity breaches may necessitate significant investment to repair or replace impacted Systems. In addition, we, including the Funds, may incur substantial costs for Systems failure risk management and cybersecurity risk management in order to attempt to prevent any such events or incidents in the future.
Insurance and other traditional risk-shifting tools may be held by or available to us in order to manage or mitigate the risks associated with Systems failures and cybersecurity breaches, but they are subject to terms and limitations such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency. While Ameriprise Financial and its affiliates maintain cyber liability insurance that provides both third-party liability and first-party
Statement of Additional Information – October 3, 2016 57

 

Table of Contents
liability coverages, this insurance does not cover the Funds and, with regard to covered entities, may not be sufficient to protect us against all losses. In addition, contractual remedies may not be available with respect to Service Providers or may prove inadequate if available (e.g., because of limits on the liability of the Service Providers) to protect the Funds against all losses.
Selling Agents, other financial intermediaries, and issuers of, and counterparties to, the Funds’ investments also may be adversely impacted by Systems failures and cybersecurity breaches in their own businesses, subjecting them to the risks described herein, as well as other additional or enhanced risks particular to their businesses, which could result in losses to the Funds and their shareholders. Issuers of securities or other instruments in which the Funds invest may also experience Systems failures or cybersecurity breaches, which could result in material adverse consequences for such issuers, and may cause the Funds’ investment in such issuers to lose money.
Depositary Receipts Risk. Depositary receipts are receipts issued by a bank or trust company reflecting ownership of underlying securities issued by foreign companies. Some foreign securities are traded in the form of American Depositary Receipts (ADRs). Depositary receipts involve risks similar to the risks associated with investments in foreign securities, including those associated with investing in the particular country of an issuer, which may be related to the particular political, regulatory, economic, social and other conditions or events, including, for example, military confrontations, war and terrorism, occurring in the country and fluctuations in its currency, as well as market risk tied to the underlying foreign company. In addition, ADR holders may have limited voting rights, may not have the same rights afforded typical company stockholders in the event of a corporate action such as an acquisition, merger or rights offering and may experience difficulty in receiving company stockholder communications. A potential conflict of interest exists to the extent that the Fund invests in ADRs for which the Fund's custodian serves as depository bank.
Derivatives Risk. Derivatives may involve significant risks. Derivatives are financial instruments, traded on an exchange or in the over-the-counter (OTC) markets, with a value in relation to, or derived from, the value of an underlying asset(s) (such as a security, commodity or currency) or other reference, such as an index, rate or other economic indicator (each an underlying reference). Derivatives may include those that are privately placed or otherwise exempt from SEC registration, including certain Rule 144A eligible securities. Derivatives could result in Fund losses if the underlying references do not perform as anticipated. Use of derivatives is a highly specialized activity that can involve investment techniques, risks, and tax planning different from those associated with more traditional investment instruments. A Fund’s derivatives strategy may not be successful and use of certain derivatives could result in substantial, potentially unlimited, losses to the Fund regardless of the Fund’s actual investment. A relatively small movement in the price, rate or other economic indicator associated with the underlying reference may result in substantial loss for the Fund. Derivatives may be more volatile than other types of investments. Derivatives can increase the Fund’s risk exposure to underlying references and their attendant risks, including the risk of an adverse credit event associated with the underlying reference (credit risk), the risk of adverse movement in the value, price or rate of the underlying reference (market risk), the risk of adverse movement in the value of underlying currencies (foreign currency risk) and the risk of adverse movement in underlying interest rates (interest rate risk). Derivatives may expose the Fund to additional risks, including the risk of loss due to a derivative position that is imperfectly correlated with the underlying reference it is intended to hedge or replicate (correlation risk), the risk that a counterparty will fail to perform as agreed (counterparty risk), the risk that a hedging strategy may fail to mitigate losses, and may offset gains (hedging risk), the risk that losses may be greater than the amount invested (leverage risk), the risk that the Fund may be unable to sell an investment at an advantageous time or price (liquidity risk), the risk that the investment may be difficult to value (pricing risk), and the risk that the price or value of the investment fluctuates significantly over short periods of time (volatility risk). The value of derivatives may be influenced by a variety of factors, including national and international political and economic developments. Potential changes to the regulation of the derivatives markets may make derivatives more costly, may limit the market for derivatives, or may otherwise adversely affect the value or performance of derivatives.
Derivatives Risk – Forward Contracts Risk. A forward contract is an over-the-counter derivative transaction between two parties to buy or sell a specified amount of an underlying reference at a specified price (or rate) on a specified date in the future. Forward contracts are negotiated on an individual basis and are not standardized or traded on exchanges. The market for forward contracts is substantially unregulated (there is no limit on daily price movements and speculative position limits are not applicable). The principals who deal in certain forward contract markets are not required to continue to make markets in the underlying references in which they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been periods during which certain participants in forward contract markets have refused to quote prices for certain underlying references or have quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at which they were prepared to sell. At or prior to maturity of a forward contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in forward contract prices. The liquidity of the markets for forward contracts depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the market for forwards could be reduced. A relatively small price movement in a forward contract may result in substantial losses to the Fund, exceeding the amount of the
Statement of Additional Information – October 3, 2016 58

 

Table of Contents
margin paid. Forward contracts can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
A forward foreign currency contract is a derivative (forward contract) in which the underlying reference is a country's or region’s currency. The Fund may agree to buy or sell a country's or region’s currency at a specific price on a specific date in the future. These instruments may fall in value (sometimes dramatically) due to foreign market downswings or foreign currency value fluctuations, subjecting the Fund to foreign currency risk (the risk that Fund performance may be negatively impacted by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund exposes a significant percentage of its assets to currencies other than the U.S. dollar). The effectiveness of any currency hedging strategy by a Fund may be reduced by the Fund’s inability to precisely match forward contract amounts and the value of securities involved. Forward foreign currency contracts used for hedging may also limit any potential gain that might result from an increase or decrease in the value of the currency. The Fund may use these instruments to gain leveraged exposure to currencies, which is a speculative investment practice that increases the Fund's risk exposure and the possibility of losses. Unanticipated changes in the currency markets could result in reduced performance for the Fund. When the Fund converts its foreign currencies into U.S. dollars, it may incur currency conversion costs due to the spread between the prices at which it may buy and sell various currencies in the market.
A forward interest rate agreement is a derivative whereby the buyer locks in an interest rate at a future settlement date. If the interest rate on the settlement date exceeds the lock rate, the buyer pays the seller the difference between the two rates (based on the notional value of the agreement). If the lock rate exceeds the interest rate on the settlement date, the seller pays the buyer the difference between the two rates (based on the notional value of the agreement). The Fund may act as a buyer or a seller.
Derivatives Risk – Futures Contracts Risk. A futures contract is an exchange-traded derivative transaction between two parties in which a buyer (holding the “long” position) agrees to pay a fixed price (or rate) at a specified future date for delivery of an underlying reference from a seller (holding the “short” position). The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Certain futures contract markets are highly volatile, and futures contracts may be illiquid. Futures exchanges may limit fluctuations in futures contract prices by imposing a maximum permissible daily price movement. The Fund may be disadvantaged if it is prohibited from executing a trade outside the daily permissible price movement. At or prior to maturity of a futures contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in futures contract prices. The liquidity of the futures markets depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the futures market could be reduced. Positions in futures contracts may be closed out only on the exchange on which they were entered into or through a linked exchange, and no secondary market exists for such contracts. Futures positions are marked to market each day and variation margin payment must be paid to or by the Fund. Because of the low margin deposits normally required in futures trading, it is possible that the Fund may employ a high degree of leverage in the portfolio. As a result, a relatively small price movement in a futures contract may result in substantial losses to the Fund, exceeding the amount of the margin paid. For certain types of futures contracts, losses are potentially unlimited. Futures markets are highly volatile and the use of futures may increase the volatility of the Fund’s net asset value. Futures contracts executed (if any) on foreign exchanges may not provide the same protection as U.S. exchanges. Futures contracts can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
A bond (or debt instrument) future is a derivative that is an agreement for the contract holder to buy or sell a bond or other debt instrument, a basket of bonds or other debt instrument, or the bonds or other debt instruments in an index on a specified date at a predetermined price. The buyer (long position) of a bond future is obliged to buy the underlying reference at the agreed price on expiry of the future.
A commodity-linked future is a derivative that is an agreement to buy or sell one or more commodities (such as crude oil, gasoline and natural gas), basket of commodities or indices of commodity futures at a specific date in the future at a specific price.
A currency future , also an FX future or foreign exchange future, is a derivative that is an agreement to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date.
An equity future is a derivative that is an agreement for the contract holder to buy or sell a specified amount of an individual equity, a basket of equities or the securities in an equity index on a specified date at a predetermined price.
Statement of Additional Information – October 3, 2016 59

 

Table of Contents
An interest rate future is a derivative that is an agreement whereby the buyer and seller agree to the future delivery of an interest-bearing instrument on a specific date at a pre-determined price. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures.
Derivatives Risk – Inverse Floaters Risk. Inverse variable or floating rate obligations, sometimes referred to as inverse floaters, are a type of over-the-counter derivative debt instrument with a variable or floating coupon rate that moves in the opposite direction of an underlying reference, typically short-term interest rates. As short-term interest rates go down, the holders of the inverse floaters receive more income and, as short-term interest rates go up, the holders of the inverse floaters receive less income. Variable rate securities provide for a specified periodic adjustment in the coupon rate, while floating rate securities have a coupon rate that changes whenever there is a change in a designated benchmark index or the issuer’s credit rating. While inverse floaters tend to provide more income than similar term and credit quality fixed-rate bonds, they also exhibit greater volatility in price movement, which could result in significant losses for the Fund. An inverse floater may have the effect of investment leverage to the extent that its coupon rate varies by a magnitude that exceeds the magnitude of the change in the index or reference rate of interest, which could result in increased losses for the Fund. There is a risk that the current interest rate on variable and floating rate instruments may not accurately reflect current market interest rates or adequately compensate the holder for the current creditworthiness of the issuer. Some inverse floaters are structured with liquidity features and may include market-dependent liquidity features that may expose the Fund to greater liquidity risk. Inverse floaters can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Options Risk. Options are derivatives that give the purchaser the option to buy (call) or sell (put) an underlying reference from or to a counterparty at a specified price (the strike price) on or before an expiration date. The Fund may purchase or write (i.e., sell) put and call options on an underlying reference it is otherwise permitted to invest in. By investing in options, the Fund is exposed to the risk that it may be required to buy or sell the underlying reference at a disadvantageous price on or before the expiration date. If the Fund sells a put option, the Fund may be required to buy the underlying reference at a strike price that is above market price, resulting in a loss. If the Fund sells a call option, the Fund may be required to sell the underlying reference at a strike price that is below market price, resulting in a loss. If the Fund sells a call option that is not covered (it does not own the underlying reference), the Fund's losses are potentially unlimited. Options may involve economic leverage, which could result in greater volatility in price movement. Options may be traded on a securities exchange or in the over-the-counter market. At or prior to maturity of an options contract, the Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in options prices. Options can increase the Fund’s risk exposure to underlying references and their attendant risks such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
Derivatives Risk – Structured Investments Risk. Structured investments are over-the-counter derivatives that provide principal and/or interest payments based on the value of an underlying reference(s). Structured investments typically provide interest income, thereby offering a potential yield advantage over investing directly in an underlying reference. Structured investments may lack a liquid secondary market and their prices or value can be volatile which could result in significant losses for the Fund. In some cases, depending on its terms, a structured investment may provide that principal and/or interest payments may be adjusted below zero resulting in a potential loss of principal and/or interest payments. Additionally, the particular terms of a structured investment may create economic leverage by requiring payment by the issuer of an amount that is a multiple of the price change of the underlying reference. Economic leverage will increase the volatility of structured investment prices, and could result in increased losses for the Fund. The Fund’s use of structured instruments may not work as intended. If structured investments are used to reduce the duration of the Fund’s portfolio, this may limit the Fund’s return when having a longer duration would be beneficial (for instance, when interest rates decline). Structured investments can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk, pricing risk and volatility risk.
A commodity-linked structured note is a derivative (structured investment) that has principal and/or interest payments based on the market price of one or more particular commodities (such as crude oil, gasoline and natural gas), a basket of commodities, indices of commodity futures or other economic variable. If payment of interest on a commodity-linked structured note is linked to the value of a particular commodity, basket of commodities, commodity index or other economic variable, the Fund might receive lower interest payments (or not receive any of the interest due) on its investments if there is a loss of value of the underlying reference. Further, to the extent that the amount of principal to be repaid upon maturity is linked to the value of a particular commodity, basket of commodities, commodity index or other economic variable, the Fund might not receive a portion (or any) of the principal at maturity of the investment or upon earlier exchange. At any time, the risk of loss associated with a particular structured note in the Fund’s portfolio may be significantly higher than the value of
Statement of Additional Information – October 3, 2016 60

 

Table of Contents
  the note. A liquid secondary market may not exist for the commodity-linked structured notes held in the Fund’s portfolio, which may make it difficult for the notes to be sold at a price acceptable to the portfolio manager(s) or for the Fund to accurately value them.
Structured investments include collateralized debt obligations which are debt instruments that are collateralized by the underlying cash flows of a pool of financial assets or receivables.
An equity-linked note (ELN) is a derivative (structured investment) that has principal and/or interest payments based on the value of a single equity security, a basket of equity securities or an index of equity securities. An ELN typically provides interest income, thereby offering a yield advantage over investing directly in an underlying equity. The Fund may purchase ELNs that trade on a securities exchange or those that trade on the over-the-counter markets, as well as in privately negotiated transactions with the issuer of the ELN. The liquidity of unlisted ELNs is normally determined by the willingness of the issuer to make a market in the ELN. While the Fund will seek to purchase ELNs only from issuers that it believes to be willing to, and capable of, repurchasing the ELN at a reasonable price, there can be no assurance that the Fund will be able to sell any ELN at such a price or at all. This may impair the Fund’s ability to enter into other transactions at a time when doing so might be advantageous. The Fund’s investments in ELNs have the potential to lead to significant losses because ELNs are subject to the market and volatility risks associated with their underlying equity. In addition, because ELNs often take the form of unsecured notes of the issuer, the Fund would be subject to the risk that the issuer may default on its obligations under the ELN, thereby subjecting the Fund to the further risk of being too concentrated in the securities (including ELNs) of that issuer. The Fund may or may not hold an ELN until its maturity. ELNs also include participation notes.
Derivatives Risk – Swaps Risk. In a typical swap transaction, two parties agree to exchange the return earned on a specified underlying reference for a fixed return or the return from another underlying reference during a specified period of time. Swaps may be difficult to value and may be illiquid. Swaps could result in Fund losses if the underlying asset or reference does not perform as anticipated. Swaps create significant investment leverage such that a relatively small price movement in a swap may result in immediate and substantial losses to the Fund. The Fund may only close out a swap with its particular counterparty, and may only transfer a position with the consent of that counterparty. Certain swaps, such as short swap transactions and total return swaps, have the potential for unlimited losses, regardless of the size of the initial investment. Swaps can increase the Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, inflation risk, leverage risk, liquidity risk, pricing risk and volatility risk.
A commodity-linked swap is a derivative (swap) that is an agreement where the underlying reference is the market price of one or more particular commodities (such as crude oil, gasoline and natural gas), basket of commodities or indices of commodity futures.
A credit default swap (including a swap on a credit default index, sometimes referred to as a credit default swap index) is a derivative and special type of swap where one party pays, in effect, an insurance premium through a stream of payments to another party in exchange for the right to receive a specified return upon the occurrence of a particular credit event by one or more third parties, such as bankruptcy, default or a similar event. A credit default swap may be embedded within a structured note or other derivative instrument. Credit default swaps enable an investor to buy or sell protection against such a credit event (such as an issuer’s bankruptcy, restructuring or failure to make timely payments of interest or principal). Credit default swap indices are indices that reflect the performance of a basket of credit default swaps and are subject to the same risks as credit default swaps. If such a default were to occur, any contractual remedies that the Fund may have may be subject to bankruptcy and insolvency laws, which could delay or limit the Fund's recovery. Thus, if the counterparty under a credit default swap defaults on its obligation to make payments thereunder, as a result of its bankruptcy or otherwise, the Fund may lose such payments altogether, or collect only a portion thereof, which collection could involve costs or delays. The Fund’s return from investment in a credit default swap index may not match the return of the referenced index. Further, investment in a credit default swap index could result in losses if the referenced index does not perform as expected. Unexpected changes in the composition of the index may also affect performance of the credit default swap index. If a referenced index has a dramatic intraday move that causes a material decline in the Fund’s net assets, the terms of the Fund’s credit default swap index may permit the counterparty to immediately close out the transaction. In that event, the Fund may be unable to enter into another credit default swap index or otherwise achieve desired exposure, even if the referenced index reverses all or a portion of its intraday move.
An inflation rate swap is a derivative typically used to transfer inflation risk from one party to another through an exchange of cash flows. In an inflation rate swap, one party pays a fixed rate on a notional principal amount, while the other party pays a floating rate linked to an inflation index, such as the Consumer Price Index (CPI).
An interest rate swap is a derivative in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate (or vice versa) or from one floating rate to another. Interest rate swaps can be based on various measures of interest rates, including LIBOR, swap rates, treasury rates and foreign interest rates.
Statement of Additional Information – October 3, 2016 61

 

Table of Contents
Portfolio and total return swaps are derivative swap transactions in which one party agrees to pay the other party an amount equal to the total return of a defined underlying reference during a specified period of time. In return, the other party would make periodic payments based on a fixed or variable interest rate or on the total return of a different underlying reference.
Contracts for differences are swap arrangements in which the parties agree that their return (or loss) will be based on the relative performance of two different groups or baskets of securities or other instruments. Often, one or both baskets will be an established securities index. The Fund’s return will be based on changes in value of theoretical long futures positions in the securities comprising one basket (with an aggregate face value equal to the notional amount of the contract for differences) and theoretical short futures positions in the securities comprising the other basket. The Fund also may use actual long and short futures positions and achieve similar market exposure by netting the payment obligations of the two contracts. If the short basket outperforms the long basket, the Fund will realize a loss – even in circumstances when the securities in both the long and short baskets appreciate in value.
Derivatives Risk – Swaptions Risk. A swaption is an options contract on a swap agreement. These transactions give a party the right (but not the obligation) to enter into new swap agreements or to shorten, extend, cancel or otherwise modify an existing swap agreement at some designated future time on specified terms, in return for payment of the purchase price (the “premium”) of the option. A Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The writer of the contract receives the premium and bears the risk of unfavorable changes in the market value on the underlying swap agreement. Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars.
Distressed Securities Risk. The Fund may purchase distressed securities of business enterprises involved in workouts, liquidations, reorganizations, bankruptcies and similar situations. Since there is typically substantial uncertainty concerning the outcome of transactions involving business enterprises in these situations, there is a high degree of risk of loss, including loss of the entire investment.
In bankruptcy, there can be considerable delay in reaching accord on a restructuring plan acceptable to a bankrupt company’s lenders, bondholders and other creditors and then obtaining the approval of the bankruptcy court. Such delays could result in substantial losses to the investments in such company’s securities or obligations. Moreover, there is no assurance that a plan favorable to the class of securities held by the Fund will be adopted or that the subject company might not eventually be liquidated rather than reorganized.
In liquidations (both in and out of bankruptcy) and other forms of corporate reorganization, there exists the risk that the reorganization either will be unsuccessful, will be delayed or will result in a distribution of cash or a new security, the value of which will be less than the purchase price of the security in respect of which such distribution is received. It may be difficult to obtain accurate information concerning a company in financial distress, with the result that the analysis and valuation are especially difficult. The market for securities of such companies tends to be illiquid and sales may be possible only at substantial discounts.
Dollar Rolls Risk. Dollar rolls are transactions in which the Fund sells securities to a counterparty and simultaneously agrees to purchase those or similar securities in the future at a predetermined price. Dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations. These transactions may also increase the Fund’s portfolio turnover rate and may result in higher transactions costs for the Fund. If the Fund reinvests the proceeds of the security sold, the Fund will also be subject to the risk that the investments purchased with such proceeds will decline in value (a form of leverage risk).
Emerging Market Securities Risk. Securities issued by foreign governments or companies in emerging market countries, such as China, Russia and certain countries in Eastern Europe, the Middle East, Asia, Latin America or Africa, are more likely to have greater exposure to the risks of investing in foreign securities that are described in Foreign Securities Risk. In addition, emerging market countries are more likely to experience instability resulting, for example, from rapid changes or developments in social, political, economic or other conditions. Their economies are usually less mature and their securities markets are typically less developed with more limited trading activity ( i.e. , lower trading volumes and less liquidity) than more developed countries. Emerging market securities tend to be more volatile than securities in more developed markets. Many emerging market countries are heavily dependent on international trade and have fewer trading partners, which makes them more sensitive to world commodity prices and economic downturns in other countries. Some emerging market countries have a higher risk of currency devaluations, and some of these countries may experience periods of high inflation or rapid changes in inflation rates and may have hostile relations with other countries.
Operational and Settlement Risks of Securities in Emerging Markets. In addition to having less developed securities markets, banks in emerging markets that are eligible foreign sub-custodians may be recently organized, lack extensive operating experience or lack effective government oversight or regulation. In addition, there may be legal restrictions or limitations on the
Statement of Additional Information – October 3, 2016 62

 

Table of Contents
ability of the Fund to recover assets held in custody by a foreign sub-custodian in the event of the bankruptcy of the sub-custodian. Because settlement systems may be less organized than in developed markets and because delivery versus payment settlement may not be possible or reliable, there may be a greater risk that settlement may be delayed and that cash or securities of the Fund may be lost because of failures of or defects in the system, including fraud or corruption. Settlement systems in emerging markets also have a higher risk of failed trades.
Risks Related to Currencies and Corporate Actions in Emerging Markets. Risks related to currencies and corporate actions are also greater in emerging market countries than in developed countries. For example, some emerging market countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Further, certain currencies may not be traded internationally, or countries may have varying exchange rates. Some emerging market countries have a higher risk of currency devaluations, and some of these countries may experience sustained periods of high inflation or rapid changes in inflation rates which can have negative effects on a country’s economy and securities markets. Corporate action procedures in emerging market countries may be less reliable and have limited or no involvement by the depositories and central banks. Lack of standard practices and payment systems can lead to significant delays in payment.
Risks Related to Corporate and Securities Laws in Emerging Markets. Securities laws in emerging markets may be relatively new and unsettled and, consequently, there is a risk of rapid and unpredictable change in laws regarding foreign investment, securities regulation, title to securities and shareholder rights. Accordingly, foreign investors may be adversely affected by new or amended laws and regulations. In addition, the systems of corporate governance to which issuers in certain emerging markets are subject may be less advanced than the systems to which issuers located in more developed countries are subject, and therefore, shareholders of such issuers may not receive many of the protections available to shareholders of issuers located in more developed countries. These risks may be heightened in China and Russia.
China Stock Connect Risk. The risks noted here are in addition to the risks described under Emerging Market Securities Risk . A Fund may, directly or indirectly (through, for example, participation notes or other types of equity-linked notes), purchase shares in mainland China-based companies that trade on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange (China A-Shares) through the Shanghai-Hong Kong Stock Connect (Stock Connect), a mutual market access program designed to, among other things, enable foreign investment in the People’s Republic of China (PRC) via brokers in Hong Kong. There are significant risks inherent in investing in China A-Shares through Stock Connect. The underdeveloped state of PRC’s investment and banking systems subjects the settlement, clearing, and registration of China A-Shares transactions to heightened risks. Stock Connect can only operate when both PRC and Hong Kong markets are open for trading and when banking services are available in both markets on the corresponding settlement days. As such, if either or both markets are closed on a U.S. trading day, a Fund may not be able to dispose of its China A-Shares in a timely manner, which could adversely affect the Fund’s performance. PRC regulations require that a fund that wishes to sell its China A-Shares pre-deliver the China A-Shares to a broker. If the China A-Shares are not in the broker’s possession before the market opens on the day of sale, the sell order will be rejected. This requirement could also limit a fund’s ability to dispose of its China A-Shares purchased through Stock Connect in a timely manner. Additionally, Stock Connect is subject to daily quota limitations on purchases of China A-Shares. Once the daily quota is reached, orders to purchase additional China A-Shares through Stock Connect will be rejected. A Fund’s investment in China A-Shares may only be traded through Stock Connect and is not otherwise transferable. Stock Connect utilizes an omnibus clearing structure, and the Fund’s shares will be registered in its custodian’s name on the Central Clearing and Settlement System. This may limit the ability of the Investment Manager (and/or any subadviser, as the case may be) to effectively manage a Fund, and may expose the Fund to the credit risk of its custodian or to greater risk of expropriation. Investment in China A-Shares through Stock Connect may be available only through a single broker that is an affiliate of the Fund’s custodian, which may affect the quality of execution provided by such broker. Stock Connect restrictions could also limit the ability of a Fund to sell its China A-Shares in a timely manner, or to sell them at all. Further, different fees, costs and taxes are imposed on foreign investors acquiring China A-Shares acquired through Stock Connect, and these fees, costs and taxes may be higher than comparable fees, costs and taxes imposed on owners of other securities providing similar investment exposure.
EuroZone-Related Risk. A number of countries in the European Union (EU) have experienced, and may continue to experience, severe economic and financial difficulties. Additional EU member countries may also fall subject to such difficulties. These events could negatively affect the value and liquidity of the Fund’s investments in euro-denominated securities and derivatives contracts, securities of issuers located in the EU or with significant exposure to EU issuers or countries. If the euro is dissolved entirely, the legal and contractual consequences for holders of euro-denominated obligations and derivative contracts would be determined by laws in effect at such time. Such investments may continue to be held, or purchased, to the extent consistent with the Fund’s investment objective and permitted under applicable law. These potential developments, or market perceptions concerning these and related issues, could adversely affect the value of Fund shares.
Certain countries in the EU have had to accept assistance from supra-governmental agencies such as the International Monetary Fund, the European Stability Mechanism (the ESM) or other supra-governmental agencies. The European Central Bank has also been intervening to purchase Eurozone debt in an attempt to stabilize markets and reduce borrowing costs.
Statement of Additional Information – October 3, 2016 63

 

Table of Contents
There can be no assurance that these agencies will continue to intervene or provide further assistance and markets may react adversely to any expected reduction in the financial support provided by these agencies. Responses to the financial problems by European governments, central banks and others including austerity measures and reforms, may not work, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. In addition, one or more countries may abandon the euro and/or withdraw from the EU. The impact of these actions, especially if they occur in a disorderly fashion, could be significant and far-reaching.
Event-Driven Trading Risk. The Fund may seek to profit from the occurrence of specific corporate or other events. A delay in the timing of these events, or the failure of these events to occur at all, may have a significant negative effect on the Fund’s performance.
Event-driven investing requires the relevant manager to make predictions about (i) the likelihood that an event will occur and (ii) the impact such event will have on the value of a company’s securities. If the event fails to occur or it does not have the effect foreseen, losses can result. For example, the adoption of new business strategies, a meaningful change in management or the sale of a division or other significant assets by a company may not be valued as highly by the market as the manager had anticipated, resulting in losses. In addition, a company may announce a plan of restructuring which promises to enhance value and fail to implement it, resulting in losses to investors.
Event-Linked Instruments Risk. The Fund may seek to profit from investment in debt securities whose performance is linked to the occurrence of specific “trigger” events, such as a hurricane, earthquake, or other physical or weather-related phenomena. If a trigger event causes losses exceeding a specific amount in the geographic region and time period specified in a bond, the Fund may lose a portion or all of its principal invested in the bond or suffer a reduction in credited interest. Some event-linked bonds have features that delay the return of capital upon the occurrence of a specified event; in these cases, whether or not there is loss of capital or interest, the return on the investment may be significantly lower during the extension period. Bonds commonly referred to as “catastrophe bonds” are a type of event-linked instrument in which the Fund may invest. Catastrophe bonds may be issued by government agencies, insurance companies, reinsurers, special purpose corporations or other on-shore or off-shore entities (such special purpose entities are created to accomplish a narrow and well-defined objective, such as the issuance of a note in connection with a reinsurance transaction). The return on these securities is tied primarily to property insurance risk and is analogous to underwriting insurance in certain circumstances. By isolating insurance risk, these securities are largely uncorrelated to other more traditional investments. Risks associated with investment in catastrophe bonds would include, for example, a major hurricane or similar catastrophe striking a heavily populated area of the East Coast of the United States or a major earthquake with an epicenter in an urban area on the West Coast of the United States. In addition to specified trigger events, catastrophe bonds may expose the Fund to other risks, such as credit risk, counterparty risk, adverse regulatory or jurisdictional interpretations, adverse tax consequences, liquidity risk, and foreign exchange risk. Event-linked exposure often provides for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. From time to time, the volume of catastrophe bonds available in the market may be insufficient to enable the Fund to invest as great a percentage of its assets in catastrophe bonds as it would like.
Exchange-Traded Fund (ETF) Risk. An ETF’s share price may not track its specified market index (if any) and may trade below its net asset value. Certain ETFs use a “passive” investment strategy and do not take defensive positions in volatile or declining markets. Other ETFs in which the Fund may invest are actively managed ETFs ( i.e. , they do not track a particular benchmark), which indirectly subjects the Fund to active management risk. An active secondary market in an ETF’s shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF’s shares will continue to be listed on an active exchange. In addition, shareholders bear both their proportionate share of the Fund’s expenses and similar expenses incurred through ownership of the ETF.
The Fund generally expects to purchase shares of ETFs through broker-dealers in transactions on a securities exchange, and in such cases the Fund will pay customary brokerage commissions for each purchase and sale. Shares of an ETF may also be acquired by depositing a specified portfolio of the ETF’s underlying securities, as well as a cash payment generally equal to accumulated dividends of the securities (net of expenses) up to the time of deposit, with the ETF’s custodian, in exchange for which the ETF will issue a quantity of new shares sometimes referred to as a “creation unit.” Similarly, shares of an ETF purchased on an exchange may be accumulated until they represent a creation unit, and the creation unit may be redeemed in kind for a portfolio of the underlying securities (based on the ETF’s net asset value) together with a cash payment generally equal to accumulated dividends as of the date of redemption. The Funds may redeem creation units for the underlying securities (and any applicable cash), and may assemble a portfolio of the underlying securities (and any required cash) to purchase creation units. The Funds’ ability to redeem creation units may be limited by the 1940 Act, which provides that ETFs, the shares of which are purchased in reliance on Section 12(d)(1)(F) of the 1940 Act, will not be obligated to redeem such shares in an amount exceeding one percent of their total outstanding securities during any period of less than 30 days.
Statement of Additional Information – October 3, 2016 64

 

Table of Contents
Exchange-Traded Notes Risk. Because exchange-traded notes (ETNs) are unsecured, unsubordinated debt securities, an investment in an ETN exposes the Fund to the risk that an ETN’s issuer may be unable to pay, which means that the Fund is subject to issuer credit risk, including that the value of the ETN may drop due to a downgrade in the issuer’s credit rating, despite the underlying benchmark or strategy remaining unchanged. ETNs do not typically offer principal protection, so the Fund may lose some or all of its investment. The returns of ETNs are usually linked to the performance of a market benchmark or strategy, less investor fees and expenses. The Fund will bear its proportionate share of the fees and expenses of the ETN, which may cause the Fund’s returns to be lower. The return on ETNs will typically be lower than the total return on a direct investment in the components of the underlying index or strategy because of the ETN’s investor fees and expenses. The value of an ETN may also be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in the underlying market, changes in the applicable interest rates, and economic, legal, political, or geographic events that affect the referenced underlying benchmark or strategy.
Foreign Currency Risk. The performance of the Fund may be materially affected positively or negatively by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund invests a significant percentage of its assets in foreign securities or other assets denominated in currencies other than the U.S. dollar. Currency rates in foreign countries may fluctuate significantly over short or long periods of time for a number of reasons, including changes in interest rates, imposition of currency controls and economic or political developments in the U.S. or abroad. The Fund may also incur currency conversion costs when converting foreign currencies into U.S. dollars and vice versa.
Foreign Currency-related Tax Risk. As a regulated investment company (RIC), the Fund must derive at least 90% of its gross income for each taxable year from sources treated as “qualifying income” under the Internal Revenue Code of 1986, as amended. The Fund may gain exposure to local currency markets through forward currency contracts. Although foreign currency gains currently constitute “qualifying income,” the Treasury Department has the authority to issue regulations excluding from the definition of “qualifying income” a RIC’s foreign currency gains not “directly related” to its “principal business” of investing in stock or securities (or options and futures with respect thereto). Such regulations might treat gains from some of the Fund’s foreign currency-denominated positions as not qualifying income and there is a possibility that such regulations might be applied retroactively, in which case, the Fund might not qualify as a RIC for one or more years. In the event the Treasury Department issues such regulations, the Fund’s Board may authorize a significant change in investment strategy or the Fund’s liquidation.
Foreign Securities Risk. Investments in or exposure to foreign securities involve certain risks not associated with investments in or exposure to securities of U.S. companies. For example, foreign markets can be extremely volatile. Foreign securities may also be less liquid than securities of U.S. companies so that the Fund may, at times, be unable to sell foreign securities at desirable times or prices. Brokerage commissions, custodial costs and other fees are also generally higher for foreign securities. The Fund may have limited or no legal recourse in the event of default with respect to certain foreign securities, including those issued by foreign governments. In addition, foreign governments may impose withholding or other taxes on the Fund’s income, capital gains or proceeds from the disposition of foreign securities, which could reduce the Fund’s return on such securities. In some cases, such withholding or other taxes could potentially be confiscatory. Other risks include: possible delays in the settlement of transactions or in the payment of income; generally less publicly available information about foreign companies; the impact of economic, political, social, diplomatic or other conditions or events (including, for example, military confrontations, war and terrorism), possible seizure, expropriation or nationalization of a company or its assets or the assets of a particular investor or category of investors; accounting, auditing and financial reporting standards that may be less comprehensive and stringent than those applicable to domestic companies; the imposition of economic and other sanctions against a particular foreign country, its nationals or industries or businesses within the country; and the generally less stringent standard of care to which local agents may be held in the local markets. In addition, it may be difficult to obtain reliable information about the securities and business operations of certain foreign issuers. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country’s securities market is, the greater the level of risks. The risks posed by sanctions against a particular foreign country, its nationals or industries or businesses within the country may be heightened to the extent the Fund invests significantly in the affected country or region or in issuers from the affected country that depend on global markets. The performance of the Fund may also be negatively impacted by fluctuations in a foreign currency's strength or weakness relative to the U.S. dollar, particularly to the extent the Fund invests a significant percentage of its assets in foreign securities or other assets denominated in currencies other than the U.S. dollar. Currency rates in foreign countries may fluctuate significantly over short or long periods of time for a number of reasons, including changes in interest rates, imposition of currency exchange controls and economic or political developments in the U.S. or abroad. The Fund may also incur currency conversion costs when converting foreign currencies into U.S. dollars and vice versa.
Operational and Settlement Risks of Foreign Securities. The Fund’s foreign securities are generally held outside the United States in the primary market for the securities in the custody of certain eligible foreign banks and trust companies (“foreign sub-custodians”), as permitted under the Investment Company Act of 1940 (the 1940 Act). Settlement practices for foreign securities may differ from those in the United States. Some countries have limited governmental oversight and regulation of industry
Statement of Additional Information – October 3, 2016 65

 

Table of Contents
practices, stock exchanges, depositories, registrars, brokers and listed companies, which increases the risk of corruption and fraud and the possibility of losses to the Fund. In particular, under certain circumstances, foreign securities may settle on a delayed delivery basis, meaning that the Fund may be required to make payment for securities before the Fund has actually received delivery of the securities or deliver securities prior to the receipt of payment. Typically, in these cases, the Fund will receive evidence of ownership in accordance with the generally accepted settlement practices in the local market entitling the Fund to delivery or payment at a future date, but there is a risk that the security will not be delivered to the Fund or that payment will not be received, although the Fund and its foreign sub-custodians take reasonable precautions to mitigate this risk. Losses can also result from lost, stolen or counterfeit securities; defaults by brokers and banks; failures or defects of the settlement system; or poor and improper record keeping by registrars and issuers.
Share Blocking. Share blocking refers to a practice in certain foreign markets under which an issuer’s securities are blocked from trading at the custodian or sub-custodian level for a specified number of days before and, in certain instances, after a shareholder meeting where a vote of shareholders takes place. The blocking period can last up to several weeks. Share blocking may prevent the Fund from buying or selling securities during this period, because during the time shares are blocked, trades in such securities will not settle. It may be difficult or impossible to lift blocking restrictions, with the particular requirements varying widely by country. As a consequence of these restrictions, the Investment Manager, on behalf of the Fund, may abstain from voting proxies in markets that require share blocking.
Forward Commitments on Mortgage-Backed Securities (including Dollar Rolls) Risk. When purchasing mortgage-backed securities in the “to be announced” (TBA) market (MBS TBAs), the seller agrees to deliver mortgage-backed securities for an agreed upon price on an agreed upon date, but may make no guarantee as to the specific securities to be delivered. In lieu of taking delivery of mortgage-backed securities, the Fund could enter into dollar rolls, which are transactions in which the Fund sells securities to a counterparty and simultaneously agrees to purchase those or similar securities in the future at a predetermined price. Dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations. These transactions may also increase the Fund’s portfolio turnover rate. If the Fund reinvests the proceeds of the security sold, the Fund will also be subject to the risk that the investments purchased with such proceeds will decline in value (a form of leverage risk). MBS TBAs and dollar rolls are subject to the risk that the counterparty to the instrument may not perform or be unable to perform in accordance with the terms of the instrument.
Frontier Market Risk. Frontier market countries generally have smaller economies and even less developed capital markets than typical emerging market countries (which themselves have increased investment risk relative to more developed market countries) and, as a result, the Fund’s exposure to risks associated with investing in emerging market countries are magnified when the Fund invests in frontier market countries. The increased risks include: the potential for extreme price volatility and illiquidity in frontier market countries; government ownership or control of parts of the private sector and of certain companies; trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which frontier market countries trade; and the relatively new and unsettled securities laws in many frontier market countries. Securities issued by foreign governments or companies in frontier market countries are even more likely than emerging markets securities to have greater exposure to the risks of investing in foreign securities that are described in Foreign Securities Risk .
Fund-of-Funds Risk. Determinations regarding asset classes or underlying funds and the Fund’s allocations thereto may not successfully achieve the Fund’s investment objective, in whole or in part. The selected underlying funds’ performance may be lower than the performance of the asset class they were selected to represent or may be lower than the performance of alternative underlying funds that could have been selected to represent the asset class. The Fund also is exposed to the same risks as the underlying funds in direct proportion to the allocation of its assets among the underlying funds. Therefore, to the extent that the Fund invests significantly in a particular underlying fund, the Fund’s performance would be significantly impacted by the performance of such underlying fund. Generally, by investing in a combination of underlying funds, the Fund has exposure to the risks of many areas of the market. By concentrating its investments in relatively few underlying funds, the Fund may have more concentrated market exposures, subjecting the Fund to greater risk of loss should those markets decline or fail to rise. The ability of the Fund to realize its investment objective will depend, in large part, on the extent to which the underlying funds realize their investment objectives. There is no guarantee that the underlying funds will achieve their respective investment objectives. The performance of underlying funds could be adversely affected if other entities that invest in the same underlying funds make relatively large investments or redemptions in such underlying funds. The Fund, and its shareholders, indirectly bear a portion of the expenses of any funds in which the Fund invests. Because the expenses and costs of each underlying fund are shared by its investors, redemptions by other investors in an underlying fund could result in decreased economies of scale and increased operating expenses for such underlying fund. These transactions might also result in higher brokerage, tax or other costs for an underlying fund. This risk may be particularly important when one investor owns a substantial portion of an underlying fund. The Investment Manager may have potential conflicts of interest in selecting affiliated funds over unaffiliated funds for investment by the Fund, and may also face potential conflicts of interest in selecting affiliated funds, because the fees the
Statement of Additional Information – October 3, 2016 66

 

Table of Contents
Investment Manager receives from some underlying funds may be higher than the fees paid by other underlying funds. Also, to the extent that the Fund is constrained/restricted from investing (or investing further) in a particular underlying fund for one or more reasons (e.g., underlying fund capacity constraints or regulatory restrictions) or if the Fund chooses to sell its investment in an underlying fund because of poor investment performance or for other reasons, the Fund may have to invest in another underlying fund(s), including less desirable funds – from a strategy or investment performance standpoint – which could have a negative impact on Fund performance. In addition, Fund performance could be negatively impacted if an appropriate alternate underlying fund(s) does not present itself in a timely manner or at all.
Geographic Focus Risk. The Fund may be particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. Currency devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund.
Global Economic Risk. Global economies and financial markets are increasingly interconnected, which increases the possibility that conditions in one country or region might adversely impact issuers in a different country or region or across the globe. For instance, a significant slowdown in China’s economy is adversely affecting worldwide commodity prices and the economies of many countries, especially those that depend heavily on commodity production and/or trade with China. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations. The imposition of sanctions by the United States or another government on a country could cause disruptions to the country’s financial system and economy, which could negatively impact the value of securities.
At a referendum in June 2016, the United Kingdom (the UK) voted to leave the European Union (EU). In connection with the British exit from the EU (commonly known as “Brexit”), it is expected that the UK will invoke article 50 of the Treaty of Lisbon to withdraw from the EU in due course, however there is a significant degree of uncertainty about how negotiations relating to the UK’s withdrawal and new trade agreements will be conducted, as well as the potential consequences and precise timeframe for Brexit. It is expected that the UK’s exit from the EU will take place within two years of the UK notifying the European Council that it intends to withdraw from the EU. During this period and beyond, the impact of any partial or complete dissolution of the EU on the UK and European economies and the broader global economy could be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and potentially lower economic growth in markets in the UK, Europe and globally, which may adversely affect the value of the Fund’s portfolio investments.
The UK has one of the largest economies in Europe, and member countries of the EU are substantial trading partners of the UK. The City of London’s economy is dominated by financial services, some of which may have to move outside of the UK post-referendum (e.g., currency trading, international settlement). Under the referendum, banks may be forced to move staff and comply with two separate sets of rules or lose business to banks in Europe. Furthermore, the referendum creates the potential for decreased trade, the possibility of capital outflows, devaluation of the pound sterling, the cost of higher corporate bond spreads due to uncertainty, and the risk that all the above could damage business and consumer spending as well as foreign direct investment. As a result of the referendum, the British economy and its currency may be negatively impacted by changes to its economic and political relations with the EU. Any further exits from the EU, or the possibility of such exits, would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties.
The impact of the referendum in the near- and long-term is still unknown and could have additional adverse effects on economies, financial markets, currencies and asset valuations around the world. Any attempt by the Fund to hedge against or otherwise protect its portfolio or to profit from such circumstances may fail and, accordingly, an investment in the Fund could lose money over short or long periods.
Growth Securities Risk. Growth securities typically trade at a higher multiple of earnings than other types of equity securities. Accordingly, the market values of growth securities may never reach their expected market value and may decline in price. In addition, growth securities, at times, may not perform as well as value securities or the stock market in general, and may be out of favor with investors for varying periods of time.
Hedging Transactions Risk. The Fund may invest in securities and utilize financial instruments for a variety of hedging purposes. Hedging transactions may limit the opportunity for gain if the value of the portfolio position should increase. There can be no assurance that the Fund will engage in hedging transactions at any given time, even under volatile market conditions, or that any hedging transactions the Fund engages in will be successful. Moreover, it may not be possible for the Fund to enter into a hedging transaction at a price sufficient to protect its assets. The Fund may not anticipate a particular risk so as to hedge against it.
Hedging against a decline in the value of a portfolio position does not eliminate fluctuations in the values of portfolio positions or prevent losses if the values of such positions decline, but establishes other positions designed to gain from those same developments, thus moderating the decline in the portfolio positions’ value. Such hedging transactions also limit the opportunity
Statement of Additional Information – October 3, 2016 67

 

Table of Contents
for gain if the value of the portfolio position should increase. Moreover, it may not be possible for the Fund to hedge against an exchange rate, interest rate or security price fluctuation that is so generally anticipated that the Fund is not able to enter into a hedging transaction at a price sufficient to protect its assets from the decline in value of the portfolio positions anticipated as a result of such fluctuations.
The Fund is not required to attempt to hedge portfolio positions and, for various reasons, may determine not to do so. Furthermore, the Fund may not anticipate a particular risk so as to hedge against it. While the Fund may enter into hedging transactions to seek to reduce risk, such transactions may result in a poorer overall performance for the Fund than if the Fund had not engaged in any such hedging transaction. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio position being hedged may vary. For a variety of reasons, the Fund may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. The successful utilization of hedging and risk management transactions requires skills complementary to those needed in the selection of the Fund’s portfolio holdings. Moreover, it should be noted that a portfolio will always be exposed to certain risks that cannot be hedged, such as credit risk (relating both to particular securities and counterparties), liquidity risk and widening risk.
High-Yield Investments Risk. Securities and other debt instruments held by the Fund that are rated below investment grade (commonly called “high-yield” or “junk” bonds) and unrated debt instruments of comparable quality tend to be more sensitive to credit risk than higher-rated debt instruments and may experience greater price fluctuations in response to perceived changes in the ability of the issuing entity or obligor to pay interest and principal when due than to changes in interest rates. These investments are generally more likely to experience a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. These debt instruments typically pay a premium – a higher interest rate or yield – because of the increased risk of loss, including default. High-yield debt instruments may require a greater degree of judgment to establish a price, may be difficult to sell at the time and price the Fund desires, may carry high transaction costs, and also are generally less liquid than higher-rated debt instruments. The ratings provided by third party rating agencies are based on analyses by these ratings agencies of the credit quality of the debt instruments and may not take into account every risk related to whether interest or principal will be timely repaid. In adverse economic and other circumstances, issuers of lower-rated debt instruments are more likely to have difficulty making principal and interest payments than issuers of higher-rated debt instruments.
Highly Leveraged Transactions Risk. The loans or other debt instruments in which the Fund invests may consist of transactions involving refinancings, recapitalizations, mergers and acquisitions and other financings for general corporate purposes. The Fund’s investments also may include senior obligations of a borrower issued in connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code (commonly known as “debtor-in-possession” financings), provided that such senior obligations are determined by the Fund’s portfolio managers to be a suitable investment for the Fund. In such highly leveraged transactions, the borrower assumes large amounts of debt in order to have the financial resources to attempt to achieve its business objectives. Such business objectives may include but are not limited to: management’s taking over control of a company (leveraged buy-out); reorganizing the assets and liabilities of a company (leveraged recapitalization); or acquiring another company. Loans or other debt instruments that are part of highly leveraged transactions involve a greater risk (including default and bankruptcy) than other investments.
Impairment of Collateral Risk. The value of collateral, if any, securing a loan can decline, and may be insufficient to meet the borrower’s obligations or difficult or costly to liquidate. In addition, the Fund’s access to collateral may be limited by bankruptcy or other insolvency laws. Further, certain floating rate and other loans may not be fully collateralized and may decline in value.
Inflation Risk. Inflation risk is the uncertainty over the future real value (after inflation) of an investment. Inflation rates may change frequently and drastically as a result of various factors, including unexpected shifts in the domestic or global economy, and the Fund’s investments may not keep pace with inflation, which may result in losses to Fund investors.
Inflation-Protected Securities Risk. Inflation-protected debt securities tend to react to changes in real interest rates. Real interest rates can be described as nominal interest rates minus the expected impact of inflation. In general, the price of an inflation-protected debt security falls when real interest rates rise, and rises when real interest rates fall. Interest payments on inflation-protected debt securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the Fund may have no income at all from such investments. Income earned by a shareholder depends on the amount of principal invested, and that principal will not grow with inflation unless the shareholder reinvests the portion of Fund distributions that comes from inflation adjustments. A Fund’s investment in certain inflation-protected debt securities may generate taxable income in excess of the interest they pay to the Fund, which may cause the Fund to sell investments to obtain cash to make income distributions to shareholders, including at times when it may not be advantageous to do so.
Statement of Additional Information – October 3, 2016 68

 

Table of Contents
IPO Risk. IPOs are subject to many of the same risks as investing in companies with smaller market capitalizations. To the extent the Fund determines to invest in IPOs, it may not be able to invest to the extent desired, because, for example, only a small portion (if any) of the securities being offered in an IPO are available to the Fund. The investment performance of the Fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when the Fund is able to do so. In addition, as the Fund increases in size, the impact of IPOs on the Fund’s performance will generally decrease. IPOs sold within 12 months of purchase may result in increased short-term capital gains, which will be taxable to the Fund’s shareholders as ordinary income.
Interest Rate Risk. Interest rate risk is the risk of losses attributable to changes in interest rates. In general, if prevailing interest rates (which are at historic lows) rise, the values of loans and other fixed-income instruments tend to fall, and if interest rates fall, the values of loans and other fixed-income instruments tend to rise. Changes in the value of a fixed-income instrument usually will not affect the amount of income the Fund receives from it but will generally affect the value of the Fund's shares. In general, the longer the maturity or duration of a fixed-income instrument, the greater its sensitivity to changes in interest rates. Interest rate declines also may increase prepayments of debt obligations, which, in turn, would increase prepayment risk. Similarly, a period of rising interest rates may negatively impact the Fund’s performance. Actions by governments and central banking authorities can result in increases in interest rates. Such actions may negatively affect the value of fixed-income instruments held by the Fund, resulting in a negative impact on the Fund's performance and NAV. Debt instruments with floating coupon rates are typically less sensitive to interest rate changes, but these debt instruments may decline in value if their coupon rates do not rise as much as, or keep pace with, yields on such types of debt instruments. Because rates on certain floating rate loans and other debt instruments reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause fluctuations in the Fund’s NAV. Any interest rate increases could cause the value of the Fund’s investments in fixed-income instruments to decrease. Rising interest rates may prompt redemptions from the Fund, which may force the Fund to sell investments at a time when it is not advantageous to do so, which could result in losses.
Investing in Other Funds Risk. The Fund’s investment in other funds (affiliated and/or unaffiliated funds, including exchange-traded funds (ETFs)) subjects the Fund to the investment performance (positive or negative) and risks of the underlying funds in direct proportion to the Fund’s investment therein. In addition, investments in ETFs have unique characteristics, including, but not limited to, the expense structure and additional expenses associated with investing in ETFs. The performance of the underlying funds could be adversely affected if other investors in the same underlying funds make relatively large investments or redemptions in such underlying funds. The Fund, and its shareholders, indirectly bear a portion of the expenses of any funds in which the Fund invests. Because the expenses and costs of an underlying fund are shared by its investors, redemptions by other investors in the underlying funds could result in decreased economies of scale and increased operating expenses for such underlying fund. These transactions might also result in higher brokerage, tax or other costs for the underlying funds. This risk may be particularly important when one investor owns a substantial portion of the underlying funds. The Investment Manager may have potential conflicts of interest in selecting affiliated underlying funds for investment by the Fund because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds, as well as a potential conflict in selecting affiliated funds over unaffiliated funds. Also, to the extent that the Fund is constrained/restricted from investing (or investing further) in a particular underlying fund for one or more reasons (e.g., underlying fund capacity constraints or regulatory restrictions) or if the Fund chooses to sell its investment in an underlying fund because of poor investment performance or for other reasons, the Fund may have to invest in other underlying funds, including less desirable funds – from a strategy or investment performance standpoint – which could have a negative impact on Fund performance. In addition, Fund performance could be negatively impacted if an appropriate alternate underlying fund does not present itself in a timely manner or at all.
Issuer Risk. An issuer in which the Fund invests or to which it has exposure may perform poorly, and the value of its loans or securities may therefore decline, which would negatively affect the Fund’s performance. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, natural disasters or other events, conditions or factors.
Large Fund Investor Risk. The Fund may from time to time sell a substantial amount of its shares to relatively few investors or a single investor, including other funds advised by the Investment Manager, or third parties. Sales to and redemptions from large investors may be very substantial relative to the size of the Fund and carry potentially adverse effects. While it is not possible to predict the overall effect of such sales and redemptions, such transactions may adversely affect the Fund’s performance to the extent that the Fund is required to invest cash received in connection with a sale or to sell a substantial amount of its portfolio securities to facilitate a redemption, in either case, a time when the Fund would otherwise prefer not to invest or sell, such as in an up market or down market, respectively. Such transactions may also increase the Fund’s transaction costs, which would also detract from Fund performance, while also having potentially negative tax consequences to investors. The Fund, because of a large redemption, may be forced to sell its liquid or more liquid positions, resulting in the Fund holding a higher percentage of less liquid or illiquid securities (securities that may be unable to sell at a favorite time or price). Because the expenses and costs
Statement of Additional Information – October 3, 2016 69

 

Table of Contents
of the Fund are shared by its investors, large redemptions in the Fund could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders. In addition, in the event of a Fund proxy proposal, a large investor(s) could dictate with its/their vote the results of the proposal, which may have a less favorable impact on minority-stake shareholders.
Leverage Risk. Leverage occurs when the Fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Use of leverage can produce volatility and may exaggerate changes in the net asset value of Fund shares and in the return on the Fund’s portfolio, which may increase the risk that the Fund will lose more than it has invested. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet any required asset segregation or position coverage requirements. Futures contracts, options on futures contracts, forward contracts and other derivatives can allow the Fund to obtain large investment exposures in return for meeting relatively small margin requirements. As a result, investments in those transactions may be highly leveraged. If the Fund uses leverage, through the purchase of particular instruments such as derivatives, the Fund may experience capital losses that exceed the net assets of the Fund. Because short sales involve borrowing securities and then selling them, the Fund’s short sales effectively leverage the Fund’s assets. The Fund’s assets that are used as collateral to secure the Fund’s obligations to return the securities sold short may decrease in value while the short positions are outstanding, which may force the Fund to use its other assets to increase the collateral. Leverage can create an interest expense that may lower the Fund's overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund's volatility and risk of loss. There can be no guarantee that a leveraging strategy will be successful.
Liquidity Risk. Liquidity risk is the risk associated with any event, circumstance, or characteristic of an investment or market that negatively impacts the Fund’s ability to sell, or realize the proceeds from the sale of, an investment at a desirable time or price. Liquidity risk may arise because of, for example, a lack of marketability of the investment. Decreases in the number of financial institutions, including banks and broker-dealers willing to make markets (match up sellers and buyers) in the Fund’s investments or decreases in their capacity or willingness to trade such investments may increase the Fund’s exposure to this risk. The debt market has experienced considerable growth, and financial institutions making markets in instruments purchased and sold by the Fund (e.g., bond dealers) have been subject to increased regulation. The impact of that growth and regulation on the ability and willingness of financial institutions to engage in trading or “making a market” in such instruments remains unsettled. As a result, the Fund, when seeking to sell its portfolio investments, could find that selling is more difficult than anticipated, especially during times of high market volatility. Market participants attempting to sell the same or a similar instrument at the same time as the Fund could exacerbate the Fund’s exposure to liquidity risk. The Fund may have to accept a lower selling price for the holding, sell other investments that it might otherwise prefer to hold, or forego another more appealing investment opportunity. Certain investments that were liquid when purchased by the Fund may later become illiquid, particularly in times of overall economic distress. Changing regulatory, market or other conditions or environments (for example, the interest rate or credit environments) may also adversely affect the liquidity and the price of the Fund's investments. Certain types of investments, such as structured notes and non-investment grade fixed-income securities, as an example, may be especially subject to liquidity risk. Floating rate loans also generally are subject to legal or contractual restrictions on resale and may trade infrequently on the secondary market. The value of the loan to the Fund may be impaired in the event that the Fund needs to liquidate such loans. The inability to purchase or sell floating rate loans and other debt instruments at a fair price may have a negative impact on the Fund’s performance. Securities or other assets in which the Fund invests may be traded in the over-the-counter market rather than on an exchange and therefore may be more difficult to purchase or sell at a fair price. Judgment plays a larger role in valuing illiquid or less liquid investments as compared to valuing liquid or more liquid investments. Price volatility may be higher for illiquid or less liquid investments as a result of, for example, the relatively less frequent pricing of such securities (as compared to liquid or more liquid investments). Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. Overall market liquidity and other factors can lead to an increase in Fund redemptions, which may negatively impact Fund performance and NAV, including, for example, if the Fund is forced to sell investments in a down market.
Governments and their regulatory agencies and self-regulatory organizations may take actions that affect the regulation of the instruments in which the Fund invests, or the issuers of such instruments, in ways that are unforeseeable. Legislation or regulation may also change the way in which the Fund or the Investment Manager or any Fund subadviser, as the case may be, are regulated or supervised. Such legislation or regulation could affect or preclude a Fund’s ability to achieve its investment objective.
Governments and their regulatory agencies and self-regulatory organizations may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or negative effects on the liquidity, valuation and performance of a Fund’s portfolio holdings. Furthermore, volatile financial markets can expose the Funds to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held by the Funds.
Statement of Additional Information – October 3, 2016 70

 

Table of Contents
While the Investment Manager and any subadvisers can endeavor to take various preventative measures to address liquidity risk, including conducting periodic portfolio risk analysis/management and stress-testing, such measures may not be successful and may not have fully accounted for the specific circumstances that ultimately impact a Fund and its holdings.
Listed Private Equity Fund Investment Risk. Private equity funds include financial institutions or vehicles whose principal business is to invest in and lend capital to privately held companies. The Fund is subject to the underlying risks that affect private equity funds in which it invests, which may include increased liquidity risk, valuation risk, sector risk and credit risk. Limited or incomplete information about the companies in which private equity funds invest, and relatively concentrated investment portfolios of private equity funds, may expose the Fund to greater volatility and risk of loss. Fund investment in private equity funds subjects Fund shareholders indirectly to the fees and expenses incurred by private equity funds.
Loan Assignment/Loan Participation Risk. If a bank loan is acquired through an assignment, the Fund may not be able to unilaterally enforce all rights and remedies under the loan and with regard to any associated collateral. If a bank loan is acquired through a participation, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, and the Fund may not benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed to the credit risk of both the borrower and the institution selling the participation.
Loan Interests Risk. Loan interests may not be considered “securities,” and purchasers, such as the Fund, therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws. Loan interests generally are subject to restrictions on transfer, and the Fund may be unable to sell loan interests at a time when it may otherwise be desirable to do so or may be able to sell them only at prices that are less than what the Fund regards as their fair market value. Accordingly, loan interests may at times be illiquid. Loan interests may be difficult to value and typically have extended settlement periods (generally greater than 7 days), which expose the Fund to the risk that the receipt of principal and interest payments may be delayed until the loan interest settles. Extended settlement periods during significant Fund redemption activity could potentially cause short-term liquidity demands within the Fund. In seeking to meet liquidity demands, the Fund could be forced to sell investments at unfavorable prices, or borrow money or effect short settlements when possible (at a cost to the Fund), in an effort to generate sufficient cash to pay redeeming shareholders. The Fund’s actions in this regard may not be successful. Interests in loans made to finance highly leveraged companies or transactions, such as corporate acquisitions, may be especially vulnerable to adverse changes in economic or market conditions.
Interests in secured loans have the benefit of collateral and, typically, of restrictive covenants limiting the ability of the borrower to further encumber its assets, although many covenants may be waived or modified with the consent of a certain percentage of the holders of the loans even if the Fund does not consent. There is a risk that the value of any collateral securing a loan in which the Fund has an interest may decline and that the collateral may not be sufficient to cover the amount owed on the loan. In most loan agreements there is no formal requirement to pledge additional collateral. In the event the borrower defaults, the Fund’s access to the collateral may be limited or delayed by bankruptcy or other insolvency laws. Further, there is a risk that a court could take action with respect to a loan that is adverse to the holders of the loan, including the Fund. Such actions may include invalidating the loan, the lien on the collateral, the priority status of the loan, or ordering the refund of interest previously paid by the borrower. Any such actions by a court could adversely affect the Fund’s performance. A default or expected default of a loan could also make it difficult for the Fund to sell the loan at a price approximating the value previously placed on it. In order to enforce its rights in the event of a default, bankruptcy or similar situation, the Fund may be required to retain legal or similar counsel. This may increase the Fund’s operating expenses and adversely affect its NAV. Loans that have a lower priority for repayment in an issuer’s capital structure may involve a higher degree of overall risk than more senior loans of the same borrower. In the event of a default, second lien secured loans will generally be paid only if the value of the collateral exceeds the amount of the borrower’s obligations to the first lien secured lenders. The remaining collateral may not be sufficient to cover the full amount owed on the loan in which the Fund has an interest. In addition, if a secured loan is foreclosed, the Fund would likely bear the costs and liabilities associated with owning and disposing of the collateral. The collateral may be difficult to sell and the Fund would bear the risk that the collateral may decline in value while the Fund is holding it. From time to time, disagreements may arise amongst the holders of loans and debt in the capital structure of an issuer, which may give rise to litigation risks, including the risk that a court could take action adverse to the holders of the loan, which could negatively impact the Fund’s performance.
The Fund may acquire a loan interest by obtaining an assignment of all or a portion of the interests in a particular loan that are held by an original lender or a prior assignee. As an assignee, the Fund normally will succeed to all rights and obligations of its assignor with respect to the portion of the loan that is being assigned. However, the rights and obligations acquired by the purchaser of a loan assignment may differ from, and be more limited than, those held by the original lenders or the assignor. Alternatively, the Fund may acquire a participation interest in a loan that is held by another party. When the Fund’s loan interest is a participation, the Fund may have less control over the exercise of remedies than the party selling the participation interest,
Statement of Additional Information – October 3, 2016 71

 

Table of Contents
and the Fund normally would not have any direct rights against the borrower. As a participant, the Fund also would be subject to the risk that the party selling the participation interest would not remit the Fund’s pro rata share of loan payments to the Fund. It may also be difficult for the Fund to obtain an accurate picture of a lending bank’s financial condition.
Macro Strategy Risk. The profitability of any macro program depends primarily on the ability of its manager to predict derivative contract price movements to implement investment ideas regarding macroeconomic trends. Price movements for commodity interests are influenced by, among other things: changes in interest rates; governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies; weather and climate conditions; natural disasters, such as hurricanes; changing supply and demand relationships; changes in balances of payments and trade; U.S. and international rates of inflation and deflation; currency devaluations and revaluations; U.S. and international political and economic events; and changes in philosophies and emotions of market participants. The manager’s trading methods may not take all of these factors into account.
The global macro programs to which the Fund’s investments are exposed typically use derivative financial instruments that are actively traded using a variety of strategies and investment techniques that involve significant risks. The derivative financial instruments traded include commodities, currencies, futures, options and forward contracts and other derivative instruments that have inherent leverage and price volatility that result in greater risk than instruments used by typical mutual funds, and the systematic programs used to trade them may rely on proprietary investment strategies that are not fully disclosed, which may in turn result in risks that are not anticipated.
Market Risk. Market risk refers to the possibility that the market values of securities or other investments that the Fund holds will fall, sometimes rapidly or unpredictably, or fail to rise. The value of Fund investments may fall or fail to rise because of a variety of actual or perceived factors affecting an issuer (e.g., an unfavorable earnings report), the industry or sector in which it operates, or the market as a whole, which may reduce the value of an investment in the Fund. Accordingly, an investment in the Fund could lose money over short or long periods. The market values of the investments the Fund holds can be affected by changes or perceived changes in U.S. or foreign economies and financial markets, and the liquidity of these investments, among other factors.
Master Limited Partnership Risk. Investments in securities (units) of master limited partnerships involve risks that differ from an investment in common stock. Holders of these units have more limited rights to vote on matters affecting the partnership. These units may be subject to cash flow and dilution risks. There are also certain tax risks associated with such an investment. In particular, the Fund’s investment in master limited partnerships can be limited by the Fund’s intention to qualify as a regulated investment company for U.S. federal income tax purposes, and can limit the Fund’s ability to so qualify. In addition, conflicts of interest may exist between common unit holders, subordinated unit holders and the general partner of a master limited partnership, including a conflict arising as a result of incentive distribution payments. In addition, there are risks related to the general partner’s right to require unit holders to sell their common units at an undesirable time or price.
Mid-Cap Company Securities Risk. Securities of mid-capitalization companies (mid-cap companies) can, in certain circumstances, have more risk than securities of larger capitalization companies (larger companies). For example, mid-cap companies may be more vulnerable to market downturns and adverse business or economic events than larger companies because they may have more limited financial resources and business operations. Mid-cap companies are also more likely than larger companies to have more limited product lines and operating histories and to depend on smaller management teams. Securities of mid-cap companies may trade less frequently and in smaller volumes and may fluctuate more sharply in value than securities of larger companies. When the Fund takes significant positions in mid-cap companies with limited trading volumes, the liquidation of those positions, particularly in a distressed market, could be difficult and result in Fund investment losses. In addition, some mid-cap companies may not be widely followed by the investment community, which can lower the demand for their stocks.
Model and Technology Risk. Investment strategies or programs that are fundamentally dependent on proprietary or licensed technology, such as, among other things, hardware, software, model-based strategies, data gathering systems, order execution, and trade allocation systems, and/or risk management systems may not be successful on an ongoing basis or could contain errors, omissions, imperfections, or malfunctions. Any such errors, imperfections or limitations in a model could affect the ability of the manager to implement strategies. Despite testing, monitoring and independent safeguards, these errors may result in, among other things, execution and allocation failures and failures to properly gather, organize and analyze amounts of data from third parties and other external sources. More specifically, as it is not possible or practicable for a manager to factor all relevant, available data into quantitative model forecasts and/or trading decisions, managers (and/or affiliated licensors of such data) will use their discretion to determine what data to gather with respect to an investment strategy and what subset of that data the models will take into account to produce forecasts that may have an impact on ultimate trading decisions, all of which may have a negative effect on the Fund.
Errors are often extremely difficult to detect and some may go undetected for long periods of time and some may never be detected. The adverse impact caused by these errors can compound over time. A manager (and/or the licensor of the models or technology) may detect certain errors that it chooses, in its sole discretion, not to address or fix. By necessity, models make
Statement of Additional Information – October 3, 2016 72

 

Table of Contents
simplifying assumptions that limit their efficacy. Models that appear to explain prior market data can fail to predict future market events. Moreover, an increasing number of market participants may rely on models that are similar to those used by a manager (or an affiliate of a manager), which may result in a substantial number of market participants taking the same action with respect to an investment. Should one or more of these other market participants begin to divest themselves of one or more portfolio investments, the Fund could suffer losses. Additionally, shareholders should be aware that there is no guarantee that a manager that uses quantitative techniques will use any specific data or type of data in generating forecasts or making trading decisions on behalf of the Fund, nor is there any guarantee that the data actually utilized in generating forecasts or making trading decisions on behalf of the Fund will be (i) the most accurate data available or (ii) free from errors.
Money Market Fund Investment Risk. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. If the liquidity of a money market fund’s portfolio deteriorates below certain levels, the money market fund may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up to 2% on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Investment Manager would otherwise redeem shares. In addition to the fees and expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests, including affiliated money market funds. To the extent these fees and expenses, along with the fees and expenses of any other funds in which the Fund may invest, are expected to equal or exceed 0.01% of the Fund’s average daily net assets, they will be reflected in the Annual Fund Operating Expenses set forth in the table under “Fees and Expenses of the Fund.” By investing in a money market fund, the Fund will be exposed to the investment risks of the money market fund in direct proportion to such investment. The money market fund may not achieve its investment objective. The Fund, through its investment in the money market fund, may not achieve its investment objective. To the extent the Fund invests in instruments such as derivatives, the Fund may hold investments, which may be significant, in money market fund shares to cover its obligations resulting from the Fund’s investments in derivatives. Money market funds and the securities they invest in are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money market funds.
Because a decision to impose or not impose such fees and/or gates on an affiliated money market fund may negatively impact any Funds that invest in it, all to which the Investment Manager and Board may also owe a fiduciary duty, any recommendation by the Investment Manager or decision by the Board with respect to redemption fees or gates on the affiliated money market fund may present potential conflicts of interest to the Investment Manager and the Board. The Board of the affiliated money market fund, for example, could be conflicted by a determination to not impose such fees and/or gates at a time when, if implemented, the other Columbia Funds could potentially experience negative impacts, while not imposing such fees and/or gates could potentially result in a negative impact to the affiliated money market fund. Any decisions by the Board to favor such fees and/or gates could result in reduced or limited investments in the affiliated money market fund by the other Columbia Funds, which may lead to increased affiliated money market fund expenses (which would be borne by the remaining Fund investors).
If a liquidity fee or redemption gate is imposed, an investing Columbia Fund may have to sell other investments at less than opportune times rather than using the cash invested in the money market fund to meet shareholder redemptions. The Investment Manager, as a result of any such fees and/or gates on an affiliated money market fund (or the potential or impending imposition thereof, recognizing that the Investment Manager will be aware of the affiliated money market fund’s liquid assets position), may determine to not invest the other Columbia Funds’ assets in the affiliated money market fund, and potentially be forced to invest in more expensive, lower-performing investments.
Mortgage- and Other Asset-Backed Securities Risk. The value of any mortgage-backed and other asset-backed securities held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements; or the market's assessment of the quality of underlying assets. Mortgage-backed securities represent interests in, or are backed by, pools of mortgages from which payments of interest and principal (net of fees paid to the issuer or guarantor of the securities) are distributed to the holders of the mortgage-backed securities. Other types of asset-backed securities typically represent interests in, or are backed by, pools of receivables such as credit, automobile, student and home equity loans. Mortgage- and other asset-backed securities can have a fixed or an adjustable rate. Mortgage- and other asset-backed securities are subject to prepayment risk, which is the possibility that the underlying mortgage or other asset may be refinanced or prepaid prior to maturity during periods of declining or low interest rates, causing the Fund to have to reinvest the money received in securities that have lower yields. In addition, the impact of prepayments on the value of mortgage- and other asset-backed securities may be difficult to predict and may result in greater
Statement of Additional Information – October 3, 2016 73

 

Table of Contents
volatility. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making them more volatile and more sensitive to changes in interest rates. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed (i) by the full faith and credit of the U.S. Government (in the case of securities guaranteed by the Government National Mortgage Association) or (ii) by its agencies, authorities, enterprises or instrumentalities (in the case of securities guaranteed by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC)), which are not insured or guaranteed by the U.S. Government (although FNMA and FHLMC may be able to access capital from the U.S. Treasury to meet their obligations under such securities). Mortgage-backed securities issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may be supported by various credit enhancements, such as pool insurance, guarantees issued by governmental entities, letters of credit from a bank or senior/subordinated structures, and may entail greater risk than obligations guaranteed by the U.S. Government, whether or not such obligations are guaranteed by the private issuer.
Multi-Strategy Risk. The multi-strategy approach employed by the Fund involves special risks, which include the risk that investment decisions, at the Fund or the underlying fund level, may conflict with each other; for example, at any particular time, one manager may be purchasing shares of an issuer whose shares are being sold by another manager. Consequently, the Fund could indirectly incur transaction costs without accomplishing any net investment result. Also, managers may use proprietary or licensed investment strategies that are based on considerations and factors that are not fully disclosed to the Fund or other investors.
Moreover, consistent with the Fund’s investment objectives, these proprietary or licensed investment strategies, which may include quantitative mathematical models or systems, may be changed or refined over time. A manager (or the licensor of the strategies used by the manager) may make certain changes to the strategies the manager has previously used, may not use such strategies at all (or the manager’s license may be revoked), or may use additional strategies, where such changes or discretionary decisions, and the reasons for such changes or decisions, are also not disclosed to the Fund or other investors. These strategies may involve risks under some market conditions that are not anticipated by the Investment Manager or the Fund.
Municipal Securities Risk. Municipal securities are debt obligations generally issued to obtain funds for various public purposes, including general financing for state and local governments, or financing for a specific project or public facility, and include obligations of the governments of the U.S. territories, commonwealths and possessions such as Guam, Puerto Rico and the U.S. Virgin Islands to the extent such obligations are exempt from state and federal income taxes. Municipal securities can be significantly affected by political and legislative changes at the state or federal level. Municipal securities may be fully or partially backed by the taxing authority of the local government, by the credit of a private issuer, by the current or anticipated revenues from a specific project or specific assets or by domestic or foreign entities providing credit support, such as letters of credit, guarantees or insurance, and are generally classified into general obligation bonds and special revenue obligations. General obligation bonds are backed by an issuer's taxing authority and may be vulnerable to limits on a government's power or ability to raise revenue or increase taxes. They may also depend for payment on legislative appropriation and/or funding or other support from other governmental bodies. Revenue obligations are payable from revenues generated by a particular project or other revenue source, and are typically subject to greater risk of default than general obligation bonds because investors can look only to the revenue generated by the project or other revenue source backing the project, rather than to the general taxing authority of the state or local government issuer of the obligations. Because many municipal securities are issued to finance projects in sectors such as education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal market. The amount of publicly available information for municipal issuers is generally less than for corporate issuers.
Certain of the municipalities or territories in which the Fund may invest have recently experienced significant financial difficulties. A credit rating downgrade relating to default by, or insolvency or bankruptcy of, one or several municipal security issuers of a state, territory, commonwealth or possession in which the Fund invests could affect the market values and marketability of many or all municipal obligations of such state, territory, commonwealth or possession. The value of the Fund’s shares will be negatively impacted to the extent it invests in such securities. The Fund’s annual and semiannual reports show the Fund’s investment exposures at a point in time. The risk of investing in the Fund is directly correlated to the Fund’s investment exposures.
The Fund’s investments in municipal securities may include securities of issuers in the health care sector, which subjects the Fund’s investments to the risks associated with that sector, including the risk of regulatory action or policy changes by numerous governmental agencies and bodies, including federal, state, and local governmental agencies, as well as requirements imposed by private entities, such as insurance companies. A major source of revenue for the health care industry is payments from the Medicare and Medicaid programs. As a result, the industry is sensitive to legislative changes and reductions in governmental spending for such programs. Numerous other factors may affect the industry, such as general and local economic conditions, demand for services, expenses (including, among others, malpractice insurance premiums) and competition among health care providers. Additional factors also may adversely affect health care facility operations, such as adoption of legislation proposing a
Statement of Additional Information – October 3, 2016 74

 

Table of Contents
national health insurance program, other state or local health care reform measures, medical and technological advances that alter the need for or cost of health services or the way in which such services are delivered, changes in medical coverage that alter the traditional fee-for-service revenue stream, and efforts by employers, insurers, and governmental agencies to reduce the costs of health insurance and health care services.
Opportunistic Investing Risk. Undervalued securities involve the risk that they may never reach their expected full market value, either because the market fails to recognize the security's intrinsic worth or the expected value was misgauged. Undervalued securities also may decline in price even though the Investment Manager believes they are already undervalued. Turnaround companies may never improve their fundamentals, may take much longer than expected to improve, or may improve much less than expected. Development stage companies could fail to develop and deplete their assets, resulting in large percentage losses.
Preferred Stock Risk. Preferred stock is a type of stock that generally pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. The most significant risks associated with investments in preferred stock include issuer risk, market risk and interest rate risk ( i.e. , the risk of losses attributable to changes in interest rates).
Prepayment and Extension Risk. Prepayment and extension risk is the risk that a loan, bond or other security or investment might, in the case of prepayment risk, be called or otherwise converted, prepaid or redeemed before maturity and, in the case of extension risk, that the investment might not be called as expected. In the case of prepayment risk, if the investment is converted, prepaid or redeemed before maturity, the portfolio managers may not be able to invest the proceeds in other investments providing as high a level of income, resulting in a reduced yield to the Fund. In the case of mortgage- or other asset-backed securities, as interest rates decrease or spreads narrow, the likelihood of prepayment increases. Conversely, extension risk is the risk that an unexpected rise in interest rates will extend the life of a mortgage- or asset-backed security beyond the prepayment time. If the Fund's investments are locked in at a lower interest rate for a longer period of time, the portfolio managers may be unable to capitalize on securities with higher interest rates or wider spreads.
Quantitative Model Risk. The Fund may use quantitative methods to select investments. Securities or other investments selected using quantitative methods may perform differently from the market as a whole or from their expected performance for many reasons, including factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. Any errors or imperfections in the Fund portfolio manager’s quantitative analyses or models, or in the data on which they are based, could adversely affect the portfolio manager’s effective use of such analyses or models, which in turn could adversely affect the Fund’s performance. It is not possible or practicable for a manager to factor all relevant, available data into quantitative model forecasts and/or trading decisions. Quantitative managers will use their discretion to determine what data to gather with respect to an investment strategy and what data the models will take into account to produce forecasts that may have an impact on ultimate trading decisions. Shareholders should be aware that there is no guarantee that a quantitative manager will use any specific data or type of data in making trading decisions on behalf of the Fund, nor is there any guarantee that the data actually utilized in generating forecasts or making trading decisions on behalf of the Fund will be the most accurate data available or free from errors. There can be no assurance that these methodologies will enable the Fund to achieve its objective.
Real Estate-Related Investment Risk. Investments in real estate investment trusts (REITs) and in securities of other companies (wherever organized) principally engaged in the real estate industry subject the Fund to, among other things, risks similar to those of direct investments in real estate and the real estate industry in general. These include risks related to general and local economic conditions, possible lack of availability of financing and changes in interest rates or property values. REITs are entities that either own properties or make construction or mortgage loans, and also may include operating or finance companies. The value of interests in a REIT may be affected by, among other factors, changes in the value of the underlying properties owned by the REIT, changes in the prospect for earnings and/or cash flow growth of the REIT itself, defaults by borrowers or tenants, market saturation, decreases in market rates for rents, and other economic, political, or regulatory matters affecting the real estate industry, including REITs. REITs and similar non-U.S. entities depend upon specialized management skills, may have limited financial resources, may have less trading volume in their securities, and may be subject to more abrupt or erratic price movements than the overall securities markets. REITs are also subject to the risk of failing to qualify for favorable tax treatment under the Internal Revenue Code of 1986, as amended. Some REITs (especially mortgage REITs) are affected by risks similar to those associated with investments in debt securities including changes in interest rates and the quality of credit extended.
Redemption Risk. The Fund may need to sell portfolio securities to meet redemption requests. The Fund could experience a loss when selling portfolio securities to meet redemption requests if there is (i) significant redemption activity by shareholders, including, for example, when a single investor or few large investors make a significant redemption of Fund shares, (ii) a
Statement of Additional Information – October 3, 2016 75

 

Table of Contents
disruption in the normal operation of the markets in which the Fund buys and sells portfolio securities or (iii) the inability of the Fund to sell portfolio securities because such securities are illiquid. In such events, the Fund could be forced to sell portfolio securities at unfavorable prices in an effort to generate sufficient cash to pay redeeming shareholders. The Fund may suspend redemptions or the payment of redemption proceeds when permitted by applicable regulations.
Regulatory Risk — Alternative Investments. Legal, tax, and regulatory developments may adversely affect the Fund and its investments. The regulatory environment for the Fund and certain of its investments is evolving, and changes in the regulation of investment funds, their managers, and their trading activities and capital markets, or a regulator’s disagreement with the Fund’s or others’ interpretation of the application of certain regulations, may adversely affect the ability of the Fund to pursue its investment strategy, its ability to obtain leverage and financing, and the value of investments held by the Fund. There has been an increase in governmental, as well as self-regulatory, scrutiny of the investment industry in general and the alternative investment industry in particular. It is impossible to predict what, if any, changes in regulations may occur, but any regulation that restricts the ability of the Fund or any underlying funds or other investments to trade in securities or other instruments or the ability of the Fund or underlying funds to employ, or brokers and other counterparties to extend, credit in their trading (as well as other regulatory changes that result) could have a material adverse impact on the Fund’s performance.
Shareholders should understand that the Fund’s business is dynamic and is expected to change over time. Therefore, the Fund and its underlying investments may be subject to new or additional regulatory constraints in the future. Such regulations may have a significant impact on shareholders or the operations of the Fund, including, without limitation, restricting the types of investments the Fund may make, preventing the Fund from exercising its voting rights with regard to certain financial instruments, requiring the Fund to disclose the identity of its investors or otherwise. To the extent the Fund or its underlying investments are subject to such regulation, such regulations may have a detrimental effect on one or more shareholders. Prospective investors are encouraged to consult their own advisors regarding an investment in the Fund.
Regulatory Risk — Money Market Funds. Money market funds and the securities they invest in are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money market funds.
Reinvestment Risk. Reinvestment risk is the risk that the Fund will not be able to reinvest income or principal at the same return it is currently earning.
Repurchase Agreements Risk. Repurchase agreements are agreements in which the seller of a security to the Fund agrees to repurchase that security from the Fund at a mutually agreed upon price and time. Repurchase agreements carry the risk that the counterparty may not fulfill its obligations under the agreement. This could cause the Fund's income and the value of your investment in the Fund to decline.
Reverse Repurchase Agreements Risk. Reverse repurchase agreements are agreements in which a Fund sells a security to a counterparty, such as a bank or broker-dealer, in return for cash and agrees to repurchase that security at a mutually agreed upon price and time. Reverse repurchase agreements carry the risk that the market value of the security sold by the Fund may decline below the price at which the Fund must repurchase the security. Reverse repurchase agreements also may be viewed as a form of borrowing, and borrowed assets used for investment creates leverage risk. Leverage can create an interest expense that may lower the Fund's overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that this strategy will be successful.
Rule 144A and Other Exempted Securities Risk. The Fund may invest in privately placed and other securities or instruments exempt from SEC registration (collectively “private placements”), subject to liquidity and other regulatory restrictions. In the U.S. market, private placements are typically sold only to qualified institutional buyers, or qualified purchasers, as applicable. An insufficient number of buyers interested in purchasing private placements at a particular time could affect adversely the marketability of such investments and the Fund might be unable to dispose of them promptly or at reasonable prices, subjecting the Fund to liquidity risk. The Fund may invest in private placements determined to be liquid as well as those determined to be illiquid. Even if determined to be liquid, the Fund’s holdings of private placements may increase the level of Fund illiquidity if eligible buyers are unable or unwilling to purchase them at a particular time. The Fund may also have to bear the expense of registering the securities for resale and the risk of substantial delays in effecting the registration. Additionally, the purchase price and subsequent valuation of private placements typically reflect a discount, which may be significant, from the market price of comparable securities for which a more liquid market exists. Issuers of Rule 144A eligible securities are required to furnish information to potential investors upon request. However, the required disclosure is much less extensive than that required of public companies and is not publicly available since the offering is not filed with the SEC. Further, issuers of Rule 144A eligible securities can require recipients of the information (such as the Fund) to agree contractually to keep the information confidential, which could also adversely affect the Fund’s ability to dispose of the security.
Statement of Additional Information – October 3, 2016 76

 

Table of Contents
Sector Risk. At times, the Fund may have a significant portion of its assets invested in securities of companies conducting business in a related group of industries within an economic sector. Companies in the same economic sector may be similarly affected by economic, regulatory, political or market events or conditions, which may make the Fund more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly. Generally, the more broadly the Fund invests, the more it spreads risk and potentially reduces the risks of loss and volatility.
Sector Risk — Consumer Discretionary Sector Investments. To the extent a Fund concentrates its investments in companies in the consumer discretionary sector, it may be more susceptible to the particular risks that may affect companies in that sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the consumer discretionary sector are subject to certain risks, including fluctuations in the performance of the overall domestic and international economy, interest rate changes, increased competition and consumer confidence. Performance of such companies may be affected by factors including reduced disposable household income, reduced consumer spending, changing demographics and consumer tastes.
Sector Risk — Energy Sector Investments. To the extent a Fund concentrates its investments in companies in the energy sector, it may be more susceptible to the particular risks that may affect companies in that sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the energy sector are subject to certain risks, including legislative or regulatory changes, adverse market conditions and increased competition. Performance of such companies may be affected by factors including, among others, fluctuations in energy prices and supply and demand of energy fuels, energy conservation, the success of exploration projects, local and international politics, and events occurring in nature. For instance, natural events (such as earthquakes, hurricanes or fires in prime natural resources areas) and political events (such as government instability or military confrontations) can affect the value of companies involved in business activities in the energy sector. Other risks may include liabilities for environmental damage and general civil liabilities, depletion of resources, and mandated expenditures for safety and pollution control. The energy sector may also be affected by economic cycles, rising interest rates, high inflation, technical progress, labor relations, legislative or regulatory changes, local and international politics, and adverse market conditions.
Sector Risk — Financial Services Sector Investments. To the extent a Fund concentrates its investments in companies in the financial services sector, it may be more susceptible to the particular risks that may affect companies in that sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the financial services sector are subject to certain risks, including the risk of regulatory change, decreased liquidity in credit markets and unstable interest rates. Such companies may have concentrated portfolios, such as a high level of loans to real estate developers, which makes them vulnerable to economic conditions that affect that industry. Performance of such companies may be affected by competitive pressures and exposure to investments or agreements that, under certain circumstances, may lead to losses ( e.g. , subprime loans). Companies in the financial services sector are subject to extensive governmental regulation that may limit the amount and types of loans and other financial commitments they can make, and interest rates and fees that they may charge. In addition, profitability of such companies is largely dependent upon the availability and the cost of capital.
Sector Risk — Health Care Sector Investments. To the extent a Fund concentrates its investments in companies in the health care sector, it may be more susceptible to the particular risks that may affect companies in that sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the health care sector are subject to certain risks, including restrictions on government reimbursement for medical expenses, government approval of medical products and services, competitive pricing pressures, and the rising cost of medical products and services (especially for companies dependent upon a relatively limited number of products or services). Performance of such companies may be affected by factors including, government regulation, obtaining and protecting patents (or the failure to do so), product liability and other similar litigation as well as product obsolescence.
Sector Risk — Industrials Sector Investments. To the extent a Fund concentrates its investments in companies in the industrials sector, it may be more susceptible to the particular risks that may affect companies in that sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the industrials sector are subject to certain risks, including changes in supply and demand for their specific product or service and for industrial sector products in general, including decline in demand for such products due to rapid technological developments and frequent new product introduction. Performance of such companies may be affected by factors including government regulation, world events and economic conditions and risks for environmental damage and product liability claims.
Sector Risk — Materials Investments. To the extent a Fund concentrates its investments in companies in the materials sector, it may be more susceptible to the particular risks that may affect companies in the materials sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the materials sector are subject to certain risks, including that many materials companies are significantly affected by the level and volatility of commodity prices, exchange rates, import controls, increased competition, environmental policies, consumer demand, and events occurring in nature. For instance, natural events (such as earthquakes, hurricanes or fires in prime natural resource areas) and political events (such as government instability or military confrontations) can affect the value of companies involved in business activities in the materials sector.
Statement of Additional Information – October 3, 2016 77

 

Table of Contents
Performance of such companies may be affected by factors including, among others, that at times worldwide production of industrial materials has exceeded demand as a result of over-building or economic downturns, leading to poor investment returns or losses. Other risks may include liabilities for environmental damage and general civil liabilities, depletion of resources, and mandated expenditures for safety and pollution control. The materials sector may also be affected by economic cycles, rising interest rates, high inflation, technical progress, labor relations, legislative or regulatory changes, local and international politics, and adverse market conditions. In addition, prices of, and thus the Fund’s investments in, precious metals are considered speculative and are affected by a variety of worldwide and economic, financial and political factors. Prices of precious metals may fluctuate sharply.
Sector Risk — Technology and Technology-Related Sector Investment Risk. To the extent a Fund concentrates its investments in companies in technology and technology related sectors, it may be more susceptible to the particular risks that may affect companies in those sectors, as well as other technology-related sectors (collectively, the technology sectors) than if it were invested in a wider variety of companies in unrelated sectors. Companies in the technology sectors are subject to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their securities may fall or fail to rise. In addition, many technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than other securities, especially over the short term.
Short Positions Risk. A Fund that establishes short positions introduces more risk to the Fund than a fund that only takes long positions (where the Fund owns the instrument or other asset) because the maximum sustainable loss on an instrument or other asset purchased (held long) is limited to the amount paid for the instrument or other asset plus the transaction costs, whereas there is no maximum price of the shorted instrument or other asset when purchased in the open market. Therefore, in theory, short positions have unlimited risk. The Fund’s use of short positions in effect “leverages” the Fund. Leverage potentially exposes the Fund to greater risks of loss due to unanticipated market movements, which may magnify losses and increase the volatility of returns. To the extent the Fund takes a short position in a derivative instrument or other asset, this involves the risk of a potentially unlimited increase in the value of the underlying instrument or other asset.
Small- and Mid-Cap Company Securities Risk. Securities of small- and mid-capitalization companies (small- and mid-cap companies) can, in certain circumstances, have a higher potential for gains than securities of larger, more established companies (larger companies) but may also have more risk. For example, small- and mid-cap companies may be more vulnerable to market downturns and adverse business or economic events than larger companies because they may have more limited financial resources and business operations. Small- and mid-cap companies are also more likely than larger companies to have more limited product lines and operating histories and to depend on smaller management teams. Securities of small- and mid-cap companies may trade less frequently and in smaller volumes and may be less liquid and fluctuate more sharply in value than securities of larger companies. When the Fund takes significant positions in small- and mid-cap companies with limited trading volumes, the liquidation of those positions, particularly in a distressed market, could be prolonged and result in losses to the Fund. In addition, some small- and mid-cap companies may not be widely followed by the investment community, which can lower the demand for their stocks.
Sovereign Debt Risk. A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.
With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis and that has led to defaults and the restructuring of certain indebtedness to the detriment of debtholders. Sovereign debt risk is increased for emerging market issuers.
Special Situations Risk. Securities of companies that are involved in an initial public offering or a major corporate event, such as a business consolidation or restructuring, may be exposed to heightened risk because of the high degree of uncertainty that can be associated with such events. Securities issued in initial public offerings often are issued by companies that are in the early stages of development, have a history of little or no revenues and may operate at a loss following the offering. It is possible that there will be no active trading market for the securities after the offering, and that the market price of the securities may be subject to significant and unpredictable fluctuations. Initial public offerings are subject to many of the same risks as investing in companies with smaller market capitalizations. To the extent the Fund determines to invest in initial public offerings, it may not be able to invest to the extent desired, because, for example, only a small portion (if any) of the securities being offered in an
Statement of Additional Information – October 3, 2016 78

 

Table of Contents
initial public offering are available to the Fund. The investment performance of the Fund during periods when it is unable to invest significantly or at all in initial public offerings may be lower than during periods when the Fund is able to do so. Securities purchased in initial public offerings which are sold within 12 months after purchase may result in increased short-term capital gains, which will be taxable to the Fund’s shareholders as ordinary income. Certain “special situation” investments are investments in securities or other instruments that are determined to be illiquid or lacking a readily ascertainable fair value. Certain special situation investments prevent ownership interests therein from being withdrawn until the special situation investment, or a portion thereof, is realized or deemed realized, which may negatively impact Fund performance. Investing in special situations may have a magnified effect on the performance of funds with small amounts of assets.
Stripped Securities Risk. Stripped securities are the separate income or principal components of debt securities. These securities are particularly sensitive to changes in interest rates, and therefore subject to greater fluctuations in price than typical interest bearing debt securities. For example, stripped mortgage-backed securities have greater interest rate risk than mortgage-backed securities with like maturities, and stripped treasury securities have greater interest rate risk than traditional government securities with identical credit ratings.
Systems and Technology Risk. The Investment Manager and, as the case may be, any Fund subadvisers, use various technology in managing the Fund, consistent with its investment objective and strategy described in the Fund’s prospectus. For example, proprietary and third-party data and systems may be utilized to support decision making for the Fund. Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect Fund performance.
Terrorism, War, Natural Disaster and Epidemic Risk. Terrorism, war, military confrontations and related geopolitical events (and their aftermath) have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Likewise, natural and environmental disasters, such as, for example, earthquakes, fires, floods, hurricanes, tsunamis and weather-related phenomena generally, as well as widespread disease and virus epidemics, can be highly disruptive to economies and markets, adversely affecting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Funds’ investments.
U.S. Government Obligations Risk. While U.S. Treasury obligations are backed by the “full faith and credit” of the U.S. Government, such securities are nonetheless subject to credit risk ( i.e. , the risk that the U.S. Government may be, or may be perceived to be, unable or unwilling to honor its financial obligations, such as making payments). Securities issued or guaranteed by federal agencies or authorities and U.S. Government-sponsored instrumentalities or enterprises may or may not be backed by the full faith and credit of the U.S. Government. For example, securities issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Federal Home Loan Banks are neither insured nor guaranteed by the U.S. Government. These securities may be supported by the ability to borrow from the U.S. Treasury or only by the credit of the issuing agency, authority, instrumentality or enterprise and, as a result, are subject to greater credit risk than securities issued or guaranteed by the U.S. Treasury.
Valuation Risk. The sales price the Fund (or an underlying fund or other investment vehicle) could receive for any particular investment may differ from the Fund’s (or an underlying fund’s or other investment vehicle’s) valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair value methodology that produces an estimate of the fair value of the security/instrument, which may prove to be inaccurate. Investors who purchase or redeem Fund shares on days when the Fund is holding securities or other instruments (or holding shares of underlying funds or other investment vehicles that have fair-valued securities or other instruments in their portfolios) may receive fewer or more shares or lower or higher redemption proceeds than they would have received if the Fund (or underlying fund or other investment vehicle) had not fair-valued the security or instrument or had used a different valuation methodology. The value of foreign securities, certain fixed-income securities and currencies, as applicable, may be materially affected by events after the close of the market on which they are valued, but before the Fund determines its net asset value.
Warrants and Rights Risk. Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants are subject to the risks associated with the security underlying the warrant, including market risk. Warrants may expire unexercised and subject the Fund to liquidity risk (the risk that it may not be possible for the Fund to liquidate the instrument at an advantageous time or price), which may result in Fund losses. Rights are available to existing shareholders of an issuer to enable them to maintain proportionate ownership in the issuer by being able to buy newly issued shares. Rights allow shareholders to buy the shares below the current market price. Rights are typically short-term instruments that are valued separately and trade in the secondary market during a subscription (or offering) period. Holders can exercise the rights and purchase the stock, sell the rights or let them expire. Their value, and their risk of investment loss, is a function of that of the underlying security.
Statement of Additional Information – October 3, 2016 79

 

Table of Contents
Zero-Coupon Bonds Risk. Zero-coupon bonds are bonds that do not pay interest in cash on a current basis, but instead accrue interest over the life of the bond. As a result, these securities are issued at a discount and their values may fluctuate more than the values of similar securities that pay interest periodically. Although these securities pay no interest to holders prior to maturity, interest accrued on these securities is reported as income to the Fund and affects the amounts distributed to its shareholders, which may cause the Fund to sell investments to obtain cash to make income distributions to shareholders, including at times when it may not be advantageous to do so.
Auditor Independence Risk. The Fund prepares financial statements in accordance with U.S. generally accepted accounting principles and has engaged PwC to serve as the independent accountant to the Fund. As the Fund’s independent accountant, PwC must meet regulatory requirements relating to independence, including the SEC’s auditor independence rules which prohibit accounting firms from having certain financial relationships with their audit clients and affiliated entities. Specifically, as interpreted by SEC staff, under Rule 2-01(c)(1)(ii)(A) of Regulation S-X (the Loan Rule), an accounting firm would not be considered independent if it receives a loan from a lender or an affiliate of a lender that is a “record or beneficial owner of more than ten percent of the audit client’s equity securities.” PwC has advised the Audit Committee of the Board that PwC and certain of its affiliates have loans from lenders who are also record owners of more than 10% of the shares issued by several funds in the Columbia Funds Complex or certain other entities within the Ameriprise Financial investment company complex.
On June 20, 2016, the SEC staff issued a “no-action” letter (the Loan Rule No-Action Letter) confirming that it would not recommend that the SEC commence enforcement action against a fund that continues to fulfill its regulatory requirements under the federal securities laws by using audit services performed by an audit firm that is not in compliance with the Loan Rule, provided that: (1) the audit firm has complied with Public Company Accounting Oversight Board (PCAOB) Rule 3526(b)(1) and 3526(b)(2) or, with respect to any fund or entity to which Rule 3526 does not apply, has provided substantially equivalent communications; (2) the audit firm’s non-compliance under the Loan Rule is limited to certain lending relationships; and (3) notwithstanding such non-compliance, the audit firm has concluded that it is objective and impartial with respect to the issues encompassed within its engagement. Although the Loan Rule No-Action Letter was issued to one fund complex, it is generally available to other fund complexes. The SEC staff stated that the relief under the Loan Rule No-Action Letter is temporary and will expire 18 months after the issuance of the letter.
After evaluating the facts and circumstances related to the Loan Rule and PwC’s lending relationships, PwC advised the Audit Committee of the Board that (1) PwC is independent with respect to the Fund, within the meaning of PCAOB Rule 3520, (2) PwC has concluded that it is objective and impartial with respect to the issues encompassed within its engagement, including the audit of the Fund’s financial statements, and (3) PwC believes that it can continue to serve as the Fund’s independent registered public accounting firm. Furthermore, PwC has advised the Audit Committee of the Board that, based on its knowledge and analyses, it is not aware of any facts that would preclude reliance by the Fund on the Loan Rule No-Action Letter. It is the Fund’s understanding that issues under the Loan Rule affect other major accounting firms and many mutual fund complexes. It is anticipated that an ultimate resolution of the issues under the Loan Rule will be achieved; however, if PwC were determined not to be independent or the Fund were unable to rely on the Loan Rule No-Action Letter or some form of exemptive relief, among other things, the financial statements audited by PwC may have to be audited by another independent registered public accounting firm and the Fund could incur additional expense and other burdens on its operations.
Certain of the risks described above in this SAI may also apply, directly or indirectly, to the Investment Manager and any investment subadviser and their affiliates, which may negatively impact their respective abilities to provide services to the Funds, potentially resulting in losses to the Fund or other consequences.
Statement of Additional Information – October 3, 2016 80

 

Table of Contents
Borrowings
In general, pursuant to the 1940 Act, a Fund may borrow money only from banks in an amount not exceeding 33  1 3 % of its total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that come to exceed this amount must be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33  1 3 % limitation.
The Trust, on behalf of the Funds, has entered into a revolving credit facility agreement (the Credit Agreement) with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank N.A. and HSBC Bank USA, N.A. whereby the Funds may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. Pursuant to a December 8, 2015 amendment, the Credit Agreement, which is a collective agreement between the Funds and certain other funds managed by the Investment Manager (collectively, the Participating Funds), severally and not jointly, permits the Participating Funds to borrow up to an aggregate commitment amount of $1 billion (the Commitment Limit) at any time outstanding, subject to asset coverage and other limitations as specified in the Credit Agreement. A Fund may borrow up to the maximum amount allowable under its current Prospectus and this SAI, subject to various other legal, regulatory or contractual limits. Borrowing results in interest expense and other fees and expenses for a Fund that may impact that Fund’s expenses, including any net expense ratios. The costs of borrowing may reduce a Fund's return. If a Fund borrows pursuant to the Credit Agreement, that Fund is charged interest at a variable rate. Each Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility. The availability of assets under the Credit Agreement can be affected by other Participating Funds’ borrowings under the agreement. As such, a Fund may be unable to borrow (or borrow further) under the Credit Agreement if the Commitment Limit has been reached.
Statement of Additional Information – October 3, 2016 81

 

Table of Contents
Lending of Portfolio Securities
To generate additional income, a Fund may lend up to 33%, or such lower percentage specified by the Fund or Investment Manager, of the value of its total assets (including securities out on loan) to broker-dealers, banks or other institutional borrowers of securities. JPMorgan serves as lending agent (the Lending Agent) to the Funds pursuant to a securities lending agreement (the Securities Lending Agreement) approved by the Board. Under the Securities Lending Agreement, the Lending Agent loans Fund securities to approved borrowers pursuant to borrower agreements in exchange for collateral at least equal in value to the loaned securities, marked to market daily. Collateral may consist of cash, securities issued by the U.S. Government or its agencies or instrumentalities (collectively, “U.S. Government securities”) or such other collateral as may be approved by the Board. For loans secured by cash, the Fund retains the interest earned on cash collateral, but the Fund is required to pay the borrower a rebate for the use of the cash collateral. For loans secured by U.S. Government securities, the borrower pays a borrower fee to the Lending Agent on behalf of the Fund.
If the market value of the loaned securities goes up, the Fund will require additional collateral from the borrower. If the market value of the loaned securities goes down, the borrower may request that some collateral be returned. During the existence of the loan, the Fund will receive from the borrower amounts equivalent to any dividends, interest or other distributions on the loaned securities, as well as interest on such amounts.
Loans are subject to termination by a Fund or a borrower at any time. A Fund may choose to terminate a loan in order to vote in a proxy solicitation, as described in this SAI under Investment Management and Other Services – Proxy Voting Policies and Procedures – General.
Securities lending involves counterparty risk, including the risk that a borrower may not provide sufficient or any collateral when required or may not return the loaned securities, timely or at all. Counterparty risk also includes a potential loss of rights in the collateral if the borrower or the Lending Agent defaults or fails financially. This risk is increased if a Fund’s loans are concentrated with a single borrower or limited number of borrowers. There are no limits on the number of borrowers a Fund may use and a Fund may lend securities to only one or a small group of borrowers. Funds participating in securities lending also bear the risk of loss in connection with investments of cash collateral received from the borrowers. Cash collateral is invested in accordance with investment guidelines contained in the Securities Lending Agreement and approved by the Board. Some or all of the cash collateral received in connection with the securities lending program may be invested in one or more pooled investment vehicles, including, among other vehicles, money market funds managed by the Lending Agent (or its affiliates). The Lending Agent shares in any income resulting from the investment of such cash collateral, and an affiliate of the Lending Agent may receive asset-based fees for the management of such pooled investment vehicles, which may create a conflict of interest between the Lending Agent (or its affiliates) and the Fund with respect to the management of such cash collateral. To the extent that the value or return of a Fund’s investments of the cash collateral declines below the amount owed to a borrower, a Fund may incur losses that exceed the amount it earned on lending the security. The Lending Agent will indemnify a fund from losses resulting from a borrower’s failure to return a loaned security when due, but such indemnification does not extend to losses associated with declines in the value of cash collateral investments. The Investment Manager is not responsible for any loss incurred by the Funds in connection with the securities lending program.
The Funds currently do not participate in the securities lending program, but the Board may determine to renew participation in the future.
Statement of Additional Information – October 3, 2016 82

 

Table of Contents
INVESTMENT MANAGEMENT AND OTHER SERVICES
The Investment Manager and Subadvisers
Columbia Management Investment Advisers, LLC, located at 225 Franklin Street, Boston, MA 02110, is the investment manager of the Funds as well as for other funds in the Columbia Fund Family. The Investment Manager is a wholly-owned subsidiary of Ameriprise Financial, which is located at 1099 Ameriprise Financial Center, Minneapolis, MN 55474. Ameriprise Financial is a holding company, which primarily conducts business through its subsidiaries to provide financial planning, products and services that are designed to be utilized as solutions for clients’ cash and liquidity, asset accumulation, income, protection and estate and wealth transfer needs.
The Investment Manager and its investment advisory affiliates (Participating Affiliates) around the world may coordinate in providing services to their clients. Such coordination may include functional leadership of the business (the “Global” business). From time to time the Investment Manager (or any affiliated investment subadviser to the Funds, as the case may be) may engage its Participating Affiliates to provide a variety of services such as investment research, investment monitoring, trading, and discretionary investment management (including portfolio management) to certain accounts managed by the Investment Manager, including the Funds. These Participating Affiliates will provide services to the Investment Manager (or any affiliated investment subadviser to the Funds as the case may be) either pursuant to subadvisory agreements, personnel-sharing agreements or similar inter-company arrangements and the Funds will pay no additional fees and expenses as a result of any such arrangements. These Participating Affiliates, like the Investment Manager, are direct or indirect subsidiaries of Ameriprise Financial and are registered with the appropriate respective regulators in their home jurisdictions and, where required, the SEC and the CFTC in the United States.
Pursuant to some of these arrangements, certain employees of these Participating Affiliates may serve as “associated persons” of the Investment Manager and, in this capacity, subject to the oversight and supervision of the Investment Manager and consistent with the investment objectives, policies and limitations set forth in the Funds' prospectuses and this SAI may provide such services to the Funds on behalf of the Investment Manager.
Services Provided
Those Funds included in the Management Agreement Fee Schedule table in the Management Agreement Fee Rates section below have entered into the Management Agreement with the Investment Manager, effective as of the date set forth in such table (the Management Services Fee Effective Date). Under the Management Agreement, the Investment Manager has contracted to furnish each such Fund with investment research and advice and all of the services necessary for, or appropriate to, the business and effective operation of each Fund that are not (a) provided by employees or other agents engaged by the Fund or (b) required to be provided by any person pursuant to any other agreement or arrangement with the Fund. Under the Management Agreement, any liability of the Investment Manager to the Trust, a Fund and/or its shareholders is limited to situations involving the Investment Manager’s own willful misfeasance, bad faith, negligence in the performance of its duties or reckless disregard of its obligations and duties.
The Management Agreement may be terminated with respect to a Fund at any time on 60 days’ written notice by the Investment Manager or by the Board or by a vote of a majority of the outstanding voting securities of a Fund. The Management Agreement will automatically terminate upon any assignment thereof, will continue in effect for two years from its initial effective date and thereafter will continue from year to year with respect to a Fund only so long as such continuance is approved at least annually (i) by the Board or by a vote of a majority of the outstanding voting securities of a Fund and (ii) by vote of a majority of the Trustees who are not interested persons (as such term is defined in the 1940 Act) of the Investment Manager or the Trust, cast in person at a meeting called for the purpose of voting on such approval.
The Investment Manager pays all compensation of the Trustees and officers of the Trust who are employees of the Investment Manager or its affiliates, except for the Chief Compliance Officer, a portion of whose salary is paid by the Columbia Funds (excluding those Funds that pay a Unitary Fee, as defined below). Except to the extent expressly assumed by the Investment Manager and except to the extent required by law to be paid or reimbursed by the Investment Manager, the Investment Manager does not have a duty to pay any Fund operating expenses incurred in the organization and operation of a Fund, including, but not limited to, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The Fund pays the cost of printing and mailing Fund prospectuses to shareholders.
The Investment Manager, at its own expense, provides office space, facilities and supplies, equipment and personnel for the performance of its functions under each Fund’s Management Agreement.
Statement of Additional Information – October 3, 2016 83

 

Table of Contents
Management Agreement Fee Rates
Each Fund set forth in the table below, unless otherwise noted, pays the Investment Manager an annual fee for its management services, as set forth in the Management Agreement and the table below, as of the date specified in the Management Services Fee Effective Date column. The fee is calculated as a percentage of the average daily net assets of each Fund and is paid monthly. The Investment Manager and/or its affiliates may from time to time waive fees and/or reimburse certain Fund expenses. See the Funds’ prospectuses for more information.
Management Agreement Fee Schedule
Fund Assets
(millions)
Annual rate at
each asset level
Management Services Fee
Effective Date
Alternative Beta Fund (a) $0 - $500 0.960% 10/1/2016
  >$500 - $1,000 0.955%  
  >$1,000 - $3,000 0.950%  
  >$3,000 - $12,000 0.940%  
  >$12,000 0.930%  
AMT-Free Intermediate Muni Bond Fund $0 - $500 0.480% 3/1/2016
  >$500 - $1,000 0.475%  
  >$1,000 - $2,000 0.445%  
  >$2,000 - $3,000 0.420%  
  >$3,000 - $6,000 0.385%  
  >$6,000 - $9,000 0.360%  
  >$9,000 - $10,000 0.350%  
  >$10,000 - $12,000 0.340%  
  >$12,000 - $15,000 0.330%  
  >$15,000 - $24,000 0.320%  
  >$24,000 - $50,000 0.300%  
  >$50,000 0.290%  
AMT-Free OR Intermediate Muni Bond Fund $0 - $250 0.470% 12/1/2015
AMT-Free CT Intermediate Muni Bond Fund >$250 - $500 0.465% 3/1/2016
AMT-Free MA Intermediate Muni Bond Fund >$500 - $1,000 0.415% 3/1/2016
AMT-Free NY Intermediate Muni Bond Fund >$1,000 - $3,000 0.380% 3/1/2016
CA Tax-Exempt Fund >$3,000 - $6,000 0.340% 3/1/2016
NY Tax-Exempt Fund >$6,000 - $7,500 0.330% 3/1/2016
  >$7,500 - $12,000 0.320%  
  >$12,000 0.310%  
AP – Alternatives Fund (a) $0 - $500 1.100% 1/1/2016
  >$500 - $1,000 1.050%  
  >$1,000 - $3,000 1.020%  
  >$3,000 - $6,000 0.990%  
  >$6,000 - $12,000 0.960%  
  > $12,000 0.950%  
AP – Directional Alternatives Fund All assets 1.60% 8/17/2016
AP – Growth Fund $0 - $500 0.770% 8/1/2015
Contrarian Core Fund >$500 - $1,000 0.720% 1/1/2016
Global Dividend Opportunity Fund >$1,000 - $1,500 0.670% 1/1/2016
Large Cap Growth Fund >$1,500 - $3,000 0.620% 12/1/2015
Select Large Cap Growth Fund >$3,000 - $6,000 0.600% 8/1/2015
  >$6,000 - $12,000 0.580%  
  >$12,000 0.570%  
AP – Small Cap Equity Fund $0 - $250 0.980% 1/1/2016
  >$250 - $500 0.930%  
  >$500 - $1,000 0.875%  
  >$1,000 - $3,000 0.870%  
  >$3,000 - $12,000 0.860%  
  >$12,000 0.850%  
Statement of Additional Information – October 3, 2016 84

 

Table of Contents
Fund Assets
(millions)
Annual rate at
each asset level
Management Services Fee
Effective Date
AP – Total Return Bond Fund $0 - $500 0.500% 1/1/2016
Bond Fund >$500 - $1,000 0.495% 9/1/2015
Corporate Income Fund >$1,000 - $2,000 0.480% 9/1/2015
Total Return Bond Fund >$2,000 - $3,000 0.460% 9/1/2015
  >$3,000 - $6,000 0.450%  
  >$6,000 - $7,500 0.430%  
  >$7,500 - $9,000 0.415%  
  >$9,000 - $12,000 0.410%  
  >$12,000 - $20,000 0.390%  
  >$20,000 - $24,000 0.380%  
  >$24,000 - $50,000 0.360%  
  >$50,000 0.340%  
Balanced Fund $0 - $500 0.720% 1/1/2016
Dividend Income Fund >$500 - $1,000 0.670% 10/1/2015
  >$1,000 - $1,500 0.620%  
  >$1,500 - $3,000 0.570%  
  >$3,000 - $6,000 0.550%  
  >$6,000 - $12,000 0.530%  
  >$12,000 0.520%  
Disciplined Small Core Fund $0 - $500 0.870% 1/1/2016
Small Cap Growth Fund I >$500 - $1,000 0.820% 1/1/2016
Small Cap Value Fund I >$1,000 - $3,000 0.770% 9/1/2015
  >$3,000 - $12,000 0.760%  
  >$12,000 0.750%  
Diversified Absolute Return Fund (a) $0 - $500 1.180% 10/1/2015
  >$500 - $1,000 1.130%  
  >$1,000 - $3,000 1.100%  
  >$3,000 - $6,000 1.070%  
  >$6,000 - $12,000 1.040%  
  >$12,000 1.030%  
Emerging Markets Fund $0 - $250 1.180% 1/1/2016
  >$250 - $500 1.160%  
  >$500 - $750 1.140%  
  >$750 - $1,000 1.115%  
  >$1,000 - $1,500 0.870%  
  >$1,500 - $3,000 0.820%  
  >$3,000 - $6,000 0.770%  
  >$6,000 0.720%  
Global Energy and Natural Resources Fund $0 - $1,000 0.750% 1/1/2016
  >$1,000 - $1,500 0.670%  
  >$1,500 - $3,000 0.620%  
  >$3,000 - $6,000 0.600%  
  >$6,000 0.580%  
Global Technology Growth Fund $0 - $500 0.870% 1/1/2016
  >$500 - $1,000 0.820%  
  >$1,000 0.770%  
Greater China Fund $0 - $1,000 0.950% 1/1/2016
Pacific/Asia Fund >$1,000 - $1,500 0.870% 8/1/2015
  >$1,500 - $3,000 0.820%  
  >$3,000 - $6,000 0.770%  
  >$6,000 0.720%  
Statement of Additional Information – October 3, 2016 85

 

Table of Contents
Fund Assets
(millions)
Annual rate at
each asset level
Management Services Fee
Effective Date
HY Municipal Fund $0 - $500 0.540% 10/1/2015
  >$500 - $1,000 0.535%  
  >$1,000 - $2,000 0.505%  
  >$2,000 - $3,000 0.480%  
  >$3,000 - $6,000 0.445%  
  >$6,000 - $7,500 0.420%  
  >$7,500 - $10,000 0.410%  
  >$10,000 - $12,000 0.400%  
  >$12,000 - $15,000 0.390%  
  >$15,000 - $24,000 0.380%  
  >$24,000 - $50,000 0.360%  
  >$50,000 0.340%  
Mid Cap Growth Fund $0 - $500 0.820% 1/1/2016
  >$500 - $1,000 0.770%  
  >$1,000 - $1,500 0.720%  
  >$1,500 - $3,000 0.670%  
  >$3,000 - $12,000 0.660%  
  >$12,000 0.650%  
Multi-Asset Income Fund $0 - $500 0.660% 9/1/2015
  >$500 - $1,000 0.625%  
  >$1,000 - $1,500 0.610%  
  >$1,500 - $3,000 0.600%  
  >$3,000 - $6,000 0.570%  
  >$6,000 - $12,000 0.545%  
  >$12,000 0.510%  
Real Estate Equity Fund $0 - $500 0.750% 5/1/2016
  >$500 - $1,000 0.745%  
  >$1,000 - $1,500 0.720%  
  >$1,500 - $3,000 0.670%  
  >$3,000 0.660%  
Strategic Income Fund $0 - $500 0.600% 3/1/2016
  >$500 - $1,000 0.590%  
  >$1,000 - $2,000 0.575%  
  >$2,000 - $3,000 0.555%  
  >$3,000 - $6,000 0.530%  
  >$6,000 - $7,500 0.505%  
  >$7,500 - $9,000 0.490%  
  >$9,000 - $10,000 0.481%  
  >$10,000 - $12,000 0.469%  
  >$12,000 - $15,000 0.459%  
  >$15,000 - $20,000 0.449%  
  >$20,000 - $24,000 0.433%  
  >$24,000 - $50,000 0.414%  
  >$50,000 0.393%  
Tax-Exempt Fund $0 - $500 0.480% 12/1/2015
  >$500 - $1,000 0.475%  
  >$1,000 - $2,000 0.445%  
  >$2,000 - $3,000 0.420%  
  >$3,000 - $6,000 0.385%  
  >$6,000 - $9,000 0.360%  
  >$9,000 - $10,000 0.350%  
  >$10,000 - $12,000 0.340%  
  >$12,000 - $15,000 0.330%  
  >$15,000 - $24,000 0.320%  
  >$24,000 - $50,000 0.300%  
  >$50,000 0.290%  
U.S. Social Bond Fund $0 - $500 0.570% 12/1/2015
  >$500 - $1,000 0.565%  
  >$1,000 - $3,000 0.560%  
  >$3,000 - $12,000 0.550%  
  >$12,000 0.540%  
U.S. Treasury Index Fund (b) All assets 0.400% 9/1/2015
Statement of Additional Information – October 3, 2016 86

 

Table of Contents
Fund Assets
(millions)
Annual rate at
each asset level
Management Services Fee
Effective Date
Ultra Short Term Bond Fund (c) All assets 0.250% 12/1/2015
(a) When calculating asset levels for purposes of determining fee breakpoints, asset levels are based on net assets of the Fund, including assets invested in any wholly-owned subsidiary advised by the Investment Manager (“Subsidiaries”). Fees payable by the Fund under this agreement shall be reduced by any management fees paid to the Investment Manager by any Subsidiaries under separate management agreements with the Subsidiaries.
(b) The Investment Manager, from the management services fee it receives from the Fund, pays all operating expenses of the Fund, with the exception of brokerage fees and commissions, taxes, interest, fees and expenses of Trustees who are not officers, directors or employees of the Investment Manager or its affiliates, distribution (Rule 12b-1) and/or shareholder servicing fees and any extraordinary non-recurring expenses that may arise, including litigation expenses.
(c) In return for the advisory fee, the Investment Manager has agreed to pay all of the operating costs and expenses of the Fund other than Independent Trustees fees and expenses, including their legal counsel, auditing expenses, interest incurred on borrowing by the Fund, if any, portfolio transaction expenses, taxes and extraordinary expenses. This fee is sometimes referred to herein as the “Unitary Fee.” Any custody credits are applied to offset Fund expenses prior to determining the expenses the Investment Manager is required to bear; however, the Investment Manager bears any custodian overdraft charges. The Fund does not pay custodian or transfer agent fees because payment for such services is included in its Unitary Fee.
Adaptive Risk Allocation Fund. The Fund pays the Investment Manager a management services fee according to the following schedules:
Asset Category Assets
(millions)
Annual rate at
each asset level
Management Services Fee
Effective Date
       
Category 1 : Assets invested in affiliated mutual funds, exchange- traded funds and closed-end funds that pay an investment management services fee to the Investment Manager. $0 - $500 0.060% 10/1/2015
>$500 - $1,000 0.055%
>$1,000 - $3,000 0.050%
>$3,000 - $12,000 0.040%
>$12,000 0.030%
Category 2 : Assets invested in exchange-traded funds and mutual funds that are not managed by the Investment Manager or its affiliates. $0 - $500 0.160%
>$500 - $1,000 0.155%
>$1,000 - $3,000 0.150%
>$3,000 - $12,000 0.140%
>$12,000 0.130%
Category 3 : Securities, instruments and other assets not described above, including without limitation affiliated mutual funds, exchange-traded funds and closed-end funds that do not pay an investment management services fee to the Investment Manager, third party closed-end funds, derivatives and individual securities. $0 - $500 0.760%
>$500 - $1,000 0.745%
>$1,000 - $1,500 0.730%
>$1,500 - $3,000 0.720%
>$3,000 - $6,000 0.690%
>$6,000 - $12,000 0.665%
>$12,000 0.630%
In no event shall the management services fee be negative even if the value of one of the categories is a negative amount (for instance, if the Fund’s liabilities exceed the value of assets in Category 3). Although the fee for each category is calculated separately and there is no negative management services fee, the Investment Manager currently intends to calculate the management services fee by reducing (but not below $0) any management services fee payable on one category by any negative management services fee in another category. The Investment Manager may change this calculation methodology at any time.
Diversified Real Return Fund. The Investment Manager has implemented a schedule for Diversified Real Return Fund’s management services fees whereby the Fund pays (i) 0.02% management fee on its assets invested in affiliated funds (including ETFs and closed-end funds) that pay a management fee (or advisory fee, as applicable) to the Investment Manager; and (ii) 0.76% management fee on its assets invested in ETFs and mutual funds that are not managed by the Investment Manager or its affiliates (Securities, instruments and other assets not described above, including without limitation affiliated mutual funds, ETFs and closed-end mutual funds that do not pay a management fee to the Investment Manager, third party closed-end funds, derivatives and individual securities).
Under the Management Agreement, a Fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees and charges; fidelity bond premiums; certain legal fees; registration fees for shares; consultants’ fees; compensation of Board members, officers and employees not employed by the Investment Manager or its affiliates; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; interest and fee expense related to a Fund’s participation in inverse floater structures; and expenses properly payable by a Fund, approved by the Board.
Statement of Additional Information – October 3, 2016 87

 

Table of Contents
Management Services Fees Paid. The table below shows the total management services fees paid by each Fund, as applicable, under the Management Agreement for the last three fiscal periods (net of management services fee waivers). Amounts shown for the first period that management services fees were paid for each Fund are for the period from the Fund’s Management Services Fee Effective Date through the applicable fiscal year end. The table is organized by fiscal year end. For more information about fees waived or Fund expenses reimbursed by the Investment Manager, see Expense Limitations .
Management Services Fees
  Management Services Fees
Fund 2016 2015 2014
For Funds with fiscal period ending March 31
AP – Growth Fund $10,774,541 N/A N/A
Pacific/Asia Fund $1,466,562 N/A N/A
Select Large Cap Growth Fund $27,503,236 N/A N/A
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (a) N/A N/A N/A
Bond Fund $1,850,973 N/A N/A
Corporate Income Fund $4,120,977 N/A N/A
Multi-Asset Income Fund $387,936 N/A N/A
Small Cap Value Fund I $4,030,575 N/A N/A
Total Return Bond Fund $10,476,193 N/A N/A
U.S. Treasury Index Fund $1,480,883 N/A N/A
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund $2,017,753 N/A N/A
Alternative Beta Fund $1,360,397 N/A N/A
Diversified Absolute Return Fund $1,189,076 N/A N/A
Dividend Income Fund $31,592,477 N/A N/A
HY Municipal Fund $3,193,770 N/A N/A
(a)The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
Investment Management Services Agreement
Prior to the Management Services Fee Effective Date, each Fund, except AP - Directional Alternatives Fund, unless otherwise noted, was party to the Investment Management Services Agreement and the Administrative Services Agreement with the Investment Manager for advisory and administrative services, respectively. Each Fund party to these agreements paid the Investment Manager an annual fee for advisory services, as set forth in the Investment Management Services Agreement, and a separate fee for administrative services under the Administrative Services Agreement. See Investment Management and Other Services – The Administrator for information with respect to the Administrative Services Agreement. As of the Management Services Fee Effective Date listed for each Fund, these services have been combined under the Management Agreement as described above.
Services Provided Under the Investment Management Services Agreement
Under the Investment Management Services Agreement, the Investment Manager has contracted to furnish each Fund with investment research and advice. For these services, unless otherwise noted, each Fund pays a monthly fee to the Investment Manager based on the average of the daily closing value of the total net assets of a Fund for such month. Under the Investment Management Services Agreement, any liability of the Investment Manager to the Trusts, a Fund and/or its shareholders is limited to situations involving the Investment Manager’s own willful misfeasance, bad faith, negligence in the performance of its duties or reckless disregard of its obligations and duties.
The Investment Management Services Agreement may be terminated with respect to a Fund at any time on 60 days’ written notice by the Investment Manager or by the Board or by a vote of a majority of the outstanding voting securities of a Fund. The Investment Management Services Agreement will automatically terminate upon any assignment thereof, will continue in effect for two years from its initial effective date and thereafter will continue from year to year with respect to a Fund only so long as
Statement of Additional Information – October 3, 2016 88

 

Table of Contents
such continuance is approved at least annually (i) by the Board or by a vote of a majority of the outstanding voting securities of a Fund and (ii) by vote of a majority of the Trustees who are not interested persons (as such term is defined in the 1940 Act) of the Investment Manager or the Trusts, cast in person at a meeting called for the purpose of voting on such approval.
The Investment Manager pays all compensation of the Trustees and officers of the Trusts who are employees of the Investment Manager or its affiliates, except for the Chief Compliance Officer, a portion of whose salary is paid by the Columbia Funds (excluding those Funds that pay a Unitary Fee, as defined below). Except to the extent expressly assumed by the Investment Manager and except to the extent required by law to be paid or reimbursed by the Investment Manager, the Investment Manager does not have a duty to pay any Fund operating expenses incurred in the organization and operation of a Fund, including, but not limited to, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The Fund pays the cost of printing and mailing Fund prospectuses to shareholders.
The Investment Manager, at its own expense, provides office space, facilities and supplies, equipment and personnel for the performance of its functions under each Fund’s Investment Management Services Agreement.
Investment Advisory Services Fee
The Investment Manager and/or its affiliates may from time to time waive fees and/or reimburse certain Fund expenses. See the Funds’ prospectuses for more information. The investment advisory services fee is calculated as a percentage of the average daily net assets of each Fund and is paid monthly at the annual rates set forth in the Investment Management Services Agreement.
Investment Advisory Services Fees Paid. The table below shows the total investment advisory services fees paid by each Fund under the Investment Management Services Agreement for the last three fiscal periods (net of investment advisory services fee waivers). Amounts shown for each Fund's most recent fiscal period, beginning with the Funds with a fiscal period ending March 31, 2016, are for the period from the first day of the applicable fiscal year through the Fund's Management Services Fee Effective Date (see Management Agreement Fee Schedule ). The table is organized by fiscal year end. For more information about fees waived or Fund expenses reimbursed by the Investment Manager, see Expense Limitations .
Investment Advisory Services Fees
  Investment Advisory Services Fees
  2016 2015 2014
For Funds with fiscal period ending January 31
Diversified Real Return Fund $6,504 $6,813 (a) N/A
For Funds with fiscal period ending March 31
AP – Growth Fund 4,662,175 11,264,268 $9,510,480
Pacific/Asia Fund 772,948 2,337,343 2,684,715
Select Large Cap Growth Fund 14,071,760 40,020,937 36,199,976
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (b) N/A N/A N/A
Bond Fund 890,053 3,091,167 4,135,423
Corporate Income Fund 2,057,083 6,174,639 6,040,737
Multi-Asset Income Fund 184,801 47,483 (c) N/A
Small Cap Value Fund I 2,410,692 9,230,465 10,928,618
Total Return Bond Fund 4,803,822 15,122,287 18,867,679
U.S. Treasury Index Fund 134,417 325,652 315,583
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 869,670 1,474,567 112,337
Alternative Beta Fund 674,446 642,780 (d) N/A
Diversified Absolute Return Fund 402,600 320,186 (e) N/A
Dividend Income Fund 15,277,338 47,320,865 45,795,703
HY Municipal Fund 1,326,979 3,742,648 3,539,495
  2015 2014 2013
For Funds with fiscal period ending July 31
Statement of Additional Information – October 3, 2016 89

 

Table of Contents
  Investment Advisory Services Fees
  2015 2014 2013
AMT-Free OR Intermediate Muni Bond Fund $1,802,859 $1,762,302 $1,992,185
Large Cap Growth Fund 20,114,401 18,583,489 16,526,481
Tax-Exempt Fund 15,029,336 14,994,704 17,140,124
U.S. Social Bond Fund 26,951 (f) N/A N/A
Ultra Short Term Bond Fund 4,102,773 4,577,428 4,262,492
For Funds with fiscal period ending August 31
AP – Alternatives Fund 7,820,583 7,445,886 5,713,001
AP – Small Cap Equity Fund 6,947,679 5,699,757 4,261,994
AP – Total Return Bond Fund 19,958,476 16,983,316 18,964,179
Balanced Fund 15,376,747 11,084,447 8,516,272
Contrarian Core Fund 33,944,896 24,213,965 16,485,570
Disciplined Small Core Fund 7,204,789 9,076,791 7,942,625
Emerging Markets Fund 14,725,495 13,473,223 8,951,551
Global Dividend Opportunity Fund 5,854,673 6,295,514 5,493,181
Global Energy and Natural Resources Fund 2,082,111 2,627,816 2,956,409
Global Technology Growth Fund 2,604,481 1,674,084 1,206,218
Greater China Fund 1,277,028 1,191,231 1,833,662
Mid Cap Growth Fund 15,395,981 17,409,882 15,698,296
Small Cap Growth Fund I 5,347,823 9,821,868 8,867,134
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 634,771 688,737 807,504
AMT-Free Intermediate Muni Bond Fund 8,483,272 8,262,651 9,938,231
AMT-Free MA Intermediate Muni Bond Fund 1,171,729 1,203,390 1,414,463
AMT-Free NY Intermediate Muni Bond Fund 1,072,538 1,014,210 1,233,273
CA Tax-Exempt Fund 1,959,863 1,870,343 2,089,802
NY Tax-Exempt Fund 709,903 682,302 761,105
Strategic Income Fund 10,818,719 11,508,313 13,715,882
For Funds with fiscal period ending December 31
Real Estate Equity Fund 3,776,529 3,762,944 4,091,656
(a) For the period from March 11, 2014 (commencement of operations) to January 31, 2015.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) For the period from March 27, 2015 (commencement of operations) to April 30, 2015.
(d) For the period from January 27, 2015 (commencement of operations) to May 31, 2015.
(e) For the period from February 19, 2015 (commencement of operations) to May 31, 2015.
(f) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
Manager of Managers Exemption
The SEC has issued an order that permits the Investment Manager, subject to the approval of the Board, to appoint an unaffiliated subadviser or to change the terms of a subadvisory agreement for a Fund without first obtaining shareholder approval. The order permits a Fund to add or to change unaffiliated subadvisers or to change the fees paid to such subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change.
The Investment Manager and its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create certain conflicts of interest. When making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, the Investment Manager discloses to the Board the nature of any such material relationships .
Statement of Additional Information – October 3, 2016 90

 

Table of Contents
Subadvisory Agreements
The assets of certain Funds are managed by subadvisers that have been selected by the Investment Manager, subject to the review and approval of the Board. Generally, the Investment Manager recommends a subadviser to the Board based upon its assessment of the skills of the subadvisers in managing other assets in accordance with objectives and investment strategies substantially similar to those of the applicable Fund. The Investment Manager monitors the performance of each subadviser and regularly provides reports to the Board. However, short-term investment performance is not the only factor in selecting or terminating a subadviser, and the Investment Manager does not expect to make frequent changes of subadvisers. Subadvisers affiliated with the Investment Manager must be approved by shareholders.
The Investment Manager allocates the assets of a Fund with multiple subadvisers among the subadvisers. Each subadviser has discretion, subject to oversight by the Board and the Investment Manager, to purchase and sell portfolio assets, consistent with the Fund’s investment objectives, policies, and restrictions. Generally, the services that a subadviser provides to the Fund are limited to asset management and related recordkeeping services.
The Investment Manager has entered into a subadvisory agreement with each subadviser under which the subadviser provides investment advisory assistance and day-to-day management of some or all of the Fund’s portfolio, as well as investment research and statistical information. A subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the Investment Manager or its affiliates.
With respect to each of Alternative Beta Fund, AP - Directional Alternatives Fund, Diversified Absolute Return Fund, Diversified Real Return Fund, Multi-Asset Income Fund and U.S. Social Bond Fund, the Funds' Board of Trustees and initial shareholder have approved a subadvisory agreement between the Investment Manager and Threadneedle, an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial. As of the date of this SAI, Threadneedle is not providing services to the Funds pursuant to the subadvisory agreement and therefore has not received any fees thereunder. To the extent Threadneedle begins to provide services to the Funds pursuant to the subadvisory agreement, subadvisory fees will be paid at the rates included in the following table.
The following table shows the subadvisory fee schedules for fees paid by the Investment Manager to subadvisers for Funds that have subadvisers. The fee is calculated as a percentage of the average daily net assets of the applicable Fund (or portion thereof subadvised by the applicable subadviser), subject to any exceptions as noted in the table below, and is paid monthly. The table is organized by fiscal year end.
Subadvisers and Subadvisory Agreement Fee Schedules
Fund Subadviser Parent
Company/Other
Information
Fee Schedule
For Funds with fiscal period ending January 31
Diversified Real Return Fund Threadneedle
(since commencement of operations)
A 0.00% for all assets (a)
For Funds with fiscal period ending March 31
AP – Growth Fund Loomis Sayles
(effective December 11, 2013)
B 0.27% for all assets
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund Boston Partners
(since commencement of operations)
L 0.95% for all assets
AQR
(since commencement of operations)
C 0.90% on the first $100 million declining to 0.85% as assets increase
Analytic Investors
(since commencement of operations)
M 0.750% on the first $20 million declining to 0.625% as assets increase
Threadneedle
(since commencement of operations)
A 0.72% for all assets
Multi-Asset Income Fund Threadneedle
(since commencement of operations)
A 0.16% for all assets
Statement of Additional Information – October 3, 2016 91

 

Table of Contents
Fund Subadviser Parent
Company/Other
Information
Fee Schedule
For Funds with fiscal period ending May 31
Alternative Beta Fund Threadneedle
(since commencement of operations)
A 0.45% for all assets
Diversified Absolute Return Fund Threadneedle
(since commencement of operations)
A 0.45% for all assets
For Funds with fiscal period ending July 31
U.S. Social Bond Fund Threadneedle
(since commencement of operations)
A 0.16% for all assets
For Funds with fiscal period ending August 31
AP – Alternatives Fund AQR
(since commencement of operations)
C 0.65% on the first $500 million declining to 0.50% as assets increase (b)
Wasatch(commencement of operations until on or about October 20, 2016) K 0.70% on the first $100 million declining to 0.60% as assets increase
Water Island
(since commencement of operations)
D 0.70% on the first $50 million declining to 0.60% as assets increase
AP – Small Cap Equity Fund BMO
(effective October 26, 2015)
I 0.30% on the first $200 million declining to 0.20% as assets increase up to $500 million, thereafter 0.25%
Conestoga
(effective October 1, 2012)
F 0.48% on all assets
DGHM
(since commencement of operations)
G 0.65% of the first $50 million declining to 0.35% as assets increase up to $200 million, thereafter 0.45%
EAM
(since commencement of operations)
H 0.50% of the first $100 million declining to 0.40% as assets increase
AP – Total Return Bond Fund Loomis Sayles
(effective April 11, 2016)
B 0.15% on the first $500 million and 0.08% as assets over $500 million
Prudential
(effective May 16, 2016)
J 0.20% on the first $300 million declining to 0.09% as assets increase
TCW
(since commencement of operations)
E 0.18% on the first $500 million declining to 0.05% as assets increase (b)
(a) The Fund invests substantially all of its assets in affiliated underlying funds, for which the Investment Manager is not paid management services fees and, therefore, the subadvisory fee rate is 0.00%.
(b) The fee is calculated based on the combined net assets of Columbia Funds subject to the subadviser’s investment management.
A – Threadneedle is a direct subsidiary of Threadneedle Asset Management Holdings Limited and an affiliate of the Investment Manager, and an indirect wholly-owned subsidiary of Ameriprise Financial. Threadneedle and Threadneedle Asset Management Holdings Limited are located at Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom.
B – Loomis Sayles is a subsidiary of Natixis US, which is part of Natixis Asset Management, an international asset management group based in Paris, France. It is located at One Financial Center, Boston, MA 02111.
Statement of Additional Information – October 3, 2016 92

 

Table of Contents
C – AQR is a Delaware limited liability company formed in 1998 and is located at Two Greenwich Plaza, Greenwich, Connecticut 06830. AQR is a wholly-owned subsidiary of AQR Capital Management Holdings, LLC (AQR Holdings), which has no activities other than holding the interest of AQR. Clifford S. Asness, Ph.D., M.B.A. may be deemed to control AQR through his voting control of the Board of Members of AQR Holdings. Affiliated Managers Group, Inc., a publicly traded holding company, holds a minority interest in AQR Holdings.
D – Water Island is located at 41 Madison Avenue, 42nd Floor, New York, New York 10010. John S. Orrico, President of Water Island, controls Water Island.
E – TCW, which is located at 865 South Figueroa Street, Suite 1800, Los Angeles, California 90017, is a wholly-owned subsidiary of The TCW Group, Inc. On February 6, 2013, The Carlyle Group acquired The TCW Group, Inc. from Société Générale, S.A.
F – Conestoga is a Delaware limited liability company located at 550 East Swedesford Road, Suite 120, Wayne, PA 19087. Conestoga is an employee-owned independent registered investment adviser. Conestoga was organized in 2001 and provides investment management services to institutional and individual clients.
G – DGHM is a Delaware limited liability company located at 565 Fifth Avenue, Suite 2101, New York, New York 10017. DGHM is 80% owned by Boston Private Financial Holdings, Inc., which is organized as a bank holding company focusing on wealth management through private banking and investment services. The remaining 20% interest in DGHM is employee owned. REMS provides advisory services with respect to investments that the portion of the AP – Small Cap Equity Fund managed by DGHM may make in REITs. REMS is located at 1100 Fifth Avenue South, Suite 305, Naples, Florida 34102. The principal owners of REMS are Edward W. Turville, John E. Webster, John S. Whitaker, Michael H. Shelly and Beach Investment Management, LLC.
H – EAM is located at 2533 South Coast Highway 101, Suite 240, Cardiff-by-the-Sea, California 92007. Prior to June 13, 2011, the firm was named Eudaimonia Asset Management, LLC. EAM employees/members own approximately 56% of EAM and Bryon C. Roth, through a majority ownership of CR Financial Holdings, Inc., indirectly owns the remaining 44% interest in the firm.
I – BMO, which is located at 115 South LaSalle Street, 11th Floor, Chicago, Illinois 60603, is a wholly-owned subsidiary of BMO Financial Corp., which is in turn a wholly-owned subsidiary of the Bank of Montréal, a publicly held Canadian diversified financial services company.
J – Prudential, which is located at 655 Broad Street, Newark, New Jersey 07102, is an indirect, wholly-owned subsidiary of Prudential Financial, Inc. Prudential is the global investment management business of Prudential Financial, Inc.
K – Wasatch, which is located at 505 Wakara Way, Salt Lake City, Utah 84108, is a wholly-owned subsidiary of WA Holdings, Inc., which is 100% owned by the employees of Wasatch.
L – Boston Partners, which is located at 909 Third Avenue, New York, New York 10022, is a wholly-owned subsidiary of Robeco Group (“Robeco”), a global investment management company headquartered in Rotterdam, the Netherlands. Robeco is majority-owned by ORIX Corporation of Japan.
M – Analytic Investors is located at 555 West Fifth Street, Los Angeles, California 90013. Analytic Investors is an employee owned and controlled independent registered investment adviser. Analytic Investors was organized in 1970 and provides investment management services to institutional and individual clients. It is anticipated that Wells Capital Management, Inc., a subsidiary of Wells Fargo & Company, will acquire Analytic Investors effective October 1, 2016.
Statement of Additional Information – October 3, 2016 93

 

Table of Contents
The following table shows the subadvisory fees paid by the Investment Manager to subadvisers in the last three fiscal periods or, if shorter, since the Fund’s commencement of operations.
With respect to each of Alternative Beta Fund, AP - Directional Alternatives Fund, Diversified Absolute Return Fund, Diversified Real Return Fund, Multi-Asset Income Fund and U.S. Social Bond Fund, as of the date of this SAI, Threadneedle is not providing services to the Funds pursuant to the subadvisory agreement; accordingly, payments to Threadneedle from these Funds are not included in the following table.
    Subadvisory Fees Paid
Fund Subadviser 2016 2015 2014
For Funds with fiscal period ending March 31
AP – Growth Fund Loomis Sayles $2,082,561 $713,550 $52,526 (a)
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (b) Analytic Investors N/A N/A N/A
AQR N/A N/A N/A
Boston Partners N/A N/A N/A
Fund Subadviser 2015 2014 2013
For Funds with fiscal period ending August 31
AP – Alternatives Fund AQR 1,855,699 1,541,430 912,940
Former subadviser:
Eaton Vance
(through November 25, 2013)
N/A 193,271 823,464
Wasatch 1,546,847 1,597,801 1,185,657
Water Island 1,549,211 1,420,066 745,392
AP – Small Cap Equity Fund BMO (c) N/A N/A N/A
Conestoga 894,675 769,719 531,558 (d)
DGHM 907,318 778,710 524,799
EAM 875,997 768,575 580,685
Former subadviser:
RS Investments
(through September 30, 2012)
N/A N/A 42,593 (e)
AP – Total Return Bond Fund Former subadviser:
Federated
(through May 13, 2016)
1,321,671 1,184,125 1,516,526
Loomis Sayles (c) N/A N/A N/A
Prudential (c) N/A N/A N/A
TCW 1,577,344 1,883,217 2,055,181
(a) For the period from December 11, 2013 to March 31, 2014.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) The subadviser began managing the Fund after its last fiscal year end; therefore there are no fees to report.
(d) For the period from October 1, 2012 to August 31, 2013.
(e) For the period from September 1, 2012 to September 30, 2012.
Statement of Additional Information – October 3, 2016 94

 

Table of Contents
Portfolio Managers. The following table provides information about the portfolio managers of each Fund as of the end of the applicable Fund’s most recent fiscal period, unless otherwise noted. The references in the Potential Conflicts of Interest and the Structure of Compensation columns in the table below refer, respectively, to the descriptions in the Potential Conflicts of Interest and Structure of Compensation subsections immediately following the table. The table is organized by fiscal year end.
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
For Funds with fiscal year ending January 31
Diversified
Real Return
Fund
Jeffrey Knight 23 RICs
2 PIVs
5 other
accounts
$63.93 billion
$20.43 million
$8.78 million
None None Columbia
Management
Columbia
Management
Orhan Imer 20 RICs
2 PIVs
10 other
accounts
$1.97 billion
$15.35 million
$8.20 million
None $1 –
$10,000 (b)
For Funds with fiscal year ending March 31
AP – Growth
Fund
Columbia Management:
Thomas M. Galvin


6 RICs
3 PIVs
2663 other
accounts


$6.19 billion
$342.23 million
$5.15 billion


3 other accounts
($1 B)


None
Columbia
Management
Columbia
Management
Richard A. Carter 6 RICs
3 PIVs
2667 other
accounts
$6.19 billion
$342.23 million
$5.14 billion
3 other
accounts
($1 B)
None
Todd D. Herget 6 RICs
3 PIVs
2667 other
accounts
$6.19 billion
$342.23 million
$5.13 billion
3 other
accounts
($1 B)
None
Loomis Sayles:
Aziz
Hamzaogullari

16 RICs
10 PIVs
82 other
accounts

$12.9 billion
$1.48 billion
$7.78 billion
1 PIV
($7.78 B)
None Loomis
Sayles
Loomis
Sayles
Pacific/Asia
Fund
Jasmine (Weili)
Huang
4 RICs
1 PIV
12 other
accounts
$2.35 billion
$528.86 million
$81.79 million
None $10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Daisuke Nomoto 3 RICs
1 PIV
3 other
accounts
$825.08 million
$528.86 million
$669,455
None $10,001 –
$50,000 (b)

$50,001 –
$100,000 (a)
Christine Seng 1 RIC
1 PIV
$48.43 million
$33.90 million
None None (c) Threadneedle Threadneedle
Statement of Additional Information – October 3, 2016 95

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
Select Large
Cap Growth
Fund
Thomas M. Galvin 6 RICs
3 PIVs
2663 other
accounts
$2.02 billion
$342.23 million
$5.15 billion
3 other
accounts
($1 B)
Over
$1,000,000 (a)
$100,001 –
$500,000 (b)
Columbia
Management
Columbia
Management
Richard A. Carter 6 RICs
3 PIVs
2667 other
accounts
$2.02 billion
$342.23 million
$5.14 billion
3 other
accounts
($1 B)
$100,001 –
$500,000 (a)
$100,001 –
$500,000 (b)
Todd D. Herget 6 RICs
3 PIVs
2667 other
accounts
$2.02 billion
$342.23 million
$5.13 billion
3 other
accounts
($1 B)
$500,001 –
$1,000,000 (b)
For the Funds with fiscal year ending April 30
AP – Directional
Alternatives
Fund
Boston Partners:
Joseph Feeney (j)

2 RICs

$6.70 million

None

None
Boston
Partners
Boston
Partners
Eric Connerly (j) 2 RICs
$6.70 million None None
AQR:
Michele Aghassi (j)

17 RICs
19 PIVs
10 other
accounts

$5.97 billion
$9.87 billion
$2.54 billion

12 PIVs
($5.5 B)
1 other
account
($306 M)
None AQR AQR
Andrea Frazzini (j) 35 RICs
28 PIVs
32 other
accounts
$15.25 billion
$15.07 billion
$2.54 billion
19 PIVs
($11.18 B)
7 other
accounts
($1.8 B)
None
Jacques Friedman (j) 48 RICs
46 PIVs
112 other
accounts
$25.10 billion
$21.80 billion
$52.80 billion
33 PIVs
($16.14 B)
33 other
accounts
($13. 61 billion)
None
Hoon Kim (j) 8 RICs
14 PIVs
21 other
accounts
$3.90 billion
$6.06 billion
$8.90 billion
9 PIVs
($2.84 B)
4 other
accounts
($681 B)
None
Analytic Investors:
Harindra de Silva (j)

13 RICs
18 PIVs
32 other
accounts

$5.44 million
$2.21 million
$7.32 million
3 PIVs
($197.9 M)
2 other
accounts
($266 M)
None Analytic Investors Analytic Investors
Dennis Bein (j) 10 RICs
18 PIVs
31 other
accounts
$3.06 million
$2.21 million
$2.12 million
3 PIVs
($197.9 M)
2 other
accounts
($266 M)
None
David Krider (j) 5 RIVs
14 PICs
11 other
accounts
$1.44 million
$1.91 million
$2.12 million
1 PIV
($128.6 M)
1 other
account
($31.3 M)
None
Statement of Additional Information – October 3, 2016 96

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
Bond Fund Carl W. Pappo 5 RICs
1 PIV
24 other
accounts
$11.86 billion
$55.18 million
$2.28 billion
None $10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Jason Callan 8 RICs
7 PIVs
4 other
accounts
$15.59 billion
$15.17 billion
$1.21 million
None None
Corporate
Income
Fund
Tom Murphy 12 RICs
29 PIVs
34 other
accounts
$2.04 billion
$34.95 billion
$4.85 billion
None None Columbia
Management
Columbia
Management
Tim Doubek 10 RICs
1 PIV
33 other
accounts
$2.01 billion
$91.59 million
$4.59 billion
None $50,001 –
$100,000 (a)
$10,001 –
$50,000 (b)
Brian Lavin 13 RICs
1 PIV
5 other
accounts
$19.30 billion
$55.18 million
$3.64 million
None None
Multi-Asset
Income
Fund
Jeffrey Knight 23 RICs
3 PIVs
5 other
accounts
$66.68 billion
$524.75 million
$9.66 million
None $100,001 –
$500,000 (b)
Columbia
Management
Columbia
Management
Anwiti Bahuguna 18 RICs
22 PIVs
16 other
accounts
$65.50 billion
$2.72 billion
$109.38 million
1 PIV
($504 M)
None
Dan Boncarosky 2 RICs
2 other
accounts
$6.62 million
$164,138.50
None None
Joshua Kutin 4 RICs
4 PIVs
14 other
accounts
$1.18 billion
$24.36 million
$9.39 million
None None
Small Cap
Value Fund I
Jeremy Javidi 1 RIC
1 PIV
10 other
accounts
$350.99 million
$172.13 million
$33.90 million
None $100,001 –
$500,000 (a)
$10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Total Return
Bond Fund
Brian Lavin 13 RICs
1 PIV
5 other
accounts
$17.34 billion
$55.18 million
$3.64 million
None None Columbia
Management
Columbia
Management
Carl W. Pappo 5 RICs
1 PIV
24 other
accounts
$9.25 billion
$55.18 million
$2.28 billion
None $10,001 –
$50,000 (b)
Jason Callan 8 RICs
7 PIVs
4 other
accounts
$12.98 billion
$15.17 billion
$1.21 million
None None
Statement of Additional Information – October 3, 2016 97

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
U.S. Treasury
Index Fund
William Finan 3 other
accounts
$962,286.73 None None Columbia
Management
Columbia
Management
Orhan Imer 20 RICs
3 PIVs
5 other
accounts
$1.50 billion
$165.49 million
$9.29 million
None None
For Funds with fiscal year ending May 31
Adaptive Risk
Allocation
Fund
Jeffrey L. Knight 23 RICs
3 PIVs
5 other
accounts
$66.42 billion
$526.68 million
$15.57 million
None over
$1,000,000 (a)
$100,001 –
$500,000 (b)
Columbia
Management;
Columbia
Management –
Fund-of-
Funds
Columbia
Management
  Beth M. Vanney 6 RICs
1 PIV
5 other
accounts
$5.38 billion
$12.55 million
$9.69 million
None $10,001 –
$50,000 (b)
  Orhan Imer 20 RICs
3 PIVs
5 other
accounts
$1.83 billion
$163.12 million
$9.97 million
None $1 –
$10,000 (b)
  Joshua Kutin 4 RICS
4 PIVS
8 other
accounts
$729.16 million
$25.60 million
$10.12 million
None None
  Toby Nangle 6 RICs
5 PIVs
2 other
accounts
$5.94 billion
$497.85 million
$307.49 million
3 PIVs
($112.3M)
None (c) Columbia
Management –
Fund-of-
Funds;
Threadneedle
Threadneedle
Alternative
Beta
Fund
Jeffrey L. Knight 23 RICs
3 PIVs
5 other
accounts
$66.83 billion
$526.68 million
$15.57 million
None $100,001 –
$500,000 (a)
Columbia
Management
Columbia
Management
William Landes 2 RICs
1 PIV
3 other
accounts
$421.67 million
$8.19 million
$5.30 million
None over
$1,000,000 (a)
Marc Khalamayzer 6 RICs
2 other
accounts
$95.97 million
$100,414.54
None $1-$10,000 (b)
Joshua Kutin 4 RICS
4 PIVS
8 other
accounts
$1.14 billion
$25.60 million
$10.12 million
None $50,001 –
$100,000 (b)
Statement of Additional Information – October 3, 2016 98

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
Diversified
Absolute
Return
Fund
Jeffrey L. Knight 23 RICs
3 PIVs
5 other
accounts
$66.89 billion
$526.68 million
$15.57 million
None $500,001 –
$1,000,000 (a)
Columbia
Management
Columbia
Management
William Landes 2 RICs
1 PIV
3 other
accounts
$481.01 million
$8.19 million
$5.30 million
None None
Kent Peterson 6 RICs
1 PIV
7 other
accounts
$21.73 billion
$8.19 million
$538,801.29
None None
Brian Virginia 10 RICs
8 other
accounts
$59.93 billion
$2.56 million
None None
Joshua Kutin 4 RICS
4 PIVS
8 other
accounts
$1.20 billion
$25.60 million
$10.12 million
None None
Dividend
Income Fund
Michael S.
Barclay
1 RIC
2 PIVs
73 other
accounts
$44.26 million
$933.66 million
$1.16 billion
None $100,001 –
$500,000 (a)(h)
$50,001 –
$100,000 (b)
Columbia
Management
Columbia
Management
Scott L. Davis 1 RIC
2 PIVs
75 other
accounts
$44.26 million
$933.66 million $1.23 billion
None $100,001 –
$500,000 (a)
$100,001 –
$500,000 (b)
Peter Santoro 4 RICs
2 PIVs
67 other
accounts
$1.63 billion
$933.66 million
$1.54 billion
None $10,001 –
$50,000 (b)
High Yield
Municipal
Fund
Chad H.
Farrington
2 RICs
12 other
accounts
$766.91 million
$172.67 million
None $10,001 –
$50,000 (a)
$10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Catherine Stienstra (i) 5 RICs
2 PIVs
4 other
accounts
$3.94 billion
$1.78 billion
$14.39 million
None $1 –
$10,000 (b)
For Funds with fiscal year ending July 31
AMT-Free OR
Intermediate
Muni Bond
Fund
Brian M.
McGreevy
11 RICs
6 other
accounts
$3.98 billion
$352.62 million
None None Columbia Management Columbia Management
Paul Fuchs (i) 5 RICs
6 other accounts
$3.53 billion
$1.39 million
None None
Statement of Additional Information – October 3, 2016 99

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
Large Cap
Growth Fund
Peter R.
Deininger
2 RICs
8 other
accounts
$1.59 billion
$156.56 million
None $50,001 –
$100,000 (b)
Columbia
Management
Columbia
Management
John T. Wilson 2 RICs
8 other
accounts
$1.59 billion
$168.73 million
None over
$1,000,000 (a)
$100,001 –
$500,000 (b)
Tchintcia S. Barros 2 RICs
8 other
accounts
$1.59 billion
$156.40 million
None $1 –
$10,000 (b)
Tax-Exempt
Fund
Kimberly A.
Campbell
2 PIVs
23 other
accounts
$378.78 million
$1.82 million
None $10,001 –
$50,000 (a)
$10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
James Dearborn (i) 1 RIC
4 other
accounts
$31.39 million
$911, 211.40
None None
U.S. Social
Bond Fund
James Dearborn 7 other
accounts
$ 891,910.23
None None Columbia
Management
Columbia
Management
Chad Farrington 1 RIC
10 other
accounts
$826.72 million
$145.83 million
None None
Tom Murphy 12 RICs
28 PIVs
39 other
accounts
$3.77 billion
$34.43 billion
$5.29 billion
None None
Ultra Short
Term Bond
Fund
Leonard A. Aplet 6 RICs
15 PIVs
69 other
accounts
$16.99 billion
$2.44 billion
$7.46 billion
None None Columbia
Management
Columbia
Management
Ronald Stahl 3 RICs
15 PIVs
52 other
accounts
$3.40 billion
$3.96 billion
$6.37 billion
None None
Greg Liechty (e) 3 RICs
14 PIVs
45 other
accounts
$3.60 billion
$3.87 billion
$6.21 billion
None None
Statement of Additional Information – October 3, 2016 100

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
For Funds with fiscal year ending August 31
AP – Alternatives
Fund
AQR:
Clifford S. Asness

35 RICs
39 PIVs
73 other
accounts

$21.47 billion
$15.1 billion
$28.86 billion

33 PIVs
($13.79 B)
24 other
accounts
($8.67 B)
None AQR AQR
Brian K. Hurst 13 RICs
47 PIVs
22 other
accounts
$16.17 billion
$26.83 billion
$10.80 billion
41 PIVs
($24.43 B)
6 other
accounts
($3.75 B)
None
John M. Liew 20 RICs
30 PIVs
30 other
accounts
$19.11 billion
$10.24 billion
$12.83 billion
25 PIVs
($8.78 B)
10 other
accounts
($4.5 B)
None
Yao Hua Ooi 13 RICs
38 PIVs
3 other
accounts
$16.17 billion
$20.92 billion
$777.5 million
34 PIVs
($19.42 B)
2 other
accounts
($516.48 M)
None
Ari Levine 5 RICs
30 PIVs
8 other
accounts
$3.14 billion
$14.04 billion
$2.8 billion
29 PIVs
($12.93 B)
3 other
accounts
($1.03 B)
None
Water Island:
Edward Chen

3 RICs
1 other
account

$190.1 million
$7.99 million

None
None Water
Island
Water
Island
Gregory Loprete 4 RICs
1 other
account
$171.29 million
$0.99 million
None None
Todd W. Munn 4 RICs
1 other
account
$2.48 billion
$1.90 million
None None
Roger P.
Foltynowicz
4 RICs
1 other
account
$2.48 billion
$1.90 million
None None
Statement of Additional Information – October 3, 2016 101

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
AP – Small Cap
Equity Fund
Columbia Management:
Jarl Ginsberg


4 RICs
14 other
accounts


$3.01 billion
$43.03 million


None
None Columbia
Management
Columbia
Management
Christian K.
Stadlinger
4 RICs
9 other
accounts
$3.01 billion
$46.72 million
None None
Conestoga:
Robert M. Mitchell

2 RICs
118 other
accounts

$651.85 million
$973.26 million

None
None Conestoga Conestoga
Joseph F.
Monahan
2 RICs
118 other
accounts
$651.85 million
$973.26 million
None None
DGHM:
Jeffrey C. Baker

2 RICs
6 PIVs
76 other
accounts

$52.27 million
$307.50 million
$1.52 billion

4 PIVs
($78.64 M)
3 other
accounts
($151.75 M)
None DGHM DGHM
Bruce H. Geller 2 RICs
6 PIVs
76 other
accounts
$52.27 million
$307.50 million
$1.52 billion
4 PIVs
($78.64 M)
3 other
accounts
($151.75 M)
None
Peter A. Gulli 2 RICs
6 PIVs
76 other
accounts
$52.27 million
$307.50 million
$1.52 billion
4 PIVs
($78.64 M)
3 other
accounts
($151.75 M)
None
Edward W. Turville
(with REMS)
2 RICs
6 PIVs
76 other
accounts
$52.27 million
$307.50 million
$1.52 billion
4 PIVs
($78.64 M)
3 other
accounts
($151.75 M)
None
EAM:
Montie L.
Weisenberger

5 RICs
1 PIV
8 other
accounts

$252.69 million
$86.20 million
$196.41 million

None
None EAM EAM
BMO:
David Corris

5 RICs
6 PIVs
122 other
accounts

$617.6 million
$4.97 billion
$4.06 billion

None
None BMO BMO
Thomas Lettenberger 1 RIC
20 other
accounts
$4.1 million
$126.5 million
None None
Statement of Additional Information – October 3, 2016 102

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
  Columbia Management:
Carl W. Pappo


5 RICs
4 PIVs
24 other
accounts


$9.06 billion
$1.40 billion
$2.15 billion


None
None Columbia
Management
Columbia
Management
  Brian Lavin 13 RICs
2 PIVs
5 other
accounts
$19.71 billion
$97.47 million
$3.89 million
None None
  Jason Callan (d) 4 RICs
6 PIVs
4 other
accounts
$3.63 billion
$14.94 billion
$701,265.76
None None
  Loomis Sayles:
Christopher Harms (f)

3 RICs
4 PIVs
148 other
accounts

$1.45 billion
$900.09 million
$11.64 billion

None
None Loomis
Sayles
Loomis
Sayles
AP – Total
Return
Bond Fund
Clifton Rowe (f) 4 RICS
7 PIVs
154 other
accounts
$2.39 billion
$1.97 billion
$13.53 billion
None None
Kurt Wagner (f) 3 RICs
7 PIVs
161 other
accounts
$1.45 billion
$6.93 billion
$14.76 billion
2 other
accounts
($4.57 B)
None
Prudential:
Michael Collins (g)

25 RICS
5 PIVs
51 other
accounts

$38.36 billion
$5.74 billion
$17.34 billion

None
None Prudential Prudential
  Robert Tipp (g) 24 RICS
17 PIVs
73 other
accounts
$20.06 billion
$8.60 billion
$21.13 billion
1 PIVs
($0.40 M)
None
  Richard Piccirillo (g) 38 RICS
24 PIVs
121 other
accounts
$46.53 billion
$10.93 billion
$43.66 billion
2 PIVs None
  Gregory Peters (g) 15 RICS
6 PIVs
34 other
accounts
$28.73 billion
$2.67 billion
$16.23 billion
None None
Statement of Additional Information – October 3, 2016 103

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
  TCW:
Tad Rivelle

28 RICs
45 PIVs
248 other
accounts

$98.97 billion
$8.41 billion
$31.47 billion

2 RICs
($169.58 M)
25 PIVs
($2.43 B)
7 other
accounts
($3.64 B)
None TCW TCW
  Stephen M. Kane 29 RICs
46 PIVs
247 other
accounts
$91.62 billion
$91.62 billion
$31.21 billion
2 RICs
($169.59 M)
25 PIVs
($2.43 B)
7 other
accounts
($3.64 B)
None
  Laird R.
Landmann
27 RICs
45 PIVs
247 other
accounts
$91.62 billion
$8.41 billion
$31.21 billion
1 RIC
($160 M)
25 PIVs
($2.43 B)
7 other
accounts
($3.64 B)
None
  Bryan Whalen 25 RICs
41 PIVs
247 other
accounts
$98.94 billion
$7.08 billion
$31.21 billion
1 RIC
($160 M)
25 PIVs
($2.43 B)
7 other
accounts
($3.64 B)
None
Balanced Fund Leonard A. Aplet 6 RICs
15 PIVs
69 other
accounts
$16.97 billion
$2.43 billion
$7.39 billion
None $50,001 –
$100,000 (a)
$50,001 –
$100,000 (b)
Columbia
Management
Columbia
Management
Brian Lavin 13 RICs
2 PIVs
5 other
accounts
$20.34 billion
$116.88 million
$3.63 million
None None
Gregory S.
Liechty
2 RICs
15 PIVs
47 other
accounts
$2.39 billion
$3.94 billion
$6.22 billion
None $10,001 –
$50,000 (b)
Guy W. Pope 10 RICs
7 PIVs
52 other
accounts
$11.49 billion
$1.17 billion
$4.12 billion
None $100,001 –
$500,000 (b)
$100,001 -
$500,000 (a)
Ronald B. Stahl 3 RICs
15 PIVs
44 other
accounts
$3.85 billion
$3.93 billion
$6.29 billion
None $10,001 –
$50,000 (b)
$50,001 –
$100,000 (a)
Contrarian
Core Fund
Guy W. Pope 10 RICs
7 PIVs
52 other
accounts
$7.39 billion
$1.17 billion
$4.12 billion
None $500,001 –
$1,000,000 (a)
$500,001 –
$1,000,000 (b)
Columbia
Management
Columbia
Management
Statement of Additional Information – October 3, 2016 104

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
Disciplined Small
Core Fund
Brian Condon (d) 22 RICs
2 PIVs
22 Other
accounts
$13.24 billion
$140.38 million
$5.07 billion
None None Columbia
Management
Columbia
Management
Alfred Alley (d) 10 RICs
10 Other
accounts
$955.04 million
$140.22 million
None None
Emerging
Markets Fund
Robert B.
Cameron
4 RICs
1 PIV
7 other
accounts
$1.29 billion
$505.79 million
$1.06 million
None $50,001 –
$100,000 (b)
Columbia
Management
Columbia
Management
Jasmine (Weili)
Huang
6 RICs
1 PIV
10 other
accounts
$1.66 billion
$505.79 million
$1.26 million
None $10,001 –
$50,000 (b)
Dara J. White 4 RICs
1 PIV
7 other
accounts
$1.29 billion
$505.79 million
$2.09 million
None $100,001 –
$500,000 (a)
$100,001 –
$500,000 (b)
Young Kim 4 RICs
1 PIV
6 other
accounts
$1.29 billion
$505.79 million
$226,042
None None
Global
Dividend
Opportunity
Fund
Stephen Thornber (d) 1 PIV
5 Other
accounts
$2.11 billion
$2.53 billion
None None (c) Threadneedle Threadneedle
Jonathan Crown (d) 4 Other
accounts
$99.5 million None None (c)
Global Energy
and Natural
Resources
Fund
Josh Kapp 1 PIV
5 other
accounts
$23.65 million
$1.35 million
None $1 –
$10,000 (b)
Columbia
Management
Columbia
Management
Jonathan Mogil 1 RIC
1 PIV
11 other
accounts
$5.03 million
$23.65 million
1.74 million
None None
Global
Technology
Growth Fund
Rahul Narang 5 RICs
8 other
accounts
$1.26 billion
$647,042
None $100,001 –
$500,000 (b)
Columbia
Management
Columbia
Management
Greater China
Fund
Jasmine (Weili)
Huang
6 RICs
1 PIV
10 other
accounts
$2.72 billion
$505.79 million
$1.26 million
None $10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Statement of Additional Information – October 3, 2016 105

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
Mid Cap
Growth Fund
George J. Myers 1 RIC
2 PIVs
9 other
accounts
$311.88 million
$268.50 million
$16.56 million
None $10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Brian D. Neigut 1 RIC
2 PIVs
8 other
accounts
$311.88 million
$268.50 million
$15.84 million
None $10,001 –
$50,000 (b)
James E. King 1 RIC
1 PIV
9 other
accounts
$311.88 million
$263.67 million
$16.16 million
None $1 –
$10,000 (b)
William
Chamberlain
1 RIC
1 PIV
5 other
accounts
$311.88 million
$263.67 million
$15.67 million
None $1 –
$10,000 (b)
Small Cap
Growth Fund I
Daniel Cole 1 RIC
6 other
accounts
$29.79 million
$3.46 million
None None Columbia
Management
Columbia
Management
Wayne M.
Collette
2 RICs
1 PIV
5 other
accounts
$417.89 million
$4.83 million
$4.08 million
None $10,001 –
$50,000 (b)
Lawrence W. Lin 1 RIC
1 PIV
9 other
accounts
$29.79 million
$4.83 million
$1.97 million
None $1 –
$10,000 (b)
$10,001 –
$50,000 (a)
Rahul Narang 5 RICs
8 other
accounts
$1.14 billion
$647,042
None None
For Funds with fiscal year ending October 31
AMT-Free CT
Intermediate
Muni Bond
Fund
Brian
McGreevy
11 RICs
11 other
accounts
$4.29 billion
$333.29 million
None None Columbia
Management
Columbia
Management
Paul F. Fuchs (i) 5 RICs
6 other
accounts
$3.53 billion
$1.39 million
None None
AMT-Free
Intermediate
Muni Bond
Fund
Paul F. Fuchs 4 RICs
4 other
accounts
$980.37 million
$521,131.66
None $10,001 –
$50,000 (b)
Columbia
Management
Columbia
Management
Brian
McGreevy
11 RICs
11 other
accounts
$2.29 billion
$333.29 million
None $10,001 –
$50,000 (a)
$10,001 –
$50,000 (b)
AMT-Free MA
Intermediate
Muni Bond
Fund
Paul F. Fuchs 4 RICs
4 other
accounts
$2.84 billion
$521,131.66
None None Columbia
Management
Columbia
Management
Brian
McGreevy
11 RICs
11 other
accounts
$4.16 billion
$333.29 million
None $100,001 –
$500,000 (a)
Statement of Additional Information – October 3, 2016 106

 

Table of Contents
    Other
accounts Managed (excluding the Fund)
Ownership
of Fund
Shares
Potential
Conflicts
of Interest
Structure
of
Compensation
Fund Portfolio
Manager
Number
and Type
of Account*
Approximate
Total Net
Assets
Performance-
Based
Accounts**
AMT-Free NY
Intermediate
Muni Bond
Fund
Paul F. Fuchs 4 RICs
4 other
accounts
$2.86 billion
$521,131.66
None None Columbia
Management
Columbia
Management
Brian
McGreevy
11 RICs
11 other
accounts
$4.17 billion
$333.29 million
None None
CA Tax-Exempt
Fund
Catherine
Stienstra
4 RICs
2 PIVs
4 other
accounts
$3.07 billion
$1.60 billion
$14.71 million
None None Columbia
Management
Columbia
Management
Anders Myhran (i) 1 RIC
1 PIV
2 other
accounts
$1.74 billion
$1.09 billion
$1.31 million
None None
NY Tax-Exempt
Fund
Catherine
Stienstra
4 RICs
2 PIVs
4 other
accounts
$3.40 billion
$1.60 billion
$14.71 million
None None Columbia
Management
Columbia
Management
Anders Myhran (i) 1 RIC
1 PIV
2 other
accounts
$1.74 billion
$1.09 billion
$1.31 million
None None
Strategic
Income Fund
Brian Lavin 13 RICs
2 PIVs
5 other
accounts
$18.01 billion
$137.08 million
$3.71 million
None None Columbia
Management
Columbia
Management
Colin Lundgren 2 RICs
51 other
accounts
$1.43 billion
$19.50 million
None $100,001 –
$500,000 (b)
Gene Tannuzzo 7 RICs
61 other
accounts
$1.79 billion
$1.29 billion
None $100,001 –
$500,000 (a)
$100,001 –
$500,000 (b)
For the Fund with fiscal year ending December 31
Real Estate
Equity Fund
Arthur J. Hurley 1 RIC
9 other
accounts
$2.24 million
$1.54 million
None $1 –
$10,000 (a)
Columbia
Management
Columbia
Management
* RIC refers to a Registered Investment Company; PIV refers to a Pooled Investment Vehicle.
** Number and type of accounts for which the advisory fee paid is based in part or wholly on performance and the aggregate net assets in those accounts.
(a) Excludes any notional investments.
(b) Notional investments through a deferred compensation account.
(c) The Fund is available for sale only in the U.S. The portfolio managers do not reside in the U.S. and therefore do not hold any shares of the Fund.
(d) The portfolio manager began managing the Fund after its last fiscal year end; reporting information is provided as of November 30, 2015.
(e) The portfolio manager began managing the Fund after its last fiscal year end; reporting information is provided as of December 31, 2015.
(f) The portfolio manager began managing the Fund after its last fiscal year end; reporting information is provided as of February 29, 2016.
(g) The portfolio manager began managing the Fund effective May 16, 2016; reporting information is provided as of February 29, 2016.
(h) The portfolio manager’s ownership information (excluding any notional investments) is provided as of September 28, 2016. As of May 31, 2016, the portfolio manager’s ownership (excluding any notional investments) was $50,001-$100,000.
(i) The portfolio manager began managing the Fund effective October 1, 2016; reporting information is provided as of July 31, 2016.
(j) The Fund is expected to commence operations on or about October 12, 2016; reporting information is provided as of July 31, 2016.
Statement of Additional Information – October 3, 2016 107

 

Table of Contents
Potential Conflicts of Interest
  Analytic Investors : Analytic Investors and its officers, employees and beneficial owners shall be free from time to time to acquire, possess, manage, and dispose of securities or other investment assets for their own accounts, for the accounts of their families, for the account of any entity in which they have a beneficial interest or for the accounts of others for whom they may provide investment advisory, brokerage or other services (collectively, “Managed Accounts”), in transactions which may or may not correspond with transactions effected or positions held in the fund. It is understood that when Analytic Investors determines that it would be appropriate for the fund and one or more Managed Accounts to participate in an investment opportunity, Analytic Investors will seek to execute orders for the fund and for such Managed Accounts on a basis which it considers equitable, but that equality of treatment of the fund and other Managed Accounts is not assured. In such situations, Analytic Investors may (but is not be required to) place orders for the fund and each other Managed Account simultaneously and if all such orders are not filled at the same price, Analytic Investors may cause the fund and each Managed Account to pay or receive the average of the prices at which the orders were filled. If all such orders cannot be fully executed under prevailing market conditions, Analytic Investors may allocate the securities traded among the fund and other Managed Accounts in a manner which it considers equitable, taking into account the size of the order placed for the fund and each other Managed Account as well as any other factors which it deems relevant.
  Certain of the Managed Accounts that Analytic Investors advises may sell securities short, including securities with respect to which other Managed Accounts hold long positions. The portfolio managers and traders for these Managed Accounts are not separated from the rest of Analytic Investors’ investment personnel and therefore have access to full information about Analytic Investors’ investment research and the investment decisions and strategies being employed for the Managed Accounts. These Managed Accounts pay Analytic Investors management fees at rates comparable to and in some cases lower than those paid by the fund and other Managed Accounts. Analytic Investors also receives a significant share of any profits earned by certain of the Managed Accounts as incentive compensation. As a result, Analytic Investors may have a conflict between its own interests and the interests of other Analytic Investors investment advisory clients in managing the portfolios of certain of these Managed Accounts.
  AQR: Each of the portfolio managers is also responsible for managing other accounts in addition to the Fund, including other accounts of AQR, or its affiliates. Other accounts may include, without limitation, separately managed accounts for foundations, endowments, pension plans, and high net-worth families; registered investment companies; unregistered investment companies relying on either Section 3(c)(1) or Section 3(c)(7) of the 1940 Act (such companies are commonly referred to as “hedge funds”); foreign investment companies; and may also include accounts or investments managed or made by the portfolio managers in a personal or other capacity (“Proprietary Accounts”). Management of other accounts in addition to the Fund can present certain conflicts of interest, as described below.
  From time to time, potential conflicts of interest may arise between a portfolio manager’s management of the investments of the Fund, on the one hand, and the management of other accounts, on the other. The other accounts might have similar investment objectives or strategies as the Fund, or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. Because of their positions with the Fund, the portfolio managers know the size, timing and possible market impact of the Fund’s trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the Fund.
  A potential conflict of interest may arise as a result of a portfolio manager’s management of a number of accounts (including Proprietary Accounts) with similar investment strategies. Often, an investment opportunity may be suitable for both the Fund and other accounts, but may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by the Fund and another account. In addition, different account guidelines and/or differences within particular investment strategies may lead to the use of different investment practices for portfolios with a similar investment strategy. AQR will not necessarily purchase or sell the same securities at the same time, same direction, or in the same proportionate amounts for all eligible accounts, particularly if different accounts have materially different amounts of capital under management by AQR, different amounts of investable cash available, different strategies, or different risk tolerances. As a result, although AQR manages numerous accounts and/or portfolios with similar or identical investment objectives, or may manage accounts with different objectives that trade in the same securities, the portfolio decisions relating to these accounts, and the performance resulting from such decisions, may differ from account to account.
  Whenever decisions are made to buy or sell securities by the Fund and one or more of the other accounts (including Proprietary Accounts) simultaneously, AQR or the portfolio manager may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. To this end, AQR has adopted policies and procedures that are intended to ensure that investment opportunities are allocated equitably among accounts over time. As a result of the allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts or the Fund may not be allocated the full amount of the securities sought
Statement of Additional Information – October 3, 2016 108

 

Table of Contents
  to be traded. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of AQR that the overall benefits outweigh any disadvantages that may arise from this practice. Subject to applicable laws and/or account restrictions, AQR may buy, sell or hold securities for other accounts while entering into a different or opposite investment decision for the Fund.
  AQR and the Fund’s portfolio managers may also face a conflict of interest where some accounts pay higher fees to AQR than others, such as by means of performance fees. Specifically, the entitlement to a performance fee in managing one or more accounts may create an incentive for AQR to take risks in managing assets that it would not otherwise take in the absence of such arrangements. Additionally, since performance fees reward AQR for performance in accounts which are subject to such fees, AQR may have an incentive to favor these accounts over those that have only fixed asset-based fees with respect to areas such as trading opportunities, trade allocation, and allocation of new investment opportunities.
  AQR has implemented specific policies and procedures (e.g., a code of ethics and trade allocation policies) that seek to address potential conflicts of interest that may arise in connection with the management of the Fund and other accounts and that are designed to ensure that all client accounts are treated fairly and equitably over time.
  BMO: A conflict of interest may arise as a result of a portfolio manager being responsible for multiple accounts, including the Fund, which may have different investment guidelines and objectives. In addition to the Fund, these accounts may include other mutual funds managed on an advisory or subadvisory basis, separate accounts, and collective trust accounts. An investment opportunity may be suitable for a Fund as well as for any of the other managed accounts. However, the investment may not be available in sufficient quantity for all of the accounts to participate fully. In addition, there may be limited opportunity to sell an investment held by a Fund and the other accounts. The other accounts may have similar investment objectives or strategies as the Fund, they may track the same benchmarks or indexes as the Fund tracks, and they may sell securities that are eligible to be held, sold or purchased by the Fund. A portfolio manager may be responsible for accounts that have different advisory fee schedules, which may create the incentive for the portfolio manager to favor one account over another in terms of access to investment opportunities. A portfolio manager also may manage accounts whose investment objectives and policies differ from those of the Fund, which may cause the portfolio manager to effect trading in one account that may have an adverse effect on the value of the holdings within another account, including a Fund.
  To address and manage these potential conflicts of interest, BMO has adopted compliance policies and procedures to allocate investment opportunities and to ensure that each of its clients is treated on a fair and equitable basis. Such policies and procedures include, but are not limited to, trade allocation and trade aggregation policies, cross trading policies, portfolio manager assignment practices, and oversight by investment management, and/or compliance departments.
  Boston Partners: Boston Partners owes its clients a duty of loyalty and monitors situations in which the interests of its advisory clients may be in conflict with its own interests. Boston Partners identifies business practices that may cause a conflict of interest between it and its clients, discloses such conflicts of interest to clients and develops reasonable procedures to mitigate such conflicts.
  Boston Partners has identified the following potential conflicts of interest and the measures it uses to address these matters:
  Equitable Treatment of Accounts
Boston Partners recognizes that potential conflicts may arise from the side-by-side management of registered investment companies and “investment accounts,” which include privately offered funds and separately managed accounts of individuals and institutional investors. Where Boston Partners’ separately managed accounts are charged performance fees, portfolio managers may be inclined to take investment risks that are outside the scope of such client’s investment objectives and strategy. In addition, since Boston Partners’ private investment funds charge performance fees and share those fees with portfolio managers, such portfolio managers may also be inclined to take additional investment risks. Boston Partners maintains a Trade Allocation and Aggregation Policy as well as a Simultaneous Management Policy to ensure that client accounts are treated equitably. The CD reviews allocations and dispersion regularly, and accounts within the same strategy are precluded from simultaneously holding a security long and short. There are certain circumstances that would permit a long/short portfolio to take a contra position in a security that is held in another strategy. This happens very infrequently and the contra position is generally not related to the fundamental views of the security (i.e. – initiating a long position in a security at year-end to take advantage of tax-loss selling as a short term investment, or initiating a position based solely on its relative weight in the benchmark to manage investment risk). However in certain situations, the investment constraints of a strategy, including but not limited to country, region, industry or benchmark, may result in a different investment thesis for the same security. Each situation is fully vetted and approved by the firm’s Chief Investment Officer or his designee. Risk Management performs periodic reviews to ensure the product complies with the investment strategy and defined risk parameters.
Statement of Additional Information – October 3, 2016 109

 

Table of Contents
  Furthermore, since Boston Partners charges a performance fee on certain accounts, and in particular these accounts may receive “new issues” allocations, Boston Partners has a conflict of interest in allocating new issues to these accounts. Boston Partners maintains an IPO Allocation Policy and the CD assists in, and/or reviews, the allocation of new issues to ensure that IPOS are being allocated among all eligible accounts in an equitable manner.
  Utilizing Brokerage to Advantage Boston Partners
Boston Partners does not place trades through affiliated brokers. Securities trades are executed through brokerage firms with which Boston Partners maintains other advantageous relationships, such as soft dollars. In these cases, the broker may expect commission business in return. Boston Partners has established a Trade Management Oversight Committee (the “TOC”) to evaluate brokerage services and to review commissions paid to brokers. In addition, Boston Partners maintains a Best Execution Policy and a Soft Dollar Policy to assist in its monitoring efforts. Boston Partners also identifies affiliates of the investment companies for which it acts as investment adviser or sub adviser to ensure it is trading in accordance with applicable rules and regulations.
  Directed Brokerage
Boston Partners faces an inherent conflict since it is in a position to direct client transactions to a broker or dealer in exchange for distribution capacity. Boston Partners maintains policies which prohibit its traders from considering a broker-dealer’s distribution capacity for promoting or selling Boston Partners’ separate account services, mutual funds, or proprietary funds (collectively “Boston Partners’ Services”) during the broker selection process. Nor will Boston Partners compensate any broker either directly or indirectly by directing brokerage transactions to that broker for consideration in selling Boston Partners’ services.
  Mixed Use Allocations and Use of Soft Dollars to Benefit Adviser
Soft dollar services which have a “mixed use” allocation present a conflict of interest when determining the allocation between those services that primarily benefit Boston Partners’ clients and those that primarily benefit Boston Partners. In addition, a conflict of interest exists when Boston Partners uses soft dollars to pay expenses that would normally be paid by Boston Partners. Boston Partners has developed soft dollar policies which require it to make a good faith allocation of “mixed use” services and to document its analysis. In addition, the CD reviews all requests for soft dollars to ensure inclusion under the safe harbor of Section 28 (e) of the Securities Exchange Act of 1934 (the “Exchange Act”).
  Trade Errors
A conflict arises when an investment adviser requests a broker/dealer to absorb the cost of a trade error in return for increased trading and/or commissions. Boston Partners prohibits correcting a trade error for any quid pro quo with a broker and has procedures for the proper correction of trade errors.
  Principal Transactions
A principal transaction occurs when an investment adviser, acting for the account of itself or an affiliate buys a security from, or sells a security to a client. An inherent conflict of interest exists since an adviser has an opportunity to transfer unwanted securities from its account to a client's account, sell securities to a client’s account at prices above the market, or transfer more favorably priced securities from a client account to its account. Boston Partners generally does not permit the selling of a security from one client account and the purchasing of the same security in another client account if Boston Partners has a principal interest in one of the accounts at the time of the transaction. Additionally, Boston Partners requires that clients give consent by signing subscription agreements to purchase a pooled investment vehicle in which Boston Partners or a related entity has an interest.
  Cross Trades
Cross transactions between clients create an inherent conflict of interest because Boston Partners has a duty to obtain the most favorable price for both the selling client and the purchasing client. Boston Partners generally does not engage in cross trading, however Boston Partners has procedures to ensure that any cross trade is in the best interests of all clients.
  Affiliated Investments
Potential conflicts exist if Boston Partners directs client investments into affiliated vehicles in order to increase the size of these vehicles and thereby increase its compensation by (a) lowering overall expenses of the vehicle, some of which Boston Partners may have responsibility for; (b) permitting greater marketing of the vehicle which will generate greater fee revenue for Boston Partners; or (c) allowing Boston Partners or an affiliate to redeem its investment capital in such vehicle. To mitigate any detriment to the client, Boston Partners has product suitability procedures and will obtain a client’s consent prior to investing client assets in an affiliated vehicle.
  Proprietary Trading Opportunities
Employees are in a position to take investment opportunities for themselves or Boston Partners before such opportunities are executed on behalf of clients. Employees have a duty to advance Boston Partners’ client interests before Boston Partners
Statement of Additional Information – October 3, 2016 110

 

Table of Contents
  interests or their personal interests. Boston Partners must assure that employees do not favor their own or Boston Partners’ accounts. The Code includes procedures on ethical conduct and personal trading, including preclearance and blackout procedures, to which all employees are subject.
  Insider Trading/Non-Public Information
Employees are in a position to learn material nonpublic information. Such employees are in a position to trade in their personal accounts on such information, to the potential disadvantage of client accounts. The Code addresses insider trading including permissible activities. Employees certify, at least annually, that they are in compliance with the Code.
  Boston Partners periodically discusses securities which may be held in client accounts with external investment professionals when sourcing and analyzing investment ideas. These discussions may include but are not limited to economic factors, market outlook, sector and industry views, and general and/or specific information regarding securities. Discussion of specific securities creates a conflict which could disadvantage Boston Partners’ clients if the external parties were to act upon this information, including but not limited to front-running and scalping either particular securities or numerous securities in a similar sector to the extent such information is known about Boston Partners’ holdings. Boston Partners has policies prohibiting discussion of client investments for non-business purposes and has outlined permissible activities as well as certain other prohibitions when sourcing investment ideas for business purposes.
  Value-Added Investors
A senior executive from a public company or a private company that is a hedge fund, broker-dealer, investment adviser, or investment bank, (collectively “VAIs”), may invest in Boston Partners’ private funds. A conflict exists if Boston Partners invests in companies affiliated with a VAI or if a VAI who works at a private company provide material non-public information to Boston Partners or vice versa. Both of these conflicts raise issues with respect to information sharing. Boston Partners has procedures to: i) identify these individuals through its annual outside businesses questionnaire, its annual compliance questionnaire, review of new account start-up documents, and its 5130 and 5131 questionnaires, and ii) monitor conflicts these persons present through its pre-trade compliance system and/or email surveillance.
  Selective Disclosure
Selective disclosure occurs when material information is given to a single investor, or a limited group of investors, and not to all investors at the same time. This practice may allow one set of investors to profit on undisclosed information prior to giving others the same opportunity. In order to prevent this conflict of interest, Boston Partners has procedures regarding the dissemination of account holdings.
  Valuation of Client Accounts
Because Boston Partners calculates its own advisory fees, it has an incentive to over-value such accounts to either increase the fees payable by the client, or to conceal poor performance for an incentive fee. Boston Partners has several safeguards in place to mitigate this conflict. Boston Partners has a policy for the valuation of securities. Boston Partners’ Operations Department (“Operations”) reconciles cash, assets, and prices for all client accounts with the client’s custodian bank’s records on a monthly basis. Finally the CD, periodically reviews client fee invoices.
  Representing Clients \t times, clients may request Boston Partners represent their interests in class action litigation, bankruptcies or other matters. Boston Partners’ expertise lies in investment management and has an inherent conflict of interest if cast in any other role. When possible, Boston Partners’ investment management agreements include provisions that Boston Partners will not act on behalf of the client in class actions, bankruptcies or matters of litigation.
  Outside Business Activities
An employee’s outside business activities may conflict with the employee’s duties to Boston Partners and its clients. Boston Partners requires all employees to disclose any outside employment to the CD, who, in conjunction with the employee’s supervisor and the Director of HR, will identify any potential conflicts. In the event that a resolution to the conflict cannot be reached, the employee may be asked to terminate either his outside employment or his position with Boston Partners.
  Business Gifts and Entertainment
Boston Partners employees periodically give or receive gifts from clients. Boston Partners employees host clients or receive entertainment provided by a client. Such gifts or entertainment may be considered efforts to gain unfair advantage. Boston Partners maintains a gifts and entertainment policy and has developed a “Q&A” guide for employees regarding certain types of gifts and entertainment. Generally, employees are not permitted to give or receive gifts of more than $100 in value, per person, per year. Entertainment that is normal or customary in the industry is considered appropriate. Employees should consult the CD if they are unsure about a particular gift or value of entertainment.
  Illegal or Unethical Behavior
Unethical or illegal conduct by employees damages Boston Partners’ ability to meet its fiduciary duties to clients. Employees are required to report to management any actual or suspected illegal or unethical conduct on the part of other employees of which they become aware or any situations in which they are concerned about the “best course of action.” In
Statement of Additional Information – October 3, 2016 111

 

Table of Contents
  addition, employees are required to certify annually that they are in compliance with this Manual. Regardless of whether a government inquiry occurs, Boston Partners views seriously any violation of this Manual. Disciplinary sanctions may be imposed on any employee committing a violation of this Manual.
  Proxy Voting
Boston Partners’ proxy voting authority for its clients, puts it in a position where its interests may conflict with the best interests of its clients when determining how to vote. Boston Partners has a proxy voting policy and has engaged an outside vendor to execute proxies according to this policy. Boston Partners has a procedure to handle conflicts of interest which may arise in voting client securities.
  Consulting Relationships
Boston Partners may purchase software, educational programs and peer group information from consulting firms that represent Boston Partners clients. Due to the lack of payment transparency, these relationships could give rise to improper activity on the part of the investment adviser or the consultant. Products purchased from consultants must serve a legitimate need for Boston Partners’ business and may not be acquired to influence a consultant’s recommendation of Boston Partners.
  Columbia Management: Like other investment professionals with multiple clients, a Fund’s portfolio manager(s) may face certain potential conflicts of interest in connection with managing both the Fund and other accounts at the same time. The Investment Manager and the Funds have adopted compliance policies and procedures that attempt to address certain of the potential conflicts that portfolio managers face in this regard. Certain of these conflicts of interest are summarized below.
  The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (performance fee accounts), may raise potential conflicts of interest for a portfolio manager by creating an incentive to favor higher fee accounts.
  Potential conflicts of interest also may arise when a portfolio manager has personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to the Investment Manager’s Code of Ethics and certain limited exceptions, the Investment Manager’s investment professionals do not have the opportunity to invest in client accounts, other than the funds.
  A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those Funds and/or accounts. The effects of this potential conflict may be more pronounced where Funds and/or accounts managed by a particular portfolio manager have different investment strategies.
  A portfolio manager may be able to select or influence the selection of the broker/dealers that are used to execute securities transactions for the Funds. A portfolio manager’s decision as to the selection of broker/dealers could produce disproportionate costs and benefits among the Funds and the other accounts the portfolio manager manages.
  A potential conflict of interest may arise when a portfolio manager buys or sells the same securities for a Fund and other accounts. On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, the Investment Manager’s trading desk may, to the extent consistent with applicable laws and regulations, aggregate the securities to be sold or bought in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a Fund or another account if a portfolio manager favors one account over another in allocating the securities bought or sold. The Investment Manager and its Participating Affiliates (including Threadneedle) may coordinate their trading operations for certain types of securities and transactions pursuant to personnel-sharing agreements or similar intercompany arrangements. However, typically the Investment Manager does not coordinate trading activities with a Participating Affiliate with respect to accounts of that Participating Affiliate unless such Participating Affiliate is also providing trading services for accounts managed by the Investment Manager. Similarly, a Participating Affiliate typically does not coordinate trading activities with the Investment Manager with respect to accounts of the Investment Manager unless the Investment Manager is also providing trading services for accounts managed by such Participating Affiliate. As a result, it is possible that the Investment Manager and its Participating Affiliates may trade in the same instruments at the same time, in the same or opposite direction or in different sequence, which could negatively impact the prices paid by the Fund on such instruments. Additionally, in circumstances where trading services are being provided on a coordinated basis for the Investment Manager’s accounts (including the Funds) and the accounts of one or more Participating Affiliates in accordance with applicable law, it is possible that the allocation opportunities available to the Funds may be decreased, especially for less actively traded securities, or orders may take longer to execute, which may negatively impact Fund performance.
  “Cross trades,” in which a portfolio manager sells a particular security held by a Fund to another account (potentially saving transaction costs for both accounts), could involve a potential conflict of interest if, for example, a portfolio manager is permitted to sell a security from one account to another account at a higher price than an independent third party would pay.
Statement of Additional Information – October 3, 2016 112

 

Table of Contents
  The Investment Manager and the Funds have adopted compliance procedures that provide that any transactions between a Fund and another account managed by the Investment Manager are to be made at a current market price, consistent with applicable laws and regulations.
  Another potential conflict of interest may arise based on the different investment objectives and strategies of a Fund and other accounts managed by its portfolio manager(s). Depending on another account’s objectives and other factors, a portfolio manager may give advice to and make decisions for a Fund that may differ from advice given, or the timing or nature of decisions made, with respect to another account. A portfolio manager’s investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a portfolio manager may buy or sell a particular security for certain accounts, and not for a Fund, even though it could have been bought or sold for the Fund at the same time. A portfolio manager also may buy a particular security for one or more accounts when one or more other accounts are selling the security (including short sales). There may be circumstances when a portfolio manager’s purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts, including the Funds.
  To the extent a Fund invests in underlying funds, a portfolio manager will be subject to the potential conflicts of interest described in Potential Conflicts of Interest – Columbia Management – Fund-of-Funds below.
  A Fund’s portfolio manager(s) also may have other potential conflicts of interest in managing the Fund, and the description above is not a complete description of every conflict that could exist in managing the Fund and other accounts. Many of the potential conflicts of interest to which the Investment Manager’s portfolio managers are subject are essentially the same or similar to the potential conflicts of interest related to the investment management activities of the Investment Manager and its affiliates.
  Columbia Management – Fund-of-Funds: Management of funds-of-funds differs from that of the other Funds. The portfolio management process is set forth generally below and in more detail in the Funds’ prospectus.
  Portfolio managers of the fund-of-funds may be involved in determining each funds-of-fund’s allocation among the three main asset classes (equity, fixed income and cash) and the allocation among investment categories within each asset class, as well as each funds-of-fund’s allocation among the underlying funds.
Because of the structure of the funds-of-funds, the potential conflicts of interest for the portfolio managers may be different than the potential conflicts of interest for portfolio managers who manage other Funds.
The Investment Manager and its affiliates may receive higher compensation as a result of allocations to underlying funds with higher fees.
In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the Fund. The Investment Manager has in place a Code of Ethics that is designed to address conflicts and that, among other things, imposes restrictions on the ability of the portfolio managers and other “investment access persons” to invest in securities that may be recommended or traded in the Fund and other client accounts.
To the extent a fund-of-funds invest in securities and instruments other than other Funds, the portfolio manager is subject to the potential conflicts of interest described in Potential Conflicts of Interest – Columbia Management above.
A Fund’s portfolio manager(s) also may have other potential conflicts of interest in managing the Fund, and the description above is not a complete description of every conflict that could exist in managing the fund and other accounts. Many of the potential conflicts of interest to which the Investment Manager’s portfolio managers are subject are essentially the same or similar to the potential conflicts of interest related to the Investment Management activities of the Investment Manager and its affiliates.
  Conestoga: Like other investment professionals with multiple clients, portfolio managers may face certain potential conflicts of interest in connection with managing both the portion of the Fund’s assets allocated to Conestoga (Conestoga’s Sleeve) and other accounts at the same time. Conestoga has adopted compliance policies and procedures that attempt to address certain of the potential conflicts that Conestoga’s portfolio managers face in this regard. Certain of those conflicts of interest are summarized below.
  The management of accounts with different advisory or sub-advisory fee rates and/or fee and expense structures may raise certain potential conflicts of interest for a portfolio manager by creating an incentive to favor higher fee, or higher profit margin accounts.
Statement of Additional Information – October 3, 2016 113

 

Table of Contents
  Potential conflicts of interest also may arise when a portfolio manager has personal investments in other accounts that may create an incentive to favor those accounts. A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. The effects of this potential conflict may be more pronounced where funds and/or accounts managed by a particular portfolio manager have different investment strategies.
  A portfolio manager may be able to select or influence the selection of the broker-dealers that are used to execute securities transactions for a fund. A portfolio manager’s decision as to the selection of broker-dealers could produce disproportionate costs and benefits among Conestoga’s Sleeve and the other accounts the portfolio manager manages.
  A potential conflict of interest may arise when a portfolio manager buys or sells the same securities for the Conestoga’s Sleeve and other accounts. On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of Conestoga’s Sleeve as well as other accounts, the Conestoga’s trading desk may, to the extent consistent with applicable laws and regulations, aggregate the securities to be sold or bought in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to Conestoga’s Sleeve or the Fund or another account if a portfolio manager favors one account over another in allocating the securities bought or sold.
  “Cross trades,” in which a portfolio manager sells a particular security held by Conestoga’s Sleeve to another account (potentially saving transaction costs for both accounts), could involve a potential conflict of interest if, for example, a portfolio manager is permitted to sell a security from one account to another account at a higher price than an independent third party would pay. The Investment Manager has adopted compliance procedures that provide that any transactions between the Fund and another account managed by Conestoga are to be made at a current market price, consistent with applicable laws and regulations.
  Another potential conflict of interest may arise based on the different investment objectives and strategies of Conestoga’s Sleeve and other accounts managed by its portfolio manager(s). Depending on another account’s objectives and other factors, a portfolio manager may give advice to and make decisions for Conestoga’s Sleeve that may differ from advice given, or the timing or nature of decisions made, with respect to another account. A portfolio manager’s investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a portfolio manager may buy or sell a particular security for certain accounts, and not for Conestoga’s Sleeve, even though it could have been bought or sold for Conestoga’s Sleeve at the same time. A portfolio manager also may buy a particular security for one or more accounts when one or more other accounts are selling the security. There may be circumstances when a portfolio manager’s purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts, including the Fund.
  The portfolio manager(s) also may have other potential conflicts of interest in managing Conestoga’s Sleeve, and the description above is not a complete description of every conflict that could exist in managing Conestoga’s Sleeve and other accounts. Many of the potential conflicts of interest to which the Conestoga’s portfolio managers are subject are essentially the same or similar to the potential conflicts of interest related to the investment management activities of the Investment Manager or other subadvisers of the Fund.
  DGHM: The portfolio managers’ management of “other accounts” may give rise to potential conflicts of interest in connection with their management of the investments of the portion of the Fund’s assets allocated to DGHM (DGHM’s Sleeve), on the one hand, and the investments of the other accounts, on the other. The other accounts include hedge funds, separately managed private clients and discretionary 401(k) accounts (“Other Accounts”). The Other Accounts might have similar investment objectives as the Fund, be compared to the same index as the Fund, or otherwise hold, purchase, or sell securities that are eligible to be held, purchased, or sold by DGHM’s Sleeve.
  Knowledge of the Timing and Size of Fund Trades . A potential conflict of interest may arise as a result of the portfolio managers’ day-to-day management of DGHM’s Sleeve. The portfolio managers know the size and timing of trades for DGHM’s Sleeve and the Other Accounts, and may be able to predict the market impact of the DGHM’s Sleeve trades. It is theoretically possible that the portfolio managers could use this information to the advantage of Other Accounts they manage and to the possible detriment of DGHM’s Sleeve, or vice versa.
  Investment Opportunities. DGHM provides investment supervisory services for a number of investment products that have varying investment guidelines. The same portfolio management team works across all investment products. Differences in the compensation structures of DGHM’s investment products may give rise to a conflict of interest by creating an incentive for DGHM to allocate the investment opportunities it believes might be the most profitable to the client accounts where it might benefit the most from the investment gains.
Statement of Additional Information – October 3, 2016 114

 

Table of Contents
  EAM: The portfolio manager is responsible for managing other accounts invested in the same strategy as the portion of the Fund’s assets allocated to EAM (EAM’s Sleeve). These other accounts include separately managed accounts for pension funds. In addition, other EAM portfolio managers manage accounts which have similar investment strategies and may invest in some of the same securities as EAM’s Sleeve or the Fund.
  From time to time, potential conflicts of interest may arise between the portfolio manager’s management of the investments of EAM’s Sleeve, on the one hand, and the management of other accounts, on the other. For example, an investment opportunity may be suitable for both EAM’s Sleeve and other accounts, but may not be available in sufficient quantities for both EAM’s Sleeve and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by EAM’s Sleeve and another account. Whenever decisions are made to buy or sell securities by EAM’s Sleeve and one or more of the other accounts simultaneously, EAM or the portfolio managers may aggregate the purchases and sales of the securities and will allocate the securities transactions in a manner that it believes to be equitable under the circumstances. As a result of the allocations, there may be instances when EAM’s Sleeve will not participate in a transaction that is allocated among other accounts or that may not be allocated the full amount of the securities sought to be traded. Another potential conflict may arise when a portfolio manager may have an incentive to allocate opportunities to an account where EAM and the portfolio manager have a greater financial incentive, such as a performance fee account.
  EAM has implemented specific policies and procedures ( e.g. , a code of ethics and trade allocation policies) that seek to address these potential conflicts.
  Loomis Sayles: Conflicts of interest may arise in the allocation of investment opportunities and the allocation of aggregated orders among the Funds and other accounts managed by the portfolio managers. A portfolio manager potentially could give favorable treatment to some accounts for a variety of reasons, including favoring larger accounts, accounts that pay higher fees, accounts that pay performance-based fees, accounts of affiliated companies and accounts in which the portfolio manager has an interest. Such favorable treatment could lead to more favorable investment opportunities or allocations for some accounts. Loomis Sayles makes investment decisions for all accounts (including institutional accounts, mutual funds, hedge funds and affiliated accounts) based on each account’s availability of other comparable investment opportunities and Loomis Sayles’ desire to treat all accounts fairly and equitably over time. Loomis Sayles maintains trade allocation and aggregation policies and procedures to address these potential conflicts. Conflicts of interest also may arise to the extent a portfolio manager short sells a stock in one client account but holds that stock long in other accounts, including the Funds, or sells a stock for some accounts while buying the stock for others, and through the use of “soft dollar arrangements,” which are discussed in Loomis Sayles’ Brokerage Allocation Policies and Procedures and Loomis Sayles’ Trade Aggregation and Allocation Policies and Procedures.
  Prudential : Like other investment advisers, Prudential is subject to various conflicts of interest in the ordinary course of its business. Prudential strives to identify potential risks, including conflicts of interest, that are inherent in its business, and conducts annual conflict of interest reviews. When actual or potential conflicts of interest are identified, Prudential seeks to address such conflicts through one or more of the following methods:
  elimination of the conflict;
  disclosure of the conflict; or
  management of the conflict through the adoption of appropriate policies, procedures or other mitigants.
  Prudential follows the policies of Prudential Financial on business ethics, personal securities trading by investment personnel, and information barriers. Prudential has adopted a code of ethics, allocation policies and conflicts of interest policies, among others, and has adopted supervisory procedures to monitor compliance with its policies. Prudential cannot guarantee, however, that its policies and procedures will detect and prevent, or result in the disclosure of, each and every situation in which a conflict may arise.
  Side-by-Side Management of Accounts and Related Conflicts of Interest. Prudential’s side-by-side management of multiple accounts can create conflicts of interest. Examples are detailed below, followed by a discussion of how Prudential addresses these conflicts.
  Performance Fees— Prudential manages accounts with asset-based fees alongside accounts with performance-based fees. This side-by-side management may be deemed to create an incentive for Prudential and its investment professionals to favor one account over another. Specifically, Prudential could be considered to have the incentive to favor accounts for which it receives performance fees, and possibly take greater investment risks in those accounts, in order to bolster performance and increase its fees.
  Affiliated accounts— Prudential manages accounts on behalf of its affiliates as well as unaffiliated accounts. Prudential could be considered to have an incentive to favor accounts of affiliates over others.
Statement of Additional Information – October 3, 2016 115

 

Table of Contents
  Large accounts—large accounts typically generate more revenue than do smaller accounts and certain of Prudential’s strategies have higher fees than others. As a result, a portfolio manager could be considered to have an incentive when allocating scarce investment opportunities to favor accounts that pay a higher fee or generate more income for Prudential.
  Long only and long/short accounts— Prudential manages accounts that only allow it to hold securities long as well as accounts that permit short selling. Prudential may, therefore, sell a security short in some client accounts while holding the same security long in other client accounts. These short sales could reduce the value of the securities held in the long only accounts. In addition, purchases for long only accounts could have a negative impact on the short positions.
  Securities of the same kind or class— Prudential may buy or sell for one client account securities of the same kind or class that are purchased or sold for another client at prices that may be different. Prudential may also, at any time, execute trades of securities of the same kind or class in one direction for an account and in the opposite direction for another account due to differences in investment strategy or client direction. Different strategies trading in the same securities or types of securities may appear as inconsistencies in Prudential’s management of multiple accounts side-by-side.
  Financial interests of investment professionals— Prudential investment professionals may invest in certain investment vehicles that it advises. Also, certain of these investment vehicles are options under the 401(k) and deferred compensation plans offered by Prudential Financial. In addition, the value of grants under Prudential’s long-term incentive plan is affected by the performance of certain client accounts. As a result, Prudential investment professionals may have financial interests in accounts managed by Prudential or that are related to the performance of certain client accounts.
  Non-discretionary accounts or models— Prudential provides non-discretionary investment advice and non-discretionary model portfolios to some clients and manages others on a discretionary basis. Trades in non-discretionary accounts could occur before, in concert with, or after Prudential executes similar trades in its discretionary accounts. The non-discretionary clients may be disadvantaged if Prudential delivers the model investment portfolio or investment advice to them after it initiates trading for the discretionary clients, or vice versa.
  How Prudential Addresses These Conflicts of Interest. Prudential has developed policies and procedures designed to address the conflicts of interest with respect to its different types of side-by-side management described above.
  The head of Prudential and its chief investment officer periodically review and compare performance and performance attribution for each client account within its various strategies.
  In keeping with Prudential’s fiduciary obligations, its policy with respect to trade aggregation and allocation is to treat all of its accounts fairly and equitably over time. Prudential’s trade management oversight committee, which generally meets quarterly, is responsible for providing oversight with respect to trade aggregation and allocation. Prudential’s compliance group reviews a sampling of new issue allocations and related documentation to confirm compliance with trade aggregation and allocation procedures. In addition, Prudential’s trade management oversight committee reviews forensic reports of new issue allocation throughout the year so that new issue allocation in each of its strategies is reviewed at least once during each year. This forensic analysis includes such data as: (i) the number of new issues allocated in the strategy; (ii) the size of new issue allocations to each portfolio in the strategy;(iii) the profitability of new issue transactions; and (iv) portfolio turnover. The procedures above are designed to detect patterns and anomalies in Prudential’s side-by-side management and trading so that it may assess and improve its processes.
  Prudential has policies and procedures that specifically address its side-by-side management of long/short and long only portfolios. These procedures address potential conflicts that could arise from differing positions between long/short and long only portfolios. In addition, lending opportunities with respect to securities for which the market is demanding a slight premium rate over normal market rates are allocated to long only accounts prior to allocating the opportunities to long/short accounts.
  Conflicts Related to Prudential’s Affiliations. As an indirect wholly-owned subsidiary of Prudential Financial, Prudential is part of a diversified, global financial services organization. Prudential is affiliated with many types of U.S. and non-U.S. financial service providers, including insurance companies, broker-dealers, commodity trading advisors, commodity pool operators and other investment advisers. Some of its employees are officers of some of these affiliates.
  Conflicts Arising Out of Legal Restrictions. Prudential may be restricted by law, regulation or contract as to how much, if any, of a particular security it may purchase or sell on behalf of a client, and as to the timing of such purchase or sale. These restrictions may apply as a result of its relationship with Prudential Financial and its other affiliates. Prudential does not purchase securities issued by Prudential Financial for client accounts. In addition, Prudential’s holdings of a security on behalf of its clients may, under some SEC rules, be aggregated with the holdings of that security by other Prudential Financial affiliates. These holdings could, on an aggregate basis, exceed certain reporting or ownership thresholds that are monitored, and Prudential may restrict purchases to avoid exceeding these thresholds. In addition, Prudential could receive material, non-public information with respect to a particular issuer and, as a result, be unable to execute transactions in securities of that issuer for its clients. For example, Prudential’s bank loan team often invests in private bank loans in
Statement of Additional Information – October 3, 2016 116

 

Table of Contents
  connection with which the borrower provides material, non-public information, resulting in restrictions on trading securities issued by those borrowers. Prudential has procedures in place to carefully consider whether to intentionally accept material, non-public information with respect to certain issuers. Prudential is generally able to avoid receiving material, non-public information from its affiliates and other units within Prudential by maintaining information barriers. In some instances, it may create an isolated information barrier around a small number of its employees so that material, non-public information received by such employees is not attributed to the rest of Prudential.
  Conflicts Related to Outside Business Activity. From time to time, certain of Prudential employees or officers may engage in outside business activity, including outside directorships. Any outside business activity is subject to prior approval pursuant to Prudential’s personal conflicts of interest and outside business activities policy. Actual and potential conflicts of interest are analyzed during such approval process. Prudential could be restricted in trading the securities of certain issuers in client portfolios in the unlikely event that an employee or officer, as a result of outside business activity, obtains material, nonpublic information regarding an issuer. The executive chairman of Prudential serves on the board of directors of the operator of an electronic trading platform. Prudential has adopted procedures to address the conflict relating to trading on this platform. The procedures include independent monitoring by Prudential’s chief investment officer and chief compliance officer and reporting on Prudential’s use of this platform to the President of Prudential.
  Conflicts Related to Investment of Client Assets in Affiliated Funds. Prudential may invest client assets in funds that it manages or sub advises for an affiliate. Prudential may also invest cash collateral from securities lending transactions in these funds. These investments benefit both Prudential and its affiliate.
  PICA General Account. Because of the substantial size of the general account of The Prudential Insurance Company of America (PICA), trading by PICA’s general account, including Prudential’s trades on behalf of the account, may affect market prices. Although Prudential doesn’t expect that PICA’s general account will execute transactions that will move a market frequently, and generally only in response to unusual market or issuer events, the execution of these transactions could have an adverse effect on transactions for or positions held by other clients.
  Conflicts Related to Securities Holdings and Other Financial Interests
  Securities Holdings. Prudential, Prudential Financial, PICA’s general account and accounts of other affiliates of Prudential (collectively, affiliated accounts) hold public and private debt and equity securities of a large number of issuers and may invest in some of the same companies as other client accounts but at different levels in the capital structure. These investments can result in conflicts between the interests of the affiliated accounts and the interests of Prudential’s clients. For example: (i) Affiliated accounts can hold the senior debt of an issuer whose subordinated debt is held by Prudential’s clients or hold secured debt of an issuer whose public unsecured debt is held in client accounts. In the event of restructuring or insolvency, the affiliated accounts as holders of senior debt may exercise remedies and take other actions that are not in the interest of, or are adverse to, other clients that are the holders of junior debt. (ii) To the extent permitted by applicable law, Prudential may also invest client assets in offerings of securities the proceeds of which are used to repay debt obligations held in affiliated accounts or other client accounts. Prudential’s interest in having the debt repaid creates a conflict of interest. Prudential has adopted a refinancing policy to address this conflict. Prudential may be unable to invest client assets in the securities of certain issuers as a result of the investments described above.
  Conflicts Related to the Offer and Sale of Securities. Certain of Prudential’s employees may offer and sell securities of, and interests in, commingled funds that it manages or subadvises. There is an incentive for Prudential’s employees to offer these securities to investors regardless of whether the investment is appropriate for such investor since increased assets in these vehicles will result in increased advisory fees to it. In addition, such sales could result in increased compensation to the employee.
  Conflicts Related to Long-Term Compensation. The performance of many client accounts is not reflected in the calculation of changes in the value of participation interests under Prudential’s long-term incentive plan. This may be because the composite representing the strategy in which the account is managed is not one of the composites included in the calculation or because the account is excluded from a specified composite due to guideline restrictions or other factors. As a result of the long-term incentive plan, Prudential’s portfolio managers from time to time have financial interests related to the investment performance of some, but not all, of the accounts they manage. To address potential conflicts related to these financial interests, Prudential has procedures, including trade allocation and supervisory review procedures, designed to ensure that each of its client accounts is managed in a manner that is consistent with Prudential’s fiduciary obligations, as well as with the account’s investment objectives, investment strategies and restrictions. For example, Prudential’s chief investment officer reviews performance among similarly managed accounts with the head of Prudential on a quarterly basis.
  Other Financial Interests. Prudential and its affiliates may also have financial interests or relationships with issuers whose securities it invests in for client accounts. These interests can include debt or equity financing, strategic corporate relationships or investments, and the offering of investment advice in various forms. For example, Prudential may invest
Statement of Additional Information – October 3, 2016 117

 

Table of Contents
  client assets in the securities of issuers that are also its advisory clients. In addition, some of Prudential’s affiliates originate and/or service commercial mortgage loans that are sold to certain issuers of agency and private-label commercial mortgage-backed securities (CMBS) and serve as security for CMBS issued by them. The proceeds of CMBS offerings by such issuers may be used to pay the purchase price for commercial mortgage loans sold to such issuers by Prudential’s affiliates. Purchases of CMBS for Prudential’s advisory clients may be viewed as supporting the business of the sponsors of the CMBS who acquire mortgages from Prudential’s affiliates. In addition, the commercial mortgage loans sold by Prudential’s affiliates are typically sold on a servicing retained basis, which means one of Prudential’s affiliates (an “affiliated servicer”) may provide certain services with respect to the mortgage loans for compensation. As a result, these commercial mortgage loans will typically be serviced by Prudential’s affiliated servicer for the life of the CMBS deal or until the deal or the specific commercial mortgage matures or is terminated. In the event that a dispute arises with respect to an affiliate’s origination or servicing of a commercial mortgage loan in a CMBS trust, the affiliate’s positions and efforts may be contrary to the interests of holders of the CMBS. Unless prohibited by applicable law, Prudential may invest assets of clients in CMBS secured by commercial mortgage loans originated and/or serviced by Prudential’s affiliates. In order to mitigate the conflicts of interest related to purchases of these CMBS, Prudential will not invest in CMBS offerings for unaffiliated clients in the primary or secondary market where commercial mortgage loans contributed by Prudential’s affiliates exceed 25% of the commercial mortgage loans backing such CMBS at the time of purchase. The activities of these affiliates restrict the universe of CMBS that Prudential is able to purchase for client accounts.
  In general, conflicts related to the securities holdings and financial interests described above are addressed by the fact that Prudential makes investment decisions for each client independently considering the best economic interests of such client.
  Conflicts Related to Valuation and Fees.
  When client accounts hold illiquid or difficult to value investments, Prudential faces a conflict of interest when making recommendations regarding the value of such investments since its management fees are generally based on the value of assets under management. Prudential believes that its valuation policies and procedures mitigate this conflict effectively and enable it to value client assets fairly and in a manner that is consistent with the client’s best interests.
  Conflicts Related to Securities Lending Fees
  When Prudential manages a client account and also serves as securities lending agent for the account, it could be considered to have the incentive to invest in securities that would yield higher securities lending rates. This conflict is mitigated by the fact that Prudential’s advisory fees are generally based on the value of assets in a client’s account. In addition, Prudential’s securities lending function has a separate reporting line to its chief operating officer (rather than its chief investment officer).
  TCW: TCW’s portfolio managers could favor one account over another in allocating new investment opportunities that have limited supply, such as (by way of example but not limitation) initial public offerings and private placements. If, for example, an initial public offering that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment performance than other accounts that did not receive an allocation of a particular initial public offering.
  A TCW portfolio manager could favor one account over another in the order in which trades for the accounts are placed. If a TCW portfolio manager decides to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for accounts that make subsequent purchases or sales to receive a less favorable price. When a TCW portfolio manager intends to trade the same security on the same day for more than one account, the trades typically are “bunched,” which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts for which bunching may not be possible for contractual reasons. Circumstances may also arise in which the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the TCW portfolio manager will place the order in a manner intended to result in as favorable a price as possible for such clients.
  A TCW portfolio manager potentially could favor an account if that portfolio manager’s compensation is tied to the performance of that account to a greater degree than other accounts managed by the TCW portfolio manager. If, for example, the TCW portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this purpose, the TCW portfolio manager may have a financial incentive to seek to have the accounts that determine the portfolio manager’s bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if TCW receives a performance-based advisory fee from an account, the
Statement of Additional Information – October 3, 2016 118

 

Table of Contents
  TCW portfolio manager may have an incentive to favor that account, whether or not the performance of that account directly determines the portfolio manager’s compensation. This structure may create inherent pressure to allocate investments having a greater potential for higher returns to those accounts with higher performance fees.
  A portfolio manager may have an incentive to favor an account if the TCW portfolio manager has a beneficial interest in the account, in order to benefit a large client or to compensate a client that had poor returns. For example, if the TCW portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the TCW portfolio manager would have an economic incentive to favor the account in which the portfolio manager held an interest.
  TCW determines which broker to use to execute each order, consistent with its duty to seek best execution, and aggregates like orders where it believes doing so is beneficial to its client accounts. However, with respect to certain separate accounts, TCW may be limited by the clients or other constraints with respect to the selection of brokers or it may be instructed to direct trades through particular brokers. In these cases, TCW may place separate, non-simultaneous transactions for the Core Fixed Income and U.S. Fixed Income Funds and another account which may temporarily affect the market price of the security or the execution of the transaction to the detriment of one or the other.
  If different accounts have materially and potentially conflicting investment objectives or strategies, a conflict of interest could arise. For example, if a TCW portfolio manager purchases a security for one account and sells the same security short for another account, such trading pattern may disadvantage either the account that is long or short. In making portfolio manager assignments, TCW seeks to avoid such potentially conflicting situations. However, where a TCW portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security.
  TCW has in place a Code of Ethics designed to minimize conflicts of interest between clients and its investment personnel. TCW also reviews potential conflicts of interest through its Trading and Allocation Committee.
  Threadneedle: Threadneedle portfolio managers may manage one or more mutual funds as well as other types of accounts, including proprietary accounts, separate accounts for institutions, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicle whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. In addition, a portfolio manager’s responsibilities at Threadneedle include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that he/she manages versus communicating his/her analyses to other portfolio managers concerning securities that he/she follows as an analyst.
  Threadneedle has a fiduciary responsibility to all of the clients for which it manages accounts. Threadneedle seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. Threadneedle has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients.
  Water Island: The fact that the portfolio managers serve as both portfolio managers of the portion of the Fund’s assets allocated to Water Island (Water Island’s Sleeve) and the other account creates the potential for conflicts of interest. However, Water Island does not believe that their overlapping responsibilities or the various elements of their compensation present any material conflict of interest for the following reasons:
Water Island’s Sleeve and the other account are similarly managed;
Water Island follows strict and detailed written allocation procedures designed to allocate securities purchases and sales between the Funds and the other account in a fair and equitable manner;
Water Island has adopted policies limiting the ability of the portfolio managers to cross trade securities between Water Island’s Sleeve and other accounts; and
all allocations are subject to review by Water Island’s chief compliance officer.
Structure of Compensation
  Analytic Investors: Analytic Investors’ compensation structure for professional employees consists of an industry median base salary (based on independent industry information) and an annual discretionary bonus. Bonus amounts are determined
Statement of Additional Information – October 3, 2016 119

 

Table of Contents
  using the following factors: the overall success of Analytic Investors in terms of profitability; the overall success of the department or team; and an individual’s contribution to the team, based on goals established during the performance period. Compensation based on investment strategy performance is not tied to individual account performance, but rather to each strategy as a whole. Strategy performance information is based on pre-tax calculations for the prior calendar year. No portfolio manager is directly compensated a portion of an advisory fee based on the performance of a specific account. Portfolio managers’ base salaries are typically reviewed on an annual basis determined by each portfolio manager’s anniversary date of employment. Discretionary bonuses are determined annually, upon analysis of information from the prior calendar year. Analytic has granted equity interests to each employee of the firm. These equity interests entitle the employee to a certain share of Analytic’s net operating income (which is net of compensation expenses, including variable compensation) at year end. No single individual can hold more than 20% of the equity interests issued by Analytic and, in the aggregate, 60% of the equity interests issued will be held by investment team personnel.
  AQR : The compensation for each of the portfolio managers that are a Principal of AQR is in the form of distributions based on the net income generated by AQR and each Principal’s relative ownership in AQR. Net income distributions are a function of assets under management and performance of the funds and accounts managed by AQR. A Principal’s relative ownership in AQR is based on cumulative research, leadership and other contributions to AQR. There is no direct linkage between assets under management, performance and compensation. However, there is an indirect linkage in that superior performance tends to attract assets and thus increase revenues. Each portfolio manager is also eligible to participate in AQR’s 401(k) retirement plan which is offered to all employees of AQR.
  BMO: Compensation for BMO’s portfolio managers consists of base salary, which is monitored to ensure competitiveness in the external marketplace. In addition to base salary, portfolio managers have a portion of their compensation tied to the investment performance of client accounts. The formula for each professional varies according to their level of portfolio responsibility and seniority. Investment professionals also may receive bonuses of restricted share units or other units linked to the performance of the Bank of Montreal, the indirect owner of BMO Asset Management Corp.
  Boston Partners : All investment professionals receive a compensation package comprised of an industry competitive base salary and a discretionary bonus and long-term incentives. Through our bonus program, key investment professionals are rewarded primarily for strong investment performance.
  Typically, bonuses are based upon a combination of one or more of the following four criteria:
  1. Individual Contribution: an evaluation of the professional’s individual contribution based on the expectations established at the beginning of each year;
  2. Product Investment Performance: performance of the investment product(s) with which the individual is involved versus the pre-designed index, based on the excess return;
  3. Investment Team Performance: the financial results of the investment group; and
  4. Firm-wide Performance: the overall financial performance of Boston Partners.
  Boston Partners professional compensation consultants with asset management expertise to annually review our practices to ensure that they remain highly competitive. The firm offers a profit participation plan focused on the firm's investment professionals whereby participants receive the equivalent of an equity stake in the firm. The incentive plan provides for the issuance of restricted shares and options that vest over multi-year periods.
  Columbia Management : Portfolio manager direct compensation is typically comprised of a base salary, and an annual incentive award that is paid either in the form of a cash bonus if the size of the award is under a specified threshold, or, if the size of the award is over a specified threshold, the award is paid in a combination of a cash bonus, an equity incentive award, and deferred compensation. Equity incentive awards are made in the form of Ameriprise Financial restricted stock, or for more senior employees both Ameriprise Financial restricted stock and stock options. The investment return credited on deferred compensation is based on the performance of specified Columbia Funds, in most cases including the Columbia Funds the portfolio manager manages.
  Base salary is typically determined based on market data relevant to the employee’s position, as well as other factors including internal equity. Base salaries are reviewed annually, and increases are typically given as promotional increases, internal equity adjustments, or market adjustments.
  Annual incentive awards are variable and are based on (1) an evaluation of the employee’s investment performance and (2) the results of a peer and/or management review of the employee, which takes into account skills and attributes such as team participation, investment process, communication, and professionalism. Scorecards are used to measure performance of Columbia Funds and other accounts managed by the employee versus benchmarks and/or peer groups. Performance versus benchmark and peer group is generally weighted for the rolling one, three, and five year periods. One year performance is weighted 10%, three year performance is weighted 60%, and five year performance is weighted 30%.
Statement of Additional Information – October 3, 2016 120

 

Table of Contents
  Relative asset size is a key determinant for fund weighting on a scorecard. Typically, weighting would be proportional to actual assets. Consideration may also be given to performance in managing client assets in sectors and industries assigned to the employee as part of his/her investment team responsibilities, where applicable. For leaders who also have group management responsibilities, another factor in their evaluation is an assessment of the group’s overall investment performance.
  Equity incentive awards are designed to align participants’ interests with those of the shareholders of Ameriprise Financial. Equity incentive awards vest over multiple years, so they help retain employees.
  Deferred compensation awards are designed to align participants’ interests with the investors in the Columbia Funds and other accounts they manage. The value of the deferral account is based on the performance of Columbia Funds. Employees have the option of selecting from various Columbia Funds for their deferral account, however portfolio managers must allocate a minimum of 25% of their incentive awarded through the deferral program to the Columbia Fund(s) they manage. Deferrals vest over multiple years, so they help retain employees.
  Exceptions to this general approach to bonuses exist for certain teams and individuals. Funding for the bonus pool is determined by management and depends on, among other factors, the levels of compensation generally in the investment management industry taking into account investment performance (based on market compensation data) and both Ameriprise Financial and Columbia Management profitability for the year, which is largely determined by assets under management.
  For all employees the benefit programs generally are the same, and are competitive within the financial services industry. Employees participate in a wide variety of plans, including options in Medical, Dental, Vision, Health Care and Dependent Spending Accounts, Life Insurance, Long Term Disability Insurance, 401(k), and a cash balance pension plan.
  Conestoga: Each of the Fund’s portfolio managers is a partner of Conestoga. As such, each portfolio manager receives a share of Conestoga’s annual profits, as specified in the manager’s partnership agreement with Conestoga, from Conestoga’s management of the Fund and all other accounts.
  DGHM: The portfolio managers’ compensation varies with the general success of the firm. Each portfolio manager’s compensation consists of a fixed annual salary, plus additional remuneration based on assets under management. The portfolio managers’ compensation is not directly linked to the performance of the Fund or other accounts managed by the firm, although positive performance and growth in managed assets are factors that may contribute to distributable profits and assets under management.
  EAM: The portfolio manager’s compensation is comprised of a base salary, a revenue allocation and firm profit allocation. The salary is in-line with industry specific benchmarks. The revenue allocation is based on firm-wide revenue while the profit allocation is based on firm-wide profitability. There is no direct linkage between performance and compensation, however, there is an indirect linkage as superior performance tends to attract and retain assets and consequently increase revenues and profitability.
  Loomis Sayles: Loomis Sayles believes that portfolio manager compensation should be driven primarily by the delivery of consistent and superior long-term performance for its clients. Portfolio manager compensation is made up primarily of three main components: base salary, variable compensation and a long-term incentive program. Although portfolio manager compensation is not directly tied to assets under management, a portfolio manager’s base salary and/or variable compensation potential may reflect the amount of assets for which the manager is responsible relative to other portfolio managers. Loomis Sayles also offers a profit sharing plan. Base salary is a fixed amount based on a combination of factors, including industry experience, firm experience, job performance and market considerations. Variable compensation is an incentive-based component and generally represents a significant multiple of base salary. Variable compensation is based on four factors: investment performance, profit growth of the firm, profit growth of the manager’s business unit and team commitment. Investment performance is the primary component of total variable compensation and generally represents at least 70% of the total for equity managers. The other three factors are used to determine the remainder of variable compensation, subject to the discretion of the Chief Investment Officer (“CIO”) and senior management. The CIO and senior management evaluate these other factors annually.
  While mutual fund performance and asset size do not directly contribute to the compensation calculation, investment performance for equity managers is measured by comparing the performance of Loomis Sayles’ institutional composites to the performance of the applicable Morningstar peer group and/or the Lipper universe. Generally speaking the performance of the respective product’s fund is compared against the applicable Morningstar peer group and/or the Lipper universe. If the majority of the assets in the product are contained in the mutual fund that comparison will drive compensation. To the extent the majority of assets managed in the fund strategy are for institutional separate accounts, the Evestment Alliance institutional peer group will also be used as an additional comparison. In situations where substantially all of the assets for the strategy are institutional, the institutional peer group will be used as the primary method of comparison. A manager’s
Statement of Additional Information – October 3, 2016 121

 

Table of Contents
  performance relative to the peer group for the 1, 3 and 5 year periods (or since the start of the manager’s tenure, if shorter) is used to calculate the amount of variable compensation payable due to performance. The 1 year may be eliminated for some products (large cap growth, all cap growth, and global growth). Longer-term performance (3 and 5 (or 10 years for large cap growth, all cap growth, and global growth) years or since the start of the manager’s tenure, if shorter) combined is weighted more than shorter-term performance (1 year or 3 years for large cap growth, all cap growth, and global growth). In addition, the performance measurement for equity compensation incorporates a consistency metric using longer term (3, 5, etc.) rolling return compared to the peer group over a sustained measurement period (5, 7, etc. years). The exact method may be adjusted to a product’s particular style. If a manager is responsible for more than one product, the rankings of each product are weighted based on relative revenue of accounts represented in each product. The external benchmark used as a secondary comparison is the Russell 1000 Growth Index.
  Loomis Sayles also uses either an institutional peer group as a point of comparison for equity manager performance or a Morningstar universe and/or the Lipper universe. In cases where the institutional peer groups are used, Loomis Sayles believes they represent the most competitive product universe while closely matching the investment styles offered by the Loomis Sayles fund.
  In addition to the compensation described above, portfolio managers may receive additional compensation based on the overall growth of their strategies.
  Most mutual funds are not included in the Loomis Sayles’ strategy composites, so unlike managed accounts, fund performance and asset size in those cases would not directly contribute to this calculation. However, each fund managed by Loomis Sayles employs strategies endorsed by Loomis Sayles and fits into the product category for the relevant investment style. Loomis Sayles may adjust compensation if there is significant dispersion among the returns of the composite and accounts not included in the composite.
  Loomis Sayles has developed and implemented two distinct long-term incentive plans to attract and retain investment talent. The plans supplement existing compensation. The first plan has several important components distinguishing it from traditional equity ownership plans:
the plan grants units that entitle participants to an annual payment based on a percentage of company earnings above an established threshold;
upon retirement, a participant will receive a multi-year payout for his or her vested units; and
participation is contingent upon signing an award agreement, which includes a non-compete covenant.
The second plan is similarly constructed although the participants’ annual participation in company earnings is deferred for two years from the time of award and is only payable if the portfolio manager remains at Loomis Sayles. In this plan, there are no post-retirement payments or non-compete covenants.
Senior management expects that the variable compensation portion of overall compensation will continue to remain the largest source of income for those investment professionals included in the plan. The plan is initially offered to portfolio managers and over time the scope of eligibility is likely to widen. Management has full discretion on what units are issued and to whom.
Portfolio managers also participate in the Loomis Sayles profit sharing plan, in which Loomis Sayles makes a contribution to the retirement plan of each employee based on a percentage of base salary (up to a maximum amount). The portfolio managers also participate in the Loomis Sayles defined benefit pension plan, which applies to all Loomis Sayles employees who joined the firm prior to May 3, 2003. The defined benefit is based on years of service and base compensation (up to a maximum amount).
  Prudential : The base salary of an investment professional Prudential is based on market data relative to similar positions as well as the past performance, years of experience and scope of responsibility of the individual. Incentive compensation, including the annual cash bonus, the long-term equity grant and grants under Prudential’s long-term incentive plan, is primarily based on such person’s contribution to Prudential’s goal of providing investment performance to clients consistent with portfolio objectives, guidelines and risk parameters and market-based data such as compensation trends and levels of overall compensation for similar positions in the asset management industry. In addition, an investment professional’s qualitative contributions to the organization are considered in determining incentive compensation. Incentive compensation is not solely based on the performance of, or value of assets in, any single account or group of client accounts.
  An investment professional’s annual cash bonus is paid from an annual incentive pool. The pool is developed as a percentage of Prudential’s operating income and is refined by business metrics, which may include:
  - business development initiatives, measured primarily by growth in operating income;
  - the number of investment professionals receiving a bonus; and/or
Statement of Additional Information – October 3, 2016 122

 

Table of Contents
  - investment performance of portfolios: (i) relative to appropriate peer groups and/or (ii) as measured against relevant investment indices.
  Long-term compensation consists of Prudential Financial restricted stock and grants under the long-term incentive plan. Grants under the long-term incentive plan are participation interests in notional accounts with a beginning value of a specified dollar amount. The value attributed to these notional accounts increases or decreases over a defined period of time based, in part, on the performance of investment composites representing a number of Prudential’s most frequently marketed investment strategies. An investment composite is an aggregation of accounts with similar investment strategies. The long-term incentive plan is designed to more closely align compensation with investment performance and the growth of Prudential’s business. Both the restricted stock and participation interests are subject to vesting requirements.
  TCW: The overall objective of TCW’s compensation program for portfolio managers is to attract experienced and expert investment professionals and to retain them over the long-term. Compensation is comprised of several components which, in the aggregate, are designed to achieve these objectives and to reward the portfolio managers for their contributions to the successful performance of the accounts they manage. Portfolio managers are compensated through a combination of base salary, profit sharing based compensation (“ profit sharing ”), bonus and equity incentive participation in TCW’s parent company (“ equity incentives ”). Profit sharing and equity incentives generally represent most of the portfolio managers’ compensation. In some cases, portfolio managers are eligible for discretionary bonuses.
  Salary . Salary is agreed to with managers at time of employment and is reviewed from time to time. It does not change significantly and often does not constitute a significant part of the portfolio manager’s compensation.
  Profit Sharing . Profit sharing for investment professionals is based on net income relating to accounts in the investment strategy area for which the portfolio managers are responsible. In most cases, revenues are allocated to a pool and profit sharing compensation is allocated among members of the investment team after the deduction of certain expenses (including base salaries) related to the strategy group. The allocations are based on the investment professionals’ contributions to TCW and its clients, including qualitative and quantitative contributions. The profit sharing percentage used to compensate a portfolio manager for management of the fund is generally the same as that used to compensate portfolio managers for all other client accounts in the same strategy managed by MetWest or one of the other TCW-affiliated advisers (together, “ the TCW Group ”). In some cases, the pool includes revenues related to more than one equity or fixed income product where the portfolio managers work together as a team, in which case each participant in the pool is entitled to profit sharing derived from all the included products. In certain cases, a portfolio manager may also participate in a profit sharing pool that includes revenues from products besides the strategies offered in the fund, including alternative investment products; the portfolio manager would be entitled to participate in such pool where he or she supervises, is involved in the management of, or is associated with a group, other members of which manage, such products.
  Investment professionals are not directly compensated for generating performance fees. In some cases, the profit sharing percentage or pool may be increased by the relative pre-tax performance of the investment strategy composite returns, net of fees and expenses, to that of the benchmark. The measurement of performance relative to the benchmark can be based on single year or multiple year metrics, or a combination thereof. The benchmark used is the one associated with the fund managed by the portfolio manager as disclosed in the prospectus. Benchmarks vary from strategy to strategy but, within a given strategy, the same benchmark applies to all accounts, including the fund.
  Discretionary Bonus/Guaranteed Minimums . In general, portfolio managers do not receive discretionary bonuses. However, in some cases bonuses may be paid on a discretionary basis out of a department profit sharing pool, as determined by the supervisor(s) in the department. In other cases where portfolio managers do not receive profit sharing or where the company has determined the combination of salary and profit sharing does not adequately compensate the portfolio manager, discretionary bonuses may be paid by the TCW Group. Also, pursuant to contractual arrangements, some portfolio managers may be entitled to a mandatory bonus if the sum of their salary and profit sharing does not meet certain minimum thresholds.
  Equity Incentives . Many portfolio managers participate in equity incentives based on overall firm performance of the TCW Group and its affiliates, through ownership or participation in restricted unit plans that vest over time or unit appreciation plans of TCW’s parent company. The plans include the Fixed Income Retention Plan, Restricted Unit Plan and 2013 Equity Unit Incentive Plan.
  Under the Fixed Income Retention Plan, certain portfolio managers in the fixed income area were awarded cash and/or partnership units in TCW’s parent company, either on a contractually-determined basis or on a discretionary basis. Awards under this plan were made in or after 2010 vested over a period of time.
  Under the Restricted Unit Plan, certain portfolio managers in the fixed income and equity areas were awarded partnership units in the TCW’s parent company. Awards under this plan vest over time. Vesting is in part dependent on satisfaction of performance criteria.
Statement of Additional Information – October 3, 2016 123

 

Table of Contents
  Under the 2013 Equity Unit Incentive Plan, certain portfolio managers in the fixed income and equity areas are awarded options to acquire partnership units in the TCW’s parent company with a strike price equal to the fair market value of the option at the date of grant. The options granted under the plan are subject to vesting and other conditions.
  Other Plans and Compensation Vehicles . Portfolio managers may also elect to participate in the TCW Group’s 401(k) plan, to which they may contribute a portion of their pre—and post-tax compensation to the plan for investment on a tax-deferred basis.
  Threadneedle: Direct compensation is typically comprised of a base salary, and an annual incentive award that is paid either in the form of a cash bonus if the size of the award is under a specified threshold, or, if the size of the award is over a specified threshold, the award is paid in a combination of a cash bonus, an equity incentive award, and deferred compensation. Equity incentive awards are made in the form of Ameriprise Financial restricted stock, or for more senior employees both Ameriprise Financial restricted stock and stock options. The investment return credited on deferred compensation is based on the performance of specified Threadneedle funds, in most cases including the funds the portfolio manager manages.
  Base salary is typically determined based on market data relevant to the employee’s position, as well as other factors including internal equity. Base salaries are reviewed annually, and increases are typically given as promotional increases, internal equity adjustments, or market adjustments.
  Annual incentive awards and pool funding are variable and are designed to reward:
Investment performance, both at the individual and team levels
Client requirements, in particular the alignment with clients through a mandatory deferral into the company’s own products
Team cooperation and Values
Scorecards are used to measure performance of Threadneedle funds and other accounts managed by the employee. Prior to 2016, the primary measurement of performance was return versus the relevant benchmark on a 1- and 3-year basis, with a bias towards 3-year performance in order to incentivize delivery of longer-term performance. In order to provide an integrated global compensation framework to investment employees across all locations, in 2016 performance will be measured versus peer performance wherever appropriate, in addition to return versus benchmark. In addition, longer-term performance will be incorporated, using 1-year, 3-year, and 4-year performance in 2016, and 1-year, 3-year, 5-year performance from 2017 onwards, both weighted 10% on the 1-year, 60% on the 3-year, and 30% on the 4 or 5-year. Consideration may also be given to performance in managing client assets in sectors and industries assigned to the employee as part of his/her investment team responsibilities, where applicable.
Equity incentive awards are designed to align participants’ interests with those of the shareholders of Ameriprise Financial. Equity incentive awards vest over multiple years, so they help retain employees.
Deferred compensation awards are designed to align participants’ interests with the investors in the funds and other accounts they manage. The value of the deferral account is based on the performance of those funds. Employees have the option of selecting from various internal funds for their deferral account. Deferrals vest over multiple years, so they help to retain employees and to align their longer-term interests with those of the investor.
Exceptions to this general approach to bonuses exist for certain teams and individuals. Funding for the bonus pool is determined by management and overseen by the EMEA Remuneration Committee, and depends on, among other factors, the levels of compensation generally in the investment management industry taking into account investment performance (based on market compensation data) and both Ameriprise Financial and the asset management business profitability for the year, which is largely determined by assets under management.
For all employees the benefit programs generally are the same, and are competitive within the Financial Services Industry. Employees participate in a wide variety of plans, including options in Medical, Health Care, Life Insurance, Long Term Disability Insurance, and retirement savings plans.
  Water Island: The portfolio managers are compensated in various forms. The following table outlines the forms of compensation paid to the portfolio managers as of May 31, 2013.
    
Form of Compensation Source of Compensation Method Used to Determine Compensation
Salary/Bonus
(paid in cash)
Water Island Each portfolio manager receives compensation that is a combination of salary and a bonus based on the profitability of Water Island.
Statement of Additional Information – October 3, 2016 124

 

Table of Contents
The Administrator
Columbia Management Investment Advisers, LLC (which is also the Investment Manager) serves as administrator of the Funds.
Administrative Services Agreement
Prior to the Management Services Fee Effective Date listed in the Investment Management and Other Services – The Investment Manager and Subadvisers – Management Agreement Fee Rates section, each Fund, except AP - Directional Alternatives Fund, unless otherwise noted, was party to the Investment Management Services Agreement and the Administrative Services Agreement with the Investment Manager for advisory and administrative services, respectively. Each Fund party to these agreements paid the Investment Manager an annual fee for advisory services, as set forth in the Investment Management Services Agreement, and a separate fee for administrative services under the Administrative Services Agreement. See Investment Management and Other Services – The Investment Manager and Subadvisers – Investment Management Services Agreement for information with respect to the Investment Management Services Agreement. As of the Management Services Fee Effective Date, these services have been combined under the Management Agreement as described in the Investment Management and Other Services – The Investment Manager and Subadvisers section.
Services Provided Under the Administrative Services Agreement
Pursuant to the terms of the Administrative Services Agreement, the Investment Manager has agreed to provide all of the services necessary for, or appropriate to, the business and effective operation of each Fund that are not (a) provided by employees or other agents engaged by the Fund or (b) required to be provided by any person pursuant to any other agreement or arrangement with the Fund.
Administrative Services Fee
The administrative services fee is calculated as a percentage of the average daily net assets of each Fund and is paid monthly at the annual rates as set forth in the Administrative Services Agreement.
Administrative Services Fees Paid. The table below shows the total administrative services fees paid by each Fund under the Administrative Services Agreement for the last three fiscal periods. Amounts shown for each Fund's most recent fiscal period, beginning with the Funds with a fiscal period ending March 31, 2016, are for the period from the first day of the applicable fiscal year through the Fund's Management Services Fee Effective Date (see Management Agreement Fee Schedule ). The table is organized by fiscal year end.
Administrative Services Fees
  Administrative Services Fees
  2016 2015 2014
For Funds with fiscal period ending January 31
Diversified Real Return Fund $2,208 $2,157 (a) N/A
For Funds with fiscal period ending March 31
AP – Growth Fund 392,250 938,124 $788,903
Pacific/Asia Fund 71,076 214,928 246,870
Select Large Cap Growth Fund 1,095,275 3,122,847 2,844,401
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (b) N/A N/A N/A
Bond Fund 142,968 492,269 648,503
Corporate Income Fund 314,329 942,806 923,677
Multi-Asset Income Fund 18,480 4,748 (c) N/A
Small Cap Value Fund I 243,472 930,547 1,100,362
Total Return Bond Fund 705,786 2,202,786 2,670,960
U.S. Treasury Index Fund 403,250 976,955 946,749
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 88,584 149,017 14,195
Alternative Beta Fund 48,241 43,808 (d) N/A
Diversified Absolute Return Fund 29,280 23,286 (e) N/A
Statement of Additional Information – October 3, 2016 125

 

Table of Contents
  Administrative Services Fees
  2016 2015 2014
Dividend Income Fund $1,293,409 $3,998,779 $3,874,276
HY Municipal Fund 192,012 542,532 514,436
  2015 2014 2013
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund 305,465 298,874 336,536
Large Cap Growth Fund 1,688,311 1,574,915 1,399,749
Tax-Exempt Fund 2,394,304 2,389,135 2,709,174
U.S. Social Bond Fund 3,773 (f) N/A N/A
Ultra Short Term Bond Fund 0 0 0
For Funds with fiscal period ending August 31
AP – Alternatives Fund 609,318 580,432 447,084
AP – Small Cap Equity Fund 638,594 524,224 389,342
AP – Total Return Bond Fund 2,809,022 2,434,558 2,681,881
Balanced Fund 1,412,144 1,003,963 763,256
Contrarian Core Fund 2,679,269 1,980,665 1,391,706
Disciplined Small Core Fund 727,538 915,159 801,561
Emerging Markets Fund 1,140,095 1,030,737 631,189
Global Dividend Opportunity Fund 490,647 527,055 460,691
Global Energy and Natural Resources Fund 181,053 228,506 257,079
Global Technology Growth Fund 0 0 0
Greater China Fund 117,428 109,539 168,613
Mid Cap Growth Fund 1,201,473 1,364,213 1,226,218
Small Cap Growth Fund I 540,729 989,666 894,140
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 111,085 120,529 141,313
AMT-Free Intermediate Muni Bond Fund 1,364,016 1,327,108 1,606,395
AMT-Free MA Intermediate Muni Bond Fund 202,872 208,051 242,345
AMT-Free NY Intermediate Muni Bond Fund 186,753 177,279 212,901
CA Tax-Exempt Fund 331,278 316,431 354,853
NY Tax-Exempt Fund 124,233 119,403 133,193
Strategic Income Fund 1,322,802 1,406,311 1,673,890
For Funds with fiscal period ending December 31
Real Estate Equity Fund 325,962 324,853 351,085
(a) For the period from March 11, 2014 (commencement of operations) to January 31, 2015.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) For the period from March 27, 2015 (commencement of operations) to April 30, 2015.
(d) For the period from January 27, 2015 (commencement of operations) to May 31, 2015.
(e) For the period from February 19, 2015 (commencement of operations) to May 31, 2015.
(f) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
The Distributor
Columbia Management Investment Distributors, Inc. (the Distributor), 225 Franklin Street, Boston, MA 02110, an indirect wholly-owned subsidiary of Ameriprise Financial and an affiliate of the Investment Manager, serves as the principal underwriter and distributor for the continuous offering of shares of the Funds pursuant to a Distribution Agreement. The Distribution Agreement obligates the Distributor to use reasonable efforts to find purchasers for the shares of the Funds.
Statement of Additional Information – October 3, 2016 126

 

Table of Contents
Distribution Obligations
Pursuant to the Distribution Agreement, the Distributor, as agent, sells shares of the Funds on a continuous basis and transmits purchase and redemption orders that it receives to the Trust or the Transfer Agent, or their designated agents. Additionally, the Distributor has agreed to use reasonable efforts to solicit orders for the sale of shares and to undertake advertising and promotion as it believes appropriate in connection with such solicitation. Pursuant to the Distribution Agreement, the Distributor, at its own expense, finances those activities as it deems reasonable and which are primarily intended to result in the sale of shares of the Funds, including, but not limited to, advertising, compensation of underwriters, dealers and sales personnel, the printing and mailing of prospectuses to other than existing shareholders, and the printing and mailing of sales literature. The Distributor, however, may be compensated or reimbursed for all or a portion of such expenses to the extent permitted by a Distribution Plan adopted by the Trust pursuant to Rule 12b-1 under the 1940 Act. See Investment Management and Other Services – Distribution and/or Servicing Plans for more information about the share classes for which the Trust has adopted a Distribution Plan.
See Investment Management and Other Services – Other Roles and Relationships of Ameriprise Financial and its Affiliates – Certain Conflicts of Interest for more information about conflicts of interest, including those that relate to the Investment Manager and its affiliates.
The Distribution Agreement became effective with respect to each Fund after approval by its Board, and, after an initial two-year period, continues from year to year, provided that such continuation of the Distribution Agreement is specifically approved at least annually by the Board, including its Independent Trustees. The Distribution Agreement terminates automatically in the event of its assignment, and is terminable with respect to each Fund at any time without penalty by the Trust (by vote of the Board or by vote of a majority of the outstanding voting securities of the Fund) or by the Distributor on 60 days’ written notice.
Underwriting Commissions Paid by the Funds
The Distributor received commissions and other compensation for its services as reflected in the following charts, which show amounts paid to the Distributor, as well as amounts the Distributor retained, after paying commissions, for the three most recently completed fiscal years.
Sales Charges Paid to, and Retained by, Distributor
  Sales Charges Paid to Distributor Amount Retained by Distributor
After Paying Commissions
Fund 2016 2015 2014 2016 2015 2014
For Funds with fiscal period ending January 31
Diversified Real Return Fund $0 $0 (a) N/A $0 $0 (a) N/A
For Funds with fiscal period ending March 31
AP – Growth Fund 0 0 $0 0 0 $0
Pacific/Asia Fund 17,791 7,352 5,038 2,639 1,015 1,169
Select Large Cap Growth Fund 1,022,570 1,136,315 1,763,649 164,470 234,232 256,761
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (b) N/A N/A N/A N/A N/A N/A
Bond Fund 67,551 42,181 39,971 11,628 6,802 7,616
Corporate Income Fund 36,891 80,500 141,793 6,685 12,942 30,440
Multi-Asset Income Fund 471 0 (c) N/A 71 0 (c) N/A
Small Cap Value Fund I 57,953 33,869 43,299 8,670 6,117 7,868
Total Return Bond Fund 240,913 279,465 262,066 38,295 47,107 50,390
U.S. Treasury Index Fund 2,677 14,959 23,853 2,677 3,658 7,073
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 368,923 616,767 8,014 75,668 89,399 1,168
Alternative Beta Fund 48,909 9,733 (d) N/A 7,683 1,415 (d) N/A
Diversified Absolute Return Fund 3,037 0 (e) N/A 410 0 (e) N/A
Dividend Income Fund 1,845,108 1,603,065 2,273,504 292,895 263,988 386,812
HY Municipal Fund 244,719 361,055 157,293 46,510 58,286 26,423
Statement of Additional Information – October 3, 2016 127

 

Table of Contents
  Sales Charges Paid to Distributor Amount Retained by Distributor
After Paying Commissions
  2015 2014 2013 2015 2014 2013
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund $72,678 $97,659 $119,800 $11,662 $19,906 $28,249
Large Cap Growth Fund 1,005,649 753,732 797,355 150,091 118,220 127,544
Tax-Exempt Fund 1,557,740 1,198,509 2,021,887 239,816 192,558 329,037
U.S. Social Bond Fund 0 (f) N/A N/A 0 (f) N/A N/A
Ultra Short Term Bond Fund N/A N/A N/A N/A N/A N/A
For Funds with fiscal period ending August 31
AP – Alternatives Fund 0 0 0 0 0 0
AP – Small Cap Equity Fund 0 0 0 0 0 0
AP – Total Return Bond Fund 0 0 0 0 0 0
Balanced Fund 6,281,355 3,027,922 1,853,350 951,730 455,972 275,877
Contrarian Core Fund 4,190,663 2,420,284 1,287,465 612,550 386,442 205,171
Disciplined Small Core Fund 57,817 134,084 80,922 12,448 20,682 13,124
Emerging Markets Fund 223,116 298,791 258,706 33,697 47,106 39,551
Global Dividend Opportunity Fund 90,766 114,351 137,131 14,294 17,962 21,723
Global Energy and Natural Resources Fund 319,897 130,325 106,922 49,263 20,711 16,832
Global Technology Growth Fund 509,917 157,172 54,778 74,714 24,452 11,745
Greater China Fund 112,545 42,848 39,470 21,019 8,058 12,683
Mid Cap Growth Fund 317,206 324,615 170,360 48,677 51,046 31,017
Small Cap Growth Fund I 29,677 37,109 19,592 4,679 6,056 4,114
Value and Restructuring Fund 32,581 32,716 34,462 5,548 5,658 6,542
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 12,062 8,733 14,854 2,755 1,346 3,081
AMT-Free Intermediate Muni Bond Fund 148,524 123,677 164,871 29,051 21,649 34,376
AMT-Free MA Intermediate Muni Bond Fund 11,664 23,261 16,645 2,118 3,824 5,028
AMT-Free NY Intermediate Muni Bond Fund 21,110 24,769 32,757 4,309 4,129 13,798
CA Tax-Exempt Fund 143,676 140,634 181,538 23,774 25,042 36,350
NY Tax-Exempt Fund 60,483 92,518 96,722 9,753 15,649 16,381
Strategic Income Fund 1,355,201 764,465 1,347,525 219,886 136,566 270,392
For Funds with fiscal period ending December 31
Real Estate Equity Fund 115,646 148,666 189,469 23,378 24,627 30,912
(a) For the period from March 11, 2014 (commencement of operations) to January 31, 2015.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) For the period from March 27, 2015 (commencement of operations) to April 30, 2015.
(d) For the period from January 27, 2015 (commencement of operations) to May 31, 2015.
(e) For the period from February 19, 2015 (commencement of operations) to May 31, 2015.
(f) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
Part of the sales charge may be paid to selling dealers who have agreements with the Distributor. The Distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. See the prospectus for amounts retained by Selling Agents as a percentage of the offering price.
Distribution and/or Servicing Plans
The Trustees have adopted distribution and/or shareholder servicing plans for certain share classes. See the cover of this SAI for the share classes offered by the Funds.
Statement of Additional Information – October 3, 2016 128

 

Table of Contents
The table below shows the annual distribution and/or services fees (payable monthly and calculated based on an annual percentage of average daily net assets) and the combined amount of such fees applicable to each share class. The Trust is not aware as to what amount, if any, of the distribution and service fees paid to the Distributor were, on a Fund-by-Fund basis, used for advertising, printing and mailing of prospectuses to other than current shareholders, compensation to broker-dealers, compensation to sales personnel, or interest, carrying or other financing charges.
  Distribution Fee Service Fee Combined Total
Class A up to 0.10% 0.25% Up to 0.25% (a)(b)
Class A for Active Portfolio Funds up to 0.25% up to 0.25% 0.25% (c)
Class B 0.75% 0.25% 1.00% (b)
Class C 0.75% 0.25% 1.00% (b)(d)
Class E 0.10% 0.25% 0.35%
Class F 0.75% 0.25% 1.00%
Class I None None None
Class K None None (e) None (e)
Class R 0.50% (f) 0.50%
Class R4 None None None
Class R5 None None None
Class T None 0.50% (g) 0.50% (g)
Class W up to 0.25% up to 0.25% 0.25%
Class Y None None None
Class Z None None None
Shares of Ultra Short Term Bond Fund None None None
(a) As shown in the table below, the maximum distribution and service fees of Class A shares varies among the Funds.
    
Funds Class A
Distribution Fee
Class A
Service Fee
Class A
Combined Total
Adaptive Risk Allocation Fund, Alternative Beta Fund, AMT-Free CT Intermediate Muni Bond Fund, AMT-Free MA Intermediate Muni Bond Fund, AMT-Free NY Intermediate Muni Bond Fund, Bond Fund, CA Tax-Exempt Fund, Corporate Income Fund, Diversified Absolute Return Fund, Diversified Real Return Fund; Emerging Markets Fund, Global Dividend Opportunity Fund, Global Energy and Natural Resources Fund, Greater China Fund, Multi-Asset Income Fund, NY Tax-Exempt Fund, Pacific/Asia Fund, Select Large Cap Growth Fund, Small Cap Value Fund I, Strategic Income Fund, U.S. Social Bond Fund and U.S. Treasury Index Fund 0.25% 0.25%
AMT-Free Intermediate Muni Bond Fund, HY Municipal Fund and Tax-Exempt Fund 0.20% 0.20%
AMT-Free OR Intermediate Muni Bond Fund, Balanced Fund, Contrarian Core Fund, Disciplined Small Core Fund, Dividend Income Fund, Global Technology Growth Fund, Large Cap Growth Fund, Mid Cap Growth Fund, Real Estate Equity Fund, Small Cap Growth Fund I and Total Return Bond Fund up to 0.10% up to 0.25% Up to 0.35%; these Funds may pay distribution and service fees up to a maximum of 0.35% of their average daily net assets attributable to Class A shares but currently limit such fees to an aggregate fee of not more than 0.25%
(b) The annual service fee for Class A, Class B and Class C shares of HY Municipal Fund, AMT-Free Intermediate Muni Bond Fund and Tax-Exempt Fund may equal up to 0.20% of the average daily net asset value of all shares of such Fund class. The annual distribution fee for Class B and Class C shares for AMT-Free Intermediate Muni Bond Fund shall be 0.65% of the average daily net assets of the Fund’s Class B and Class C shares. The Distributor has voluntarily agreed to waive the Service Fee for Class A, Class B and Class C shares of U.S. Treasury Index Fund so that the Service Fee does not exceed 0.15% annually. This arrangement may be modified by the Distributor at any time.
Statement of Additional Information – October 3, 2016 129

 

Table of Contents
(c) Class A shares of Active Portfolio Funds may pay distribution and service fees up to a maximum of 0.25% of the Fund’s average daily net assets attributable to Class A shares (comprised of up to 0.25% for distribution services and up to 0.25% for shareholder liaison services).
(d) The Distributor has voluntarily agreed to waive a portion of the distribution fee for Class C shares of the following Funds so that the distribution fee does not exceed the specified percentage annually: 0.45% for AMT-Free CT Intermediate Muni Bond Fund, AMT-Free MA Intermediate Muni Bond Fund, AMT-Free NY Intermediate Muni Bond Fund, AMT-Free OR Intermediate Muni Bond Fund, CA Tax-Exempt Fund and NY Tax-Exempt Fund; 0.60% for Corporate Income Fund; 0.65% for HY Municipal Fund and Tax-Exempt Fund; and 0.70% for U.S. Treasury Index Fund. These arrangements may be modified or terminated by the Distributor at any time.
(e) Under a Plan Administration Services Agreement, the Funds’ Class K shares pay for plan administration services. These fees for Class K shares are not paid pursuant to a Rule 12b-1 plan. See Investment Management and Other Services – Other Services Provided – Plan Administration Services for more information.
(f) Class R shares pay a distribution fee pursuant to a Fund’s distribution (Rule 12b-1) plan for Class R shares. The Funds do not have a shareholder service plan for Class R shares.
(g) The shareholder servicing fees for Class T shares are up to 0.50% of average daily net assets attributable to Class T shares for equity Funds and 0.40% for fixed income Funds. In general, the Funds currently limit such fees to a maximum of 0.25% for equity Funds and 0.15% for fixed income Funds. These fees for Class T shares are not paid pursuant to a Rule 12b-1 plan. See Class T Shares Shareholder Service Fees below for more information.
If you maintain shares of a Fund directly with the Fund, without working directly with a financial advisor or Selling Agent, distribution and service fees, as applicable, are retained by the Distributor as payment or reimbursement for incurring certain distribution and shareholder service related expenses.
Over time, these distribution and/or shareholder service fees will reduce the return on your investment and may cost you more than paying other types of sales charges. The Fund will pay these fees to the Distributor and/or to eligible Selling Agents for as long as the distribution and/or shareholder servicing plans continue in effect. The Fund may reduce or discontinue payments at any time. Your Selling Agent may also charge you other additional fees for providing services to your account, which may be different from those described here.
The shareholder servicing plans permit the Funds to compensate or reimburse Servicing Agents for the shareholder services they have provided. The Distribution Plans permit the Funds to compensate or reimburse the Distributor and/or Selling Agents for activities or expenses primarily intended to result in the sale of the classes’ shares. Payments are made at an annual rate and paid monthly, as a percentage of average daily net assets, set from time to time by the Board, and are charged as expenses of each Fund directly to the applicable share class. A substantial portion of the expenses incurred pursuant to these plans may be paid to affiliates of the Distributor and Ameriprise Financial.
Under the shareholder servicing plan, the Board must review, at least quarterly, a written report of the amounts paid under the servicing agreements and the purposes for which those expenditures were made. The initial term of the shareholder servicing plan is one year and it will continue in effect from year to year provided that its continuance is specifically approved at least annually by a majority of the Board, including a majority of the Independent Trustees who have no direct or indirect financial interest in the operation of the shareholder servicing plan or in any agreement related to it. Any material amendment to the shareholder servicing plan must be approved in the same manner. The shareholder servicing plan is terminable at any time with respect to the Funds by a vote of a majority of the Independent Trustees.
The Trustees believe the Distribution Plans could be a significant factor in the growth and retention of a Fund’s assets resulting in more advantageous expense ratios and increased investment flexibility which could benefit each class of Fund shareholders. The Distribution Plans will continue in effect from year to year so long as continuance is specifically approved at least annually by a vote of the Trustees, including the Independent Trustees. The Distribution Plans may not be amended to increase the fee materially without approval by vote of a majority of the outstanding voting securities of the relevant class of shares, and all material amendments of the Distribution Plans must be approved by the Trustees in the manner provided in the foregoing sentence. The Distribution Plans may be terminated at any time by vote of a majority of the Independent Trustees or by vote of a majority of the outstanding voting securities of the relevant class of shares.
Class T Shares Shareholder Service Fees
The Funds that offer Class T shares have adopted a shareholder services plan that permits them to pay for certain services provided to Class T shareholders by their Selling Agents. Equity Funds may pay shareholder servicing fees up to an aggregate annual rate of 0.50% of the Fund’s average daily net assets attributable to Class T shares (comprised of up to 0.25% for shareholder liaison services and up to 0.25% for administrative support services). Fixed income Funds may pay shareholder servicing fees up to an aggregate annual rate of 0.40% of the Fund’s average daily net assets attributable to Class T shares (comprised of an annual rate of up to 0.20% for shareholder liaison services and up to 0.20% for administrative support services). These fees are currently limited to an aggregate annual rate of not more than 0.25% for equity Funds and not more than 0.15% for fixed income Funds. These fees for Class T shares are not paid pursuant to a 12b-1 plan. With respect to those Funds that declare dividends on a daily basis, the shareholder servicing fee shall be waived by the Selling Agents and/or Servicing Agents to the extent necessary to prevent net investment income from falling below 0.00% on a daily basis. The Funds consider “administrative support services” to include, without limitation, (i) aggregating and processing purchase and redemption orders, (ii) providing beneficial owners with statements showing their positions in the Funds, (iii) processing
Statement of Additional Information – October 3, 2016 130

 

Table of Contents
dividend payments, (iv) providing sub-accounting services for Fund shares held beneficially, (v) forwarding shareholder communications, such as proxies, shareholder reports, dividend and tax notices, and updating prospectuses to beneficial owners, (vi) receiving, tabulating and transmitting proxies executed by the beneficial owners, (vii) sub-transfer agent services for beneficial owners of Fund shares and (viii) other similar services. If you maintain shares of a Fund directly with the Fund, without working directly with a financial advisor or other intermediary, shareholder services fees may be retained by the Distributor as payment or reimbursement for incurring certain shareholder service related expenses.
Fees Paid
For its most recent fiscal period, each Fund paid distribution and/or service fees as shown in the following table. The table is organized by fiscal year end.
12b-1 Fees
Fund Class A Class B Class C Class R Class T Class W
For Funds with fiscal period ending January 31
Diversified Real Return Fund $59 N/A $219 N/A N/A $22
For Funds with fiscal period ending March 31
AP – Growth Fund 5,776,564 N/A N/A N/A N/A N/A
Pacific/Asia Fund 8,663 N/A 10,488 N/A N/A 6
Select Large Cap Growth Fund 3,752,327 N/A 2,367,868 $105,960 N/A 83,291
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (a) N/A N/A N/A N/A N/A N/A
Bond Fund 128,581 $4,870 96,241 10,332 $16,765 25
Corporate Income Fund 266,084 3,840 111,083 N/A N/A 139,545
Multi-Asset Income Fund 120 N/A 657 N/A N/A 23
Small Cap Value Fund I 653,179 13,661 285,741 15,814 N/A N/A
Total Return Bond Fund 2,871,342 78,725 563,148 13,808 N/A 1,359,214
U.S. Treasury Index Fund 47,907 8,247 68,443 N/A N/A 319,950
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 398,939 N/A 590,225 1,669 N/A 518,696
Alternative Beta Fund 39,577 N/A 17,952 48 N/A 301,579
Diversified Absolute Return Fund 383 N/A 98 N/A N/A 61,508
Dividend Income Fund 5,647,307 62,372 6,478,551 412,994 187,690 311
HY Municipal Fund 310,960 4,298 363,227 N/A N/A N/A
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund 99,585 105 165,360 N/A N/A N/A
Large Cap Growth Fund (b) 4,291,241 210,601 720,794 12,040 495,307 342,561
Tax-Exempt Fund 6,628,301 26,762 768,266 N/A N/A N/A
U.S. Social Bond Fund 9 (c) N/A 35 (c) N/A N/A N/A
Ultra Short Term Bond Fund N/A N/A N/A N/A N/A N/A
For Funds with fiscal period ending August 31
AP – Alternatives Fund 1,947,269 N/A N/A N/A N/A N/A
AP – Small Cap Equity Fund 2,053,320 N/A N/A N/A N/A N/A
AP – Total Return Bond Fund 12,159,835 N/A N/A N/A N/A N/A
Balanced Fund 4,024,551 113,152 4,428,389 137,826 N/A N/A
Contrarian Core Fund 5,070,822 122,180 3,238,321 200,394 406,232 354,495
Disciplined Small Core Fund 879,479 4,550 274,339 N/A 196,314 30,881
Emerging Markets Fund 720,705 43,876 249,122 37,831 N/A 247
Global Dividend Opportunity Fund 346,044 15,037 146,654 4,155 N/A 6
Statement of Additional Information – October 3, 2016 131

 

Table of Contents
Fund Class A Class B Class C Class R Class T Class W
Global Energy and Natural Resources Fund $256,204 $15,632 $153,914 $13,052 N/A N/A
Global Technology Growth Fund 263,687 15,850 302,959 N/A N/A N/A
Greater China Fund 208,326 20,731 153,438 N/A N/A $6
Mid Cap Growth Fund 2,475,688 106,399 527,221 105,184 $64,436 591
Small Cap Growth Fund I 525,345 21,888 176,269 9,950 N/A N/A
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 18,037 1,503 43,596 N/A 18,070 N/A
AMT-Free Intermediate Muni Bond Fund 459,072 3,468 459,260 N/A 22,074 N/A
AMT-Free MA Intermediate Muni Bond Fund 57,855 102 69,033 N/A 30,577 N/A
AMT-Free NY Intermediate Muni Bond Fund 68,094 765 133,953 N/A 11,351 N/A
CA Tax-Exempt Fund 900,128 2,403 296,894 N/A N/A N/A
NY Tax-Exempt Fund 363,752 4,068 124,417 N/A N/A N/A
Strategic Income Fund 3,307,767 123,301 1,884,641 9,680 N/A 25
For Funds with fiscal period ending December 31
Real Estate Equity Fund 314,149 19,012 198,509 45,295 N/A 72
(a) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(b) The Fund paid distribution and/or service fees of $56,005 for Class E shares and $8,638 for Class F shares for the fiscal year ended 2015.
(c) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
Other Services Provided
The Transfer Agent
Columbia Management Investment Services Corp. is the transfer agent for the Funds. The Transfer Agent is located at 225 Franklin Street, Boston, MA 02110. Under the Transfer Agency Agreement, the Transfer Agent provides transfer agency, dividend disbursing and shareholder services to the Funds, for which the Funds pay transfer agency fees. Class I shares and Class Y shares do not pay transfer agency fees. For all other share classes, the Funds pay the Transfer Agent an annual fee payable monthly that varies by account type. For accounts established directly with the Fund (other than certain networked or omnibus accounts), the annual transfer agency fee is $39.55 per account; for certain accounts that are established or maintained directly with the Fund pursuant to the networking system of the NSCC and certain other similar “networked” accounts, the annual transfer agency fee is $9.10 per account; and for other omnibus accounts, the transfer agency fee is paid at an annual rate of 0.0103% of the value of such accounts. Prior to October 1, 2016, the Funds paid an annual transfer agency fee, payable monthly, of $36.40 per account; for certain accounts that are established or maintained directly with the Fund pursuant to the networking system of the NSCC and certain other similar “networked” accounts, the annual transfer agency fee is $8.50 per account; and for other omnibus accounts, the transfer agency fee is paid at an annual rate of 0.0125% of the value of such accounts. Prior to July 1, 2015, the Funds paid an annual transfer agency fee, payable monthly, of $34.25 for accounts established directly with the Fund (other than certain networked or omnibus accounts), $11.00 per account for certain accounts established or maintained directly with the Fund pursuant to the networking system of the NSCC and certain other similar “networked” accounts, and for other omnibus accounts, the transfer agency fee was paid at an annual rate of 0.014% of the value of such accounts. Prior to November 1, 2014, the Funds paid an annual transfer agency fee of $19.25 per account, payable monthly for all share classes except for Class I shares and Class Y shares.
In addition to the fees above, the Funds pay a fee for shareholder services provided by Servicing Agents who maintain shares through omnibus or networked accounts. See Other Practices – Additional Shareholder Servicing Payments for more information.
The Funds also pay certain reimbursable out-of-pocket expenses of the Transfer Agent. The Transfer Agent also may retain as additional compensation for its services revenues for fees for wire, telephone and redemption orders, IRA trustee agent fees and account transcripts due the Transfer Agent from Fund shareholders and credits (net of bank charges) earned with respect to balances in accounts the Transfer Agent maintains in connection with its services to the Funds. Transfer agency costs for each Fund are calculated separately for each of (i) Class K and Class R5 shares and (ii) all other share classes (except Class I and Class Y shares, which pay no transfer agency fees).
The fees paid to the Transfer Agent may be changed by the Board without shareholder approval.
Statement of Additional Information – October 3, 2016 132

 

Table of Contents
The Transfer Agent retains BFDS/DST, 2000 Crown Colony Drive, Quincy, MA 02169 as the Funds’ sub-transfer agent. BFDS/DST assists the Transfer Agent in carrying out its duties.
Plan Administration Services
The Funds that offer Class K shares have a Plan Administration Services Agreement with the Transfer Agent. Under the agreement, the Funds pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs). The fee for services is equal on an annual basis to 0.25% of the average daily net assets of each Fund attributable to Class K shares. These fees for Class K shares are not paid pursuant to a 12b-1 plan.
The Custodian
The Funds' securities and cash are held pursuant to a custodian agreement with JPMorgan, 1 Chase Manhattan Plaza, 19th Floor, New York, NY 10005. JPMorgan is responsible for safeguarding the Funds' cash and securities, receiving and delivering securities and collecting the Funds' interest and dividends. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, each Fund pays its custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian’s out-of-pocket expenses.
As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of JPMorgan or in other financial institutions as permitted by law and by the Funds' custodian agreement.
Independent Registered Public Accounting Firm
PwC, which is located at 45 South Seventh Street, Suite 3400, Minneapolis, MN 55402, is the Funds' independent registered public accounting firm. The financial statements contained in each Fund’s Annual Report were audited by PwC. The Board has selected PwC as the independent registered public accounting firm to audit the Funds' books and review their tax returns for their respective fiscal years.
The Report of Independent Registered Public Accounting Firm and the audited financial statements are included in the annual report to shareholders of each Fund, and are incorporated herein by reference. No other parts of the annual or semi-annual reports to shareholders are incorporated by reference herein. The audited financial statements incorporated by reference into the Funds' prospectuses and this SAI have been so incorporated in reliance upon the report of the independent registered public accounting firm, given on its authority as an expert in auditing and accounting.
Counsel
Ropes & Gray LLP serves as legal counsel to the Trust. Its address is Prudential Tower, 800 Boylston St., Boston, Massachusetts 02199. Vedder Price P.C. serves as co-counsel. Its address is 1401 I Street N.W., Suite 1100, Washington, DC 20005.
Expense Limitations
The Investment Manager and certain of its affiliates have agreed to waive fees and/or reimburse certain expenses, subject to certain exclusions described in a Fund’s prospectus, so that certain Funds’ net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s custodian, do not exceed specified rates for specified time periods, also as described in a Fund’s prospectus.
The table below shows the total Fund level expenses reimbursed by the Investment Manager and its affiliates for the last three fiscal periods. The table is organized by fiscal year end.
Expenses Reimbursed
  Amounts Reimbursed
  2016 2015 2014
For Funds with fiscal period ending January 31
Diversified Real Return Fund $153,869 $176,999 (a) N/A
For Funds with fiscal period ending March 31
AP – Growth Fund 0 0 $21,114
Pacific/Asia Fund 0 0 0
Select Large Cap Growth Fund 0 0 0
For Funds with fiscal period ending April 30
Statement of Additional Information – October 3, 2016 133

 

Table of Contents
  Amounts Reimbursed
  2016 2015 2014
AP – Directional Alternatives Fund (b) N/A N/A N/A
Bond Fund $908,180 $752,335 $238,061
Corporate Income Fund 476,459 89,583 1,218
Multi-Asset Income Fund 411,083 64,010 (c) N/A
Small Cap Value Fund I 1,923 0 0
Total Return Bond Fund 1,507,986 2,029,498 2,408,094
U.S. Treasury Index Fund 1,037,002 677,252 657,944
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 331,893 633,805 299,257
Alternative Beta Fund 976,916 335,108 (d) N/A
Diversified Absolute Return Fund 392,299 90,008 (e) N/A
Dividend Income Fund 0 0 0
HY Municipal Fund 788,955 770,550 660,295
  2015 2014 2013
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund 153,915 228,550 298,719
Large Cap Growth Fund 0 0 0
Tax-Exempt Fund 0 0 0
U.S. Social Bond Fund 69,661 (f) N/A N/A
Ultra Short Term Bond Fund 93,709 123,048 113,452
For Funds with fiscal period ending August 31
AP – Alternatives Fund 0 0 174,772
AP – Small Cap Equity Fund 1,694,733 1,560,798 1,421,145
AP – Total Return Bond Fund 0 0 0
Balanced Fund 0 0 174,344
Contrarian Core Fund 0 0 57,718
Disciplined Small Core Fund 0 0 23,843
Emerging Markets Fund 0 0 531,115
Global Dividend Opportunity Fund 446,626 70,960 365,991
Global Energy and Natural Resources Fund 0 0 0
Global Technology Growth Fund 0 0 31,538
Greater China Fund 0 0 0
Mid Cap Growth Fund 0 0 0
Small Cap Growth Fund I 0 0 53,467
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 288,981 301,578 338,425
AMT-Free Intermediate Muni Bond Fund 2,569,822 2,332,871 3,012,105
AMT-Free MA Intermediate Muni Bond Fund 462,338 453,509 553,959
AMT-Free NY Intermediate Muni Bond Fund 576,794 536,026 611,524
CA Tax-Exempt Fund 457,819 422,557 455,738
NY Tax-Exempt Fund 244,644 230,452 241,744
Strategic Income Fund 627,722 23,441 159
For Funds with fiscal period ending December 31
Statement of Additional Information – October 3, 2016 134

 

Table of Contents
  Amounts Reimbursed
  2015 2014 2013
Real Estate Equity Fund $0 $0 $0
(a) For the period from March 11, 2014 (commencement of operations) to January 31, 2015.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) For the period from March 27, 2015 (commencement of operations) to April 30, 2015.
(d) For the period from January 27, 2015 (commencement of operations) to May 31, 2015.
(e) For the period from February 19, 2015 (commencement of operations) to May 31, 2015.
(f) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
The table below shows the total fees waived by the Investment Manager and its affiliates for the last three fiscal periods. The table is organized by fiscal year end. If a Fund is not shown, there were no fees waived for the relevant fiscal periods.
Fees Waived
  Fees Waived
  2016 2015 2014
For Funds with fiscal period ending April 30
Bond Fund N/A $5,339 $18,710
Corporate Income Fund $19,565 22,458 28,402
Total Return Bond Fund N/A 63,536 114,650
U.S. Treasury Index Fund 44,856 28,560 11,418
For Funds with fiscal period ending May 31
Alternative Beta Fund 214,103 28,890 (a) N/A
HY Municipal Fund 42,675 30,431 20,060
  2015 2014 2013
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund 76,493 83,762 91,741
Tax-Exempt Fund 160,023 280,401 198,871
For Funds with fiscal period ending August 31
AP – Total Return Bond Fund 66,602 0 0
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 18,684 20,981 26,076
AMT-Free Intermediate Muni Bond Fund 0 74,080 251,117
AMT-Free MA Intermediate Muni Bond Fund 29,586 34,367 43,021
AMT-Free NY Intermediate Muni Bond Fund 57,409 58,408 75,465
CA Tax-Exempt Fund 127,240 118,938 131,079
NY Tax-Exempt Fund 53,321 47,893 57,732
Strategic Income Fund 0 242,507 383,776
(a) For the period from January 27, 2015 (commencement of operations) to May 31, 2015.
Other Roles and Relationships of Ameriprise Financial and Its Affiliates —
Certain Conflicts of Interest
As described above in the Investment Management and Other Services section of this SAI, and in the More Information About the Fund – Primary Service Providers section of each Fund's prospectus, the Investment Manager, Distributor and Transfer Agent, all affiliates of Ameriprise Financial, receive compensation from the Funds for the various services they provide to the Funds. Additional information as to the specific terms regarding such compensation is set forth in these affiliated service providers’ contracts with the Funds, each of which typically is included as an exhibit to Part C of each Fund's registration statement.
Statement of Additional Information – October 3, 2016 135

 

Table of Contents
In many instances, the compensation paid to the Investment Manager and other Ameriprise Financial affiliates for the services they provide to the Funds is based, in some manner, on the size of the Funds' assets under management. As the size of the Funds' assets under management grows, so does the amount of compensation paid to the Investment Manager and, as the case may be, other Ameriprise Financial affiliates for providing services to the Funds. This relationship between Fund assets and any affiliated service provider compensation may create economic and other conflicts of interests of which Fund investors should be aware. These potential conflicts of interest, as well as additional ones, are discussed in detail below and also are addressed in other disclosure materials, including the Funds' prospectuses. Many of these conflicts of interest also are highlighted in account documentation and other disclosure materials of Ameriprise Financial affiliates that make available or offer the Columbia Funds as investments in connection with their respective products and services. In addition, Part 1A and 2A of the Investment Manager’s Form ADV, which it must file with the SEC as an investment adviser registered under the Investment Advisers Act of 1940, provide information about the Investment Manager’s business, assets under management, affiliates and potential conflicts of interest. Parts 1A and 2A of the Investment Manager’s Form ADV are available online through the SEC’s website at www.adviserinfo.sec.gov.
Additional actual or potential conflicts of interest and certain investment activity limitations that could affect the Funds may arise from the financial services activities of Ameriprise Financial and its affiliates, including, for example, the investment advisory/management services provided for clients and customers other than the Funds. Ameriprise Financial and its affiliates are engaged in a wide range of financial activities beyond the fund-related activities of the Investment Manager, including, among others, broker-dealer (sales and trading), asset management, insurance and other financial activities. The broad range of financial services activities of Ameriprise Financial and its affiliates may involve multiple advisory, transactional, lending, financial and other interests in securities and other instruments, and in companies, that may be bought, sold or held by the Funds. The following describes certain actual and potential conflicts of interest that may be presented.
Actual and Potential Conflicts of Interest Related to the Investment Advisory/Management Activities of Ameriprise Financial and its Affiliates in Connection With Other Advised/Managed Funds and Accounts
The Investment Manager, Ameriprise Financial and other affiliates of Ameriprise Financial may advise or manage funds and accounts other than the Funds. In this regard, Ameriprise Financial and its affiliates may provide investment advisory/management and other services to other advised/managed funds and accounts that are similar to those provided to the Funds. The Investment Manager and Ameriprise Financial’s other investment adviser affiliates (including, for example, Columbia Wanger Asset Management, LLC) will give investment advice to and make investment decisions for advised/managed funds and accounts, including the Funds, as they believe to be in that fund’s and/or account’s best interests, consistent with their fiduciary duties. The Funds and the other advised/managed funds and accounts of Ameriprise Financial and its affiliates are separately and potentially divergently managed, and there is no assurance that any investment advice Ameriprise Financial and its affiliates give to other advised/managed funds and accounts will also be given simultaneously or otherwise to the Funds.
A variety of other actual and potential conflicts of interest may arise from the advisory relationships of the Investment Manager, Ameriprise Financial and other Ameriprise Financial affiliates with other clients and customers. Advice given to the Funds and/or investment decisions made for the Funds by the Investment Manager or other Ameriprise Financial affiliates may differ from, or may conflict with, advice given to and/or investment decisions made by the Investment Manager, Ameriprise Financial and other Ameriprise Financial affiliates for other advised/managed funds and accounts. As a result, the performance of the Funds may differ from the performance of other funds or accounts advised/managed by the Investment Manager, Ameriprise Financial or other Ameriprise Financial affiliates. Similarly, a position taken by Ameriprise Financial and its affiliates, including the Investment Manager, on behalf of other funds or accounts may be contrary to a position taken on behalf of the Funds. Moreover, Ameriprise Financial and its affiliates, including the Investment Manager, may take a position on behalf of other advised/managed funds and accounts, or for their own proprietary accounts, that is adverse to companies or other issuers in which the Funds are invested. For example, the Funds may hold equity securities of a company while another advised/managed fund or account may hold debt securities of the same company. If the portfolio company were to experience financial difficulties, it might be in the best interest of the Funds for the company to reorganize while the interests of the other advised/managed fund or account might be better served by the liquidation of the company. This type of conflict of interest could arise as the result of circumstances that cannot be generally foreseen within the broad range of investment advisory/management activities in which Ameriprise Financial and its affiliates engage.
Investment transactions made on behalf of other funds or accounts advised/managed by the Investment Manager, Ameriprise Financial or other Ameriprise Financial affiliates also may have a negative effect on the value, price or investment strategies of the Funds. For example, this could occur if another advised/managed fund or account implements an investment decision ahead of, or at the same time as, the Funds and causes the Funds to experience less favorable trading results than they otherwise would have experienced based on market liquidity factors. In addition, the other funds and accounts advised/managed by the Investment Manager, Ameriprise Financial and other Ameriprise Financial affiliates, including the other Columbia Funds and accounts of Ameriprise Financial and its affiliates, may have the same or very similar investment objective and strategies as the
Statement of Additional Information – October 3, 2016 136

 

Table of Contents
Funds. In this situation, the allocation of, and competition for, investment opportunities among the Funds and other funds and/or accounts advised/managed by the Investment Manager, Ameriprise Financial or other Ameriprise Financial affiliates may create conflicts of interest especially where, for example, limited investment availability is involved. The Investment Manager has adopted policies and procedures designed to address the allocation of investment opportunities among the Funds and other funds and accounts advised by the Investment Manager, Ameriprise Financial and other affiliates of Ameriprise Financial. For more information, see Investment Management and Other Services – The Investment Manager and Subadvisers – Portfolio Managers – Potential Conflicts of Interest .
Sharing of Information among Advised/Managed Accounts
Ameriprise Financial and its affiliates, including the Investment Manager, also may possess information that could be material to the management of a Fund and may not be able to, or may determine not to, share that information with the Fund, even though the information might be beneficial to the Fund. This information may include actual knowledge regarding the particular investments and transactions of other advised/managed funds and accounts, as well as proprietary investment, trading and other market research, analytical and technical models, and new investment techniques, strategies and opportunities. Depending on the context, Ameriprise Financial and its affiliates generally will have no obligation to share any such information with the Funds. In general, employees of Ameriprise Financial and its affiliates, including the portfolio managers of the Investment Manager, will make investment decisions without regard to information otherwise known by other employees of Ameriprise Financial and its affiliates, and generally will have no obligation to access any such information and may, in some instances, not be able to access such information because of legal and regulatory constraints or the internal policies and procedures of Ameriprise Financial and its affiliates. For example, if the Investment Manager or another Ameriprise Financial affiliate, or their respective employees, come into possession of non-public information regarding another advised/managed fund or account, they may be prohibited by legal and regulatory constraints, or internal policies and procedures, from using that information in connection with transactions made on behalf of the Funds. For more information, see Investment Management and Other Services – The Investment Manager and Subadvisers – Portfolio Managers – Potential Conflicts of Interest .
Soft Dollar Benefits
Certain products and services, commonly referred to as “soft dollar services” (including, to the extent permitted by law, research reports, economic and financial data, financial publications, proxy analysis, computer databases and other research-oriented materials), that the Investment Manager may receive in connection with brokerage services provided to a Fund may have the inadvertent effect of disproportionately benefiting other advised/managed funds or accounts. This could happen because of the relative amount of brokerage services provided to a Fund as compared to other advised/managed funds or accounts, as well as the relative compensation paid by a Fund.
Services Provided to Other Advised/Managed Accounts
Ameriprise Financial and its affiliates, including the Investment Manager, Distributor and Transfer Agent, also may act as an investment adviser, investment manager, administrator, transfer agent, custodian, trustee, broker-dealer, agent, or in another capacity, for advised/managed funds and accounts other than the Funds, and may receive compensation for acting in such capacity. This compensation that the Investment Manager, Distributor and Transfer Agent and other Ameriprise Financial affiliates receive could be greater than the compensation Ameriprise Financial and its affiliates receive for acting in the same or similar capacity for the Funds. In addition, the Investment Manager, Distributor and Transfer Agent and other Ameriprise Financial affiliates may receive other benefits, including enhancement of new or existing business relationships. This compensation and/or the benefits that Ameriprise Financial and its affiliates may receive from other advised/managed funds and accounts and other relationships could potentially create incentives to favor other advised/managed funds and accounts over the Funds. Trades made by Ameriprise Financial and its affiliates for the Funds may be, but are not required to be, aggregated with trades made for other funds and accounts advised/managed by the Investment Manager and other Ameriprise Financial affiliates. If trades are aggregated among the Funds and those other funds and accounts, the various prices of the securities being traded may be averaged, which could have the potential effect of disadvantaging the Funds as compared to the other funds and accounts with which trades were aggregated.
Proxy Voting
The Investment Manager has adopted proxy voting policies and procedures that are designed to provide that all proxy voting is done in the best interests of its clients, including the Funds, without any resulting benefit or detriment to the Investment Manager and/or its affiliates, including Ameriprise Financial and its affiliates. Although the Investment Manager endeavors to make all proxy voting decisions with respect to the interests of the Funds for which it is responsible in accordance with its proxy voting policies and procedures, the Investment Manager’s proxy voting decisions with respect to a Fund’s portfolio securities may or may not benefit other advised/managed funds and accounts, and/or clients, of Ameriprise Financial and its affiliates. For more information about the Funds' proxy voting policies and procedures, see Investment Management and Other Services – Proxy Voting Policies and Procedures .
Statement of Additional Information – October 3, 2016 137

 

Table of Contents
Certain Trading Activities
The directors/trustees, officers and employees of Ameriprise Financial and its affiliates may buy and sell securities or other investments for their own accounts, and in doing so may take a position that is adverse to the Funds. In order to reduce the possibility that such personal investment activities of the directors/trustees, officers and employees of Ameriprise Financial and its affiliates will materially adversely affect the Funds, Ameriprise Financial and its affiliates have adopted policies and procedures, and the Funds, the Board, the Investment Manager and the Distributor have each adopted a Code of Ethics that addresses such personal investment activities. For more information, see Investment Management and Other Services – Codes of Ethics .
Affiliate Transactions
Subject to applicable legal and regulatory requirements, a Fund may enter into transactions in which Ameriprise Financial and/or its affiliates, or companies that are deemed to be affiliates of a Fund because of, among other factors, their or their affiliates’ ownership or control of shares of the Fund, may have an interest that potentially conflicts with the interests of the Fund. For example, an affiliate of Ameriprise Financial may sell securities to a Fund from an offering in which it is an underwriter or that it owns as a dealer, subject to applicable legal and regulatory requirements. Applicable legal and regulatory requirements also may prevent a Fund from engaging in transactions with an affiliate of the Fund, which may include Ameriprise Financial and its affiliates, or from participating in an investment opportunity in which an affiliate of a Fund participates.
Certain Investment Limitations
Regulatory and other restrictions may limit a Fund’s investment activities in various ways. For example, certain securities may be subject to ownership limitations due to regulatory limits on investments in certain industries (such as, for example, banking and insurance) and markets (such as emerging or international markets), or certain transactions (such as those involving certain derivatives or other instruments) or mechanisms imposed by certain issuers (such as, among others, poison pills). Certain of these restrictions may impose limits on the aggregate amount of investments that may be made by affiliated investors in the aggregate or in individual issuers. In these circumstances, the Investment Manager may be prevented from acquiring securities for a Fund (that it might otherwise prefer to acquire) if the acquisition would cause the Fund and its affiliated investors to exceed an applicable limit. These types of regulatory and other applicable limits are complex and vary significantly in different contexts including, among others, from country to country, industry to industry and issuer to issuer. The Investment Manager has policies and procedures designed to monitor and interpret these limits. Nonetheless, given the complexity of these limits, the Investment Manager and/or its affiliates may inadvertently breach these limits, and a Fund may therefore be required to sell securities that it might otherwise prefer to hold in order to comply with such limits. In addition, aggregate ownership limitations could cause performance dispersion among funds and accounts managed by the Investment Manager with similar investment objectives and strategies and portfolio management teams. For example, if further purchases in an issuer are restricted due to regulatory or other reasons, a portfolio manager would not be able to acquire securities or other assets of an issuer for a new Fund that may already be held by other funds and accounts with the same/similar investment objectives and strategies that are managed by the same portfolio management team. The Investment Manager may also choose to limit purchases in an issuer to a certain threshold for risk management purposes. If the holdings of the Investment Manager’s affiliates are included in that limitation, a Fund may be more limited in its ability to purchase a particular security or other asset than if the holdings of the Investment Manager’s affiliates had been excluded from the limitation. At certain times, a Fund may be restricted in its investment activities because of relationships that an affiliate of the Fund, which may include Ameriprise Financial and its affiliates, may have with the issuers of securities. This could happen, for example, if a Fund desired to buy a security issued by a company for which Ameriprise Financial or an affiliate serves as underwriter. In any of these scenarios, a Fund’s inability to participate (or participate further) in a particular investment, despite a portfolio manager’s desire to so participate, may negatively impact Fund performance. The internal policies and procedures of Ameriprise Financial and its affiliates covering these types of restrictions and addressing similar issues also may at times restrict a Fund’s investment activities. See also About Fund Investments – Certain Investment Activity Limits .
Actual and Potential Conflicts of Interest Related to Ameriprise Financial and its Affiliates’ Non-Advisory Relationships with Clients and Customers other than the Funds
The financial relationships that Ameriprise Financial and its affiliates may have with companies and other entities in which a Fund may invest can give rise to actual and potential conflicts of interest. Subject to applicable legal and regulatory requirements, a Fund may invest (a) in the securities of Ameriprise Financial and/or its affiliates and/or in companies in which Ameriprise Financial and its affiliates have an equity, debt or other interest, and/or (b) in the securities of companies held by other Columbia Funds. The purchase, holding and sale of such securities by a Fund may enhance the profitability and the business interests of Ameriprise Financial and/or its affiliates and/or other Columbia Funds. There also may be limitations as to the sharing with the Investment Manager of information derived from the non-investment advisory/management activities of
Statement of Additional Information – October 3, 2016 138

 

Table of Contents
Ameriprise Financial and its affiliates because of legal and regulatory constraints and internal policies and procedures (such as information barriers and ethical walls). Because of these limitations, Ameriprise Financial and its affiliates generally will not share information derived from its non-investment advisory/management activities with the Investment Manager.
Actual and Potential Conflicts of Interest Related to Ameriprise Financial Affiliates’ Marketing and Use of the Columbia Funds as Investment Options
Ameriprise Financial and its affiliates also provide a variety of products and services that, in some manner, may utilize the Columbia Funds as investment options. For example, the Columbia Funds may be offered as investments in connection with brokerage and other securities products offered by Ameriprise Financial and its affiliates, and may be utilized as investments in connection with fiduciary, investment management and other accounts offered by affiliates of Ameriprise Financial, as well as for other Columbia Funds structured as “funds-of-funds.” The use of the Columbia Funds in connection with other products and services offered by Ameriprise Financial and its affiliates may introduce economic and other conflicts of interest. These conflicts of interest are highlighted in account documentation and other disclosure materials for the other products and services offered by Ameriprise Financial and its affiliates.
Ameriprise Financial and its affiliates, including the Investment Manager, may, subject to applicable legal and regulatory requirements, make payments to their affiliates in connection with the promotion and sale of the Funds' shares, in addition to the sales-related and other compensation that these parties may receive from the Funds, if any. As a general matter, personnel of Ameriprise Financial and its affiliates do not receive compensation in connection with their sales or use of the Funds that is greater than that paid in connection with their sales of other comparable products and services. Nonetheless, because the compensation that the Investment Manager and other affiliates of Ameriprise Financial may receive for providing services to the Funds is generally based on the Funds' assets under management and those assets will grow as shares of the Funds are sold, potential conflicts of interest may exist. See Other Practices – Additional Shareholder Servicing Payments and Additional Selling Agent Payments for more information.
Actual or Potential Conflicts of Interest Related to Affiliated Indexes
Columbia Management and its affiliates may develop, own and operate stock market and other indexes (each, an Affiliated Index) based on investment and trading strategies developed by Columbia Management and/or its affiliates (Affiliated Index Strategies). Some of the ETFs for which Columbia Management acts as investment adviser (the Affiliated Index ETFs) seek to track the performance of the Affiliated Indexes. Columbia Management and/or its affiliates may, from time to time, manage other funds or accounts that invest in these Affiliated Index ETFs. In the future, Columbia Management and/or its affiliates may manage client accounts that track the same Affiliated Indexes used by the Affiliated Index ETFs or which are based on the same, or substantially similar, Affiliated Index Strategies that are used in the operation of the Affiliated Indexes and the Affiliated Index ETFs. The operation of the Affiliated Indexes, the Affiliated Index ETFs and other accounts managed in this manner may give rise to potential conflicts of interest.
For example, any accounts managed by Columbia Management and/or its affiliates that seek to track the same Affiliated Indexes may engage in purchases and sales of securities at different times. These differences may result in certain accounts having more favorable performance relative to that of the Affiliated Index or other accounts that seek to track the Affiliated Index. Other potential conflicts include (i) the potential for unauthorized access to Affiliated Index information, allowing Affiliated Index changes that benefit Columbia Management and/or its affiliates or other accounts managed by Columbia Management and/or its affiliates and not the clients in the accounts seeking to track the Affiliated Index, and (ii) the manipulation of Affiliated Index pricing to present the performance of accounts seeking to track the Affiliated Index, or the firm’s tracking ability, in a preferential light.
Columbia Management has adopted policies and procedures that are designed to address potential conflicts that may arise in connection with the operation of the Affiliated Indexes, the Affiliated Index ETFs and other accounts.
To the extent it is intended that an account managed by Columbia Management and/or its affiliates seeks to track an Affiliated Index, the account may not match (performance or holdings), and may vary substantially from, such index for any period of time. An account that seeks to track an index may purchase, hold and sell securities at times when another client would not do so. Columbia Management and its affiliates do not guarantee that any tracking error targets will be achieved. Accounts managed by Columbia Management and/or its affiliates that seek to track an index may be negatively impacted by errors in the index, either as a result of calculation errors, inaccurate data sources or otherwise. Columbia Management and its affiliates do not guarantee the timeliness, accuracy and/or completeness of an index and are not responsible for errors, omissions or interruptions in the index (including when Columbia Management or an affiliate acts as the index provider) or the calculation thereof (including when Columbia Management or an affiliate acts as the calculation agent).
Columbia Management and its affiliates are not obligated to license the Affiliated Indexes to clients or other third-parties.
Statement of Additional Information – October 3, 2016 139

 

Table of Contents
Codes of Ethics
The Funds, the Investment Manager, the subadvisers and the Distributor have adopted Codes of Ethics pursuant to the requirements of the 1940 Act, including Rule 17j-1 under the 1940 Act. These Codes of Ethics permit personnel subject to the Codes of Ethics to invest in securities, including securities that may be bought or held by the Funds. These Codes of Ethics are included as exhibits to Part C of the Funds' registration statement. These Codes of Ethics can be reviewed and copied at the SEC’s Public Reference Room and may be obtained by calling the SEC at 202.551.8090; they also are available on the SEC’s website at www.sec.gov, and may be obtained, after paying a duplicating fee, by electronic request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section, Washington, D.C. 20549-1520.
Proxy Voting Policies and Procedures
General. The Funds have delegated to the Investment Manager the responsibility to vote proxies relating to portfolio securities held by the Funds, including Funds managed by subadvisers. In deciding to delegate this responsibility to the Investment Manager, the Board reviewed the policies adopted by the Investment Manager. These included the procedures that the Investment Manager follows when a vote presents a conflict between the interests of the Funds and their shareholders and the Investment Manager and its affiliates.
The Investment Manager’s policy is to vote all proxies for Fund securities in a manner considered by the Investment Manager to be in the best economic interests of its clients, including the Funds, without regard to any benefit or detriment to the Investment Manager, its employees or its affiliates. The best economic interests of clients is defined for this purpose as the interest of enhancing or protecting the value of client accounts, considered as a group rather than individually, as the Investment Manager determines in its discretion. The Investment Manager endeavors to vote all proxies of which it becomes aware prior to the vote deadline; provided, however, that in certain circumstances the Investment Manager may refrain from voting securities. For instance, the Investment Manager may refrain from voting foreign securities if it determines that the costs of voting outweigh the expected benefits of voting and typically will not vote securities if voting would impose trading restrictions.
Oversight. The operation of the Investment Manager’s proxy voting policy and procedures is overseen by a committee (the Proxy Voting Committee) composed of representatives of the Investment Manager’s equity investments, equity research, compliance, legal and operations functions. The Proxy Voting Committee has the responsibility to review, at least annually, the Investment Manager’s proxy voting policies to ensure consistency with internal policies, regulatory requirements, conflicts of interest and client disclosures.
Predetermined voting guidelines will be used to vote securities. The voting guidelines indicate whether to vote for, against or abstain from particular proposals, or whether the matter should be considered on a case-by-case basis. The Proxy Voting Committee may determine to vote differently from the guidelines on particular proposals in the event it determines that doing so is in the clients’ best economic interests. The Investment Manager may also consider the voting recommendations of analysts, portfolio managers and information obtained from outside resources, including one or more third party research providers. When proposals are not covered by the voting guidelines or a voting determination must be made on a case-by-case basis, a portfolio manager or analyst will make the voting determination based on his or her determination of the clients’ best economic interests. In addition, the Proxy Voting Committee may determine proxy votes when proposals require special consideration.
Addressing Conflicts of Interest. The Investment Manager seeks to address potential material conflicts of interest by having predetermined voting guidelines. In addition, if the Investment Manager determines that a material conflict of interest exists, the Investment Manager will invoke one or more of the following conflict management practices: (i) causing the proxies to be voted in accordance with the recommendations of an independent third party (which may be the Investment Manager’s proxy voting administrator or research provider); (ii) causing the proxies to be delegated to an independent third party (which may be the Investment Manager’s proxy voting administrator or research provider); and (iii) in unusual cases, with the Board’s consent and upon ample notice, forwarding the proxies to the Board so that the Board may vote the proxies for the Funds. A member of the Proxy Voting Committee is prohibited from voting on any proposal for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal. Persons making recommendations to the Proxy Voting Committee or its members are required to disclose to the committee any relationship with a party making a proposal or other matter known to the person that would create a potential conflict of interest.
Voting Proxies of Affiliated Underlying Funds. Certain Funds may invest in shares of other Columbia Funds (referred to in this context as “underlying funds”) and may own substantial portions of these underlying funds. If such Funds are in a master-feeder structure, the feeder Fund will either seek instructions from its shareholders with regard to the voting of proxies with respect to the master fund’s shares and vote such proxies in accordance with such instructions or vote the shares held by it in the same proportion as the vote of all other master fund shareholders. With respect to Funds that hold shares of underlying funds other than in a master-feeder structure, the holding Funds will vote proxies of underlying funds in the same proportion as the vote of all other holders of the underlying fund’s shares, unless the Board otherwise instructs.
Statement of Additional Information – October 3, 2016 140

 

Table of Contents
Proxy Voting Agents. The Investment Manager has retained Institutional Shareholder Services Inc., a third-party vendor, as its proxy voting administrator to implement its proxy voting process and to provide recordkeeping and vote disclosure services. The Investment Manager has retained both Institutional Shareholder Services Inc. and Glass-Lewis & Co. to provide proxy research services.
Additional Information. Information regarding how the Columbia Funds (except certain Columbia Funds that do not invest in voting securities) voted proxies relating to portfolio securities during the most recent twelve month period ended June 30 will be available by August 31 of this year free of charge: (i) through the Columbia Funds’ website at www.columbiathreadneedle.com/us and (ii) on the SEC’s website at www.sec.gov. For a copy of the Investment Manager’s voting guidelines in effect on the date of this SAI, see Appendix B to this SAI.
Organization and Management of Wholly-Owned Subsidiaries
Each of Alternative Beta Fund, AP – Alternatives Fund and Diversified Absolute Return Fund (for purposes of this section, referred to collectively as a “Fund”) may invest a portion of its assets, within the limitations of Subchapter M and Section 817(h) of the Code, as applicable, in one or more of its wholly-owned subsidiaries (previously defined collectively as the “Subsidiary”). The Subsidiary is a limited liability company organized under the laws of the Cayman Islands, whose registered office is located at P.O. Box 309, Ugland House, Grand Cayman Islands.
The Subsidiary is overseen by its own board of directors and is not registered under the 1940 Act. The Fund, as the sole shareholder of the Subsidiary, does not have all of the protections offered by the 1940 Act to shareholders of investment companies registered under the 1940 Act. However, the Subsidiary is wholly-owned and controlled by the Fund and the Fund’s Board of Trustees oversees the investment activities of the Fund, including its investment in the Subsidiary, and the Fund’s role as sole shareholder of the Subsidiary. The Investment Manager and, where applicable, the Fund’s subadvisers are responsible for the Subsidiary’s day-to-day business pursuant to their separate agreements with, or in respect of, the Subsidiary. The following individuals serve as a director of the Subsidiary:
Name, address, year of birth Position held with Subsidiary
and length of service
Principal occupation during past five years
Anthony P. Haugen
807 Ameriprise
Financial Center,
Minneapolis, MN 55474-2405
Born 1964
Director since
November 2013
Vice President – Finance, Ameriprise Financial, Inc.
since June 2004
Amy K. Johnson
5228 Ameriprise
Financial Center
Minneapolis, MN 55474-2405
Born 1965
Director since
November 2013
See Fund Governance – Fund Officers .
Christopher O. Petersen
5228 Ameriprise
Financial Center
Minneapolis, MN 55474-2405
Born 1970
Director since
January 2015
See Fund Governance – Fund Officers .
The Subsidiary has entered into a separate management agreement for the provision of advisory and administrative services with the Investment Manager. Under this agreement, the Investment Manager provides the Subsidiary with the same type of management services, under the same terms, as are provided to the Fund. The Subsidiary pays the Investment Manager an annual fee for its management services, as set forth in the management agreement and the table below.
Management Agreement Fee Schedule
Subsidiary Assets
(millions)
Annual rate at
each asset level (a)
ASGM Offshore Fund, Ltd. $0 - $500 1.100%
ASMF Offshore Fund, Ltd. >$500 - $1,000 1.050%
(Subsidiaries of AP – Alternatives Fund) >$1,000 - $3,000 1.020%
  >$3,000 - $6,000 0.990%
  >$6,000 - $12,000 0.960%
  >$12,000 0.950%
Statement of Additional Information – October 3, 2016 141

 

Table of Contents
Subsidiary Assets
(millions)
Annual rate at
each asset level (a)
CAAF Offshore Fund, Ltd. $0 - $500 0.960%
(Subsidiary of Alternative Beta Fund) >$500 - $1,000 0.955%
  >$1,000 - $3,000 0.950%
  >$3,000 - $12,000 0.940%
  >$12,000 0.930%
CDARF1 Offshore Fund, Ltd. $0 - $500 1.180%
CDARF2 Offshore Fund, Ltd. >$500 - $1,000 1.130%
CDARF3 Offshore Fund, Ltd. >$1,000 - $3,000 1.100%
(Subsidiaries of Diversified Absolute Return Fund) >$3,000 - $6,000 1.070%
  >$6,000 - $12,000 1.040%
  >$12,000 1.030%
(a) When calculating asset levels for purposes of determining fee rate breakpoints, asset levels are based on aggregate net assets of the Fund and the Parent Fund. When calculating the fee payable under this agreement, the annual rates are based on a percentage of the average daily net assets of the Fund.
Statement of Additional Information – October 3, 2016 142

 

Table of Contents
The Subsidiary has entered into a separate contract for the provision of custody services with the same service providers who provide those services to the Fund. The Subsidiary has also entered into arrangements with PwC to serve as the Subsidiary’s independent registered public accounting firm. The Subsidiary will bear the fees and expenses incurred in connection with the services that it receives pursuant to each of these separate agreements and arrangements. The Fund expects that the expenses borne by the Subsidiary will not be material in relation of the value of the Fund’s assets.
For purposes of adhering to the Fund’s compliance policies and procedures, the Investment Manager will treat the assets of the Subsidiary as if the assets were held directly by the Fund. The Chief Compliance Officer makes periodic reports to the Fund’s Board regarding the management and operations of the Subsidiary.
The financial information of the Subsidiary is consolidated into the Fund’s financial statements, as contained within the Fund’s annual and semiannual reports provided to shareholders.
Please refer to the section titled “ Taxation – The Subsidiary ” for information about certain tax considerations relating to the Fund’s investment in the Subsidiary.
By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. The derivatives and other investments held by the Subsidiary are subject to the same risks that would apply to similar investments if held directly by the Fund. The Subsidiary is subject to the same principal risk that the Fund is subject to (which are described in the Fund’s prospectus). There can be no assurance that the investment objective of the Subsidiary will be achieved. The Subsidiary is not registered under the 1940 Act and, except as otherwise noted, is not subject to the investor protections of the 1940 Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the Subsidiary are both managed by the Investment Manager, making it unlikely that the Subsidiary will take action contrary to the interests of the Fund and its shareholders. The Fund’s Board has oversight responsibility for the investment activities of the Fund, including its investment in the Subsidiary, and the Fund’s role as sole shareholder of the Subsidiary. In managing the Subsidiary’s investment portfolio, the Investment Manager will manage the Subsidiary’s portfolio in accordance with the Fund’s investment policies and restrictions.
Changes in the laws of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary, respectively, are organized, could result in the inability of the Fund and/or the Subsidiary to operate as described in the applicable prospectus and this SAI and could adversely affect the Fund and its shareholders. For example, the Cayman Islands laws currently do not impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax on the Subsidiary. If Cayman Islands law were changed and the Subsidiary was required to pay Cayman Islands taxes, the investment returns of the Fund would likely decrease.
The Investment Manager and any subadviser, if applicable, as it relates to the Subsidiary, complies with provisions of the 1940 Act relating to investment advisory contracts under Section 15 as an investment adviser to the Fund under Section 2(a)(20) of the 1940 Act. The Fund complies with the provisions of the 1940 Act, including those relating to investment policies (Section 8) and capital structure and leverage (Section 18) on an aggregate basis with the Subsidiary, and the Subsidiary complies with the provisions relating to affiliated transactions and custody (Section 17).
The Fund has not sought or received a private letter ruling from the IRS or an opinion of counsel as to the character of undistributed income derived from the Subsidiary. Nevertheless, the Subsidiary will take steps to ensure that income recognized by the Fund in respect of the Subsidiary will be qualifying income.
Statement of Additional Information – October 3, 2016 143

 

Table of Contents
FUND GOVERNANCE
Board of Trustees and Officers
Shareholders elect the Board that oversees the Funds' operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Funds' Trustees as of the date of this SAI, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, members serve terms of indefinite duration.
Trustees
Independent Trustees
Name, Address, Year of Birth Position Held with the Trust and Length of Service Principal Occupation(s)
During the Past Five Years and Other Relevant
Professional Experience
Number
of Funds
in the
Columbia
Funds
Complex
Overseen
Other Directorships
Held by Trustee During
the Past Five Years
Committee Assignments
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1957
Trustee
1996
Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (integrated energy company) since September 2007 57 None Compliance, Product and Distribution, Governance, Investment Oversight Committee #2
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1955
Trustee and Chairman of the Board
1996
Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines from December 2002 to May 2006; President of UAL Loyalty Services (airline marketing company) from September 2001 to December 2002; Executive Vice President and Chief Financial Officer of United Airlines from July 1999 to September 2001 57 Spartan Nash Company (food distributor); Nash Finch Company (food distributor) from 2005 to 2013; Aircastle Limited (aircraft leasing); SeaCube Container Leasing Ltd. (container leasing) from 2010 to 2013; and Travelport Worldwide Limited (travel information technology) Audit, Governance, Investment Oversight Committee #1
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1956
Trustee
2011
Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser) from 1997 to 2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools) from 2007 to 2010; Director, Wellington Trust Company, NA and other Wellington affiliates from 1997 to 2010 57 None Advisory Fees & Expenses, Product and Distribution, Investment Oversight Committee #2
Statement of Additional Information – October 3, 2016 144

 

Table of Contents
Name, Address, Year of Birth Position Held with the Trust and Length of Service Principal Occupation(s)
During the Past Five Years and Other Relevant
Professional Experience
Number
of Funds
in the
Columbia
Funds
Complex
Overseen
Other Directorships
Held by Trustee During
the Past Five Years
Committee Assignments
William E. Mayer
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1940
Trustee
1991
Partner, Park Avenue Equity Partners (private equity) since February 1999 57 DynaVox Inc. (speech creation); Lee Enterprises (print media); WR Hambrecht + Co. (financial service provider) from 2000 to 2012; BlackRock Capital Investment Corporation (investment company); and Premier, Inc. (healthcare) Product and Distribution, Governance, Investment Oversight Committee #2
David M. Moffett
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1952
Trustee
2011
Retired. Consultant to Bridgewater and Associates 57 Director of CIT Bank, CIT Group Inc. (commercial and consumer finance); eBay Inc. (online trading community); Genworth Financial, Inc. (financial and insurance products and services); Paypal Holdings Inc. (payment and data processing services); and Trustee, University of Oklahoma Foundation Compliance, Audit, Investment Oversight Committee #1
Charles R. Nelson
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1942
Trustee
1981
Retired. Professor Emeritus, University of Washington since 2011; Professor of Economics, University of Washington from 1976 to 2011; Ford and Louisa Van Voorhis Professor of Political Economy, University of Washington from 1993 to 2011; Adjunct Professor of Statistics, University of Washington from 1980 to 2011; Associate Editor, Journal of Money, Credit and Banking from September 1993 to 2008; consultant on econometric and statistical matters 57 None Advisory Fees & Expenses, Compliance, Investment Oversight Committee #2
John J. Neuhauser
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1943
Trustee
1984
President, Saint Michael’s College since August 2007; Director or Trustee of several non-profit organizations, including University of Vermont Medical Center; Academic Vice President and Dean of Faculties, Boston College from August 1999 to October 2005; University Professor, Boston College from November 2005 to August 2007 57 Liberty All-Star Equity Fund and Liberty All-Star Growth Fund (closed-end funds) Advisory Fees & Expenses, Product and Distribution, Investment Oversight Committee #2
Statement of Additional Information – October 3, 2016 145

 

Table of Contents
Name, Address, Year of Birth Position Held with the Trust and Length of Service Principal Occupation(s)
During the Past Five Years and Other Relevant
Professional Experience
Number
of Funds
in the
Columbia
Funds
Complex
Overseen
Other Directorships
Held by Trustee During
the Past Five Years
Committee Assignments
Patrick J. Simpson
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1944
Trustee
2000
Of Counsel, Perkins Coie LLP (law firm) since 2015; Partner, Perkins Coie LLP from 1988 to 2014 57 None Advisory Fees & Expenses, Audit, Governance, Investment Oversight Committee #1
Anne-Lee Verville
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1945
Trustee
1998
Retired. General Manager, Global Education Industry from 1994 to 1997, President – Application Systems Division from 1991 to 1994, Chief Financial Officer – US Marketing & Services from 1988 to 1991, and Chief Information Officer from 1987 to 1988, IBM Corporation (computer and technology) 57 Enesco Group, Inc. (producer of giftware and home and garden decor products) from 2001 to 2006 Audit, Compliance, Investment Oversight Committee #1
Consultant to the Trustees*
Name, Address, Year of Birth Position Held with the Funds and Length of Service Principal Occupation(s)
During the Past Five Years and Other Relevant
Professional Experience
Number
of Funds
in the
Columbia
Funds
Complex
Overseen
Other Directorships
Held by Trustee During
the Past Five Years
Committee Assignments
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC,
225 Franklin Street,
Mail Drop BX32 05228,
Boston, MA 02110
1964
Trustee Consultant
2016
Trustee Consultant, Columbia Funds since March 2016; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC from May 2010 to February 2015; President, Columbia Funds from 2009 to 2015; and senior officer of Columbia Funds and affiliated funds from 2003 to 2015 57 Board of Governors, Gateway Healthcare since January 2016; Trustee, New Century Portfolios since March 2015; and Director, The Autism Project since March 2015 Product and Distribution, Advisory Fees & Expenses, Audit, Investment Oversight Committees #1 & #2
* J. Kevin Connaughton was appointed consultant to the Trustees effective March 1, 2016. Shareholders of the Funds are expected to be asked to elect Mr. Connaughton as a Trustee at a future shareholder meeting.
Statement of Additional Information – October 3, 2016 146

 

Table of Contents
Interested Trustee Affiliated with Investment Manager*
Name, Address,
Year of Birth
Position Held
with the Trust and Length of Service
Principal Occupation(s)
During the Past Five Years
and Other Relevant
Professional Experience
Number of
Funds in the
Columbia Funds Complex
Overseen
Other Directorships Held by Trustee During the Past Five Years Committee
Assignments
William F. Truscott
c/o Columbia Management Investment Advisers, LLC,
225 Franklin St.
Boston, MA 02110
1960
Trustee
2012
Chairman of the Board and President, Columbia Management Investment Advisers, LLC since May 2010 and February 2012, respectively; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012 (previously Chief Executive Officer, U.S. Asset Management & President, Annuities, May 2010 - September 2012); Director and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since May 2010 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006; Director, Threadneedle Asset Management Holdings, SARL since 2014; President and Chief Executive Officer, Ameriprise Certificate Company, 2006 - August 2012. 185 Trustee to other Columbia Funds since 2001; Chairman of the Board, Columbia Management Investment Advisers, LLC since May 2010; Director, Columbia Management Investment Distributors, Inc. since May 2010; Former Director, Ameriprise Certificate Company, 2006 - January 2013 None
* Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial.
The Officers
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Trust as of the date of this SAI, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Truscott, who is Senior Vice President, the Funds' other officers are:
Fund Officers
Name, Address
and Year of Birth
Position and Year
First Appointed to
Position for any Fund in the
Columbia Funds Complex
or a Predecessor Thereof
Principal Occupation(s) During Past Five Years
Christopher O. Petersen
5228 Ameriprise Financial Center
Minneapolis, MN 55474
Born 1970
President and Principal Executive Officer (2015) Vice President and Lead Chief Counsel, Ameriprise Financial, Inc. since January 2015 (previously, Vice President and Chief Counsel January 2010 – December 2014); officer of Columbia Funds and affiliated funds since 2007.
Michael G. Clarke
225 Franklin Street
Boston, MA 02110
Born 1969
Treasurer (2011), Chief Financial Officer (2009) and Chief Accounting Officer (2015) Vice President – Mutual Fund Administration, Columbia Management Investment Advisers, LLC, since May 2010; senior officer of Columbia Funds and affiliated funds since 2002.
Statement of Additional Information – October 3, 2016 147

 

Table of Contents
Name, Address
and Year of Birth
Position and Year
First Appointed to
Position for any Fund in the
Columbia Funds Complex
or a Predecessor Thereof
Principal Occupation(s) During Past Five Years
Paul B. Goucher
100 Park Avenue
New York, NY 10017
Born 1968
Senior Vice President (2011), Chief Legal Officer (2015) and Assistant Secretary (2008) Vice President and Lead Chief Counsel, Ameriprise Financial, Inc. since November 2008 and January 2013, respectively (previously Chief Counsel, January 2010 - January 2013); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since May 2010.
Thomas P. McGuire
225 Franklin Street
Boston, MA 02110
Born 1972
Senior Vice President and Chief Compliance Officer (2012) Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Ameriprise Certificate Company since September 2010.
Colin Moore
225 Franklin Street
Boston, MA 02110
Born 1958
Senior Vice President (2010) Executive Vice President and Global Chief Investment Officer, Ameriprise Financial, Inc., since July 2013; Executive Vice President and Global Chief Investment Officer, Columbia Management Investment Advisers, LLC since July 2013 (previously Director and Global Chief Investment Officer, 2010 – 2013).
Michael E. DeFao
225 Franklin Street
Boston, MA 02110
Born 1968
Vice President (2011) and Assistant Secretary (2010) Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010.
Amy Johnson
5228 Ameriprise Financial Center
Minneapolis, MN 55474
Born 1965
Vice President (2006) Managing Director and Global Head of Operations, Columbia Management Investment Advisers, LLC since April 2016 (previously Managing Director and Chief Operating Officer, 2010 – 2016).
Lyn Kephart-Strong
5228 Ameriprise Financial Center
Minneapolis, MN 55474
Born 1960
Vice President (2015) President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009.
Ryan C. Larrenaga
225 Franklin Street
Boston, MA 02110
Born 1970
Vice President and Secretary (2015) Vice President and Group Counsel, Ameriprise Financial, Inc. since August 2011; officer of Columbia Funds and affiliated funds since 2005.
Responsibilities of the Board with respect to fund management
The Board consists of ten Trustees who have varied experience and skills. With respect to Mr. Truscott, the Trustees have concluded that having a senior officer of the Investment Manager serve as a Trustee benefits Fund shareholders by facilitating communication between the Independent Trustees and the senior management of the Investment Manager, and by assisting efforts to align the interests of the Investment Manager more closely with those of Fund shareholders. Further information about the backgrounds and qualifications of the Trustees can be found in the section Trustee Biographical Information and Qualifications . The Board has several standing committees, which are an integral part of each Fund’s overall governance and risk oversight structure. The roles of each committee are more fully described in the section Committees of the Board below.
The Funds have retained the Investment Manager as the Funds’ investment adviser and administrator. The Investment Manager provides the Funds with investment advisory services, and is responsible for day-to-day administration of the Funds and management of the risks that arise from the Funds’ investments and operations. The Board provides oversight of the services provided by the Investment Manager, including risk management services. In addition, each committee of the Board provides oversight of the Investment Manager’s risk management services with respect to the particular activities within the committee’s purview. In the course of providing oversight, the Board and the committees receive a wide range of reports with respect to the Funds’ activities, including reports regarding each Fund’s investment portfolio, the compliance of the Funds with applicable laws, and the Funds’ financial accounting and reporting. The Board and the relevant committees meet periodically with officers of the Funds and the Investment Manager and with representatives of various of the Funds’ service providers. The Board and certain committees also meet periodically with the Funds’ Chief Compliance Officer to receive reports regarding the compliance of the Funds and the Investment Manager with the federal securities laws and their internal compliance policies and procedures. In addition, the Board meets periodically with the portfolio managers of the Funds to receive reports regarding the management of the Funds, including their investment risks.
Statement of Additional Information – October 3, 2016 148

 

Table of Contents
The Board recognizes that not all risks that may affect the Funds can be identified in advance; that it may not be practical or cost-effective to eliminate or mitigate certain risks; that it may be necessary to bear certain risks (such as various investment-related risks) in seeking to achieve the Funds’ investment objectives; and that the processes and controls employed to address certain risks may be limited in their effectiveness. As a result of the foregoing and other factors, the Board’s risk management oversight is subject to substantial limitations.
The Board reviews its leadership structure periodically and believes that its structure is appropriate, in light of the size of the Trust and the nature of its business, to enable the Board to exercise its oversight of the Funds and the other investment companies overseen by the Trustees. In particular, the Board believes that having an Independent Trustee serve as the chair of the Board and having other Independent Trustees serve as chairs of each committee promotes independence from the Investment Manager in setting agendas and conducting meetings. The Board believes that its committee structure makes the oversight process more efficient and more effective by allowing, among other things, smaller groups of Trustees to bring increased focus to matters within the purview of each committee.
Trustee Biographical Information and Qualifications
The following provides an overview of the considerations that led the Board to conclude that each individual serving as a Trustee should so serve. Generally, no one factor was decisive in the selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (i) the individual’s business and professional experience and accomplishments; (ii) the individual’s ability to work effectively with the other Trustees; (iii) the individual’s prior experience, if any, serving on the boards of public companies (including, where relevant, other investment companies) and other complex enterprises and organizations; and (iv) how the individual’s skills, experience and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.
In respect of each current Trustee, the individual’s substantial professional accomplishments and experience, including in fields related to the operations of the Fund, were a significant factor in the determination that, in light of the business and structure of the Trust, the individual should serve as a Trustee. Following is a summary of each Trustee’s particular professional experience and additional considerations that contributed to the Board’s conclusion that an individual should serve as a Trustee:
Douglas A. Hacker — Mr. Hacker has extensive executive experience, having served in various executive roles with United Airlines and more recently as an independent business executive. Mr. Hacker also has experience on other boards of directors. As former chief financial officer of United Airlines, Mr. Hacker has significant experience in accounting and financial management, including in a public company setting.
Janet Langford Carrig — Ms. Carrig is Senior Vice President, General Counsel and Corporate Secretary for ConocoPhillips. Prior to joining ConocoPhillips, Ms. Carrig held senior legal and leadership roles in other large corporations and law firms, including as a partner at the law firms Sidley & Austin and at Zelle, Hoffman, Voelbel, Mason and Gette. Ms. Carrig has previously served on the board of directors for a public company and various industry groups and non-profit organizations.
Nancy T. Lukitsh — Ms. Lukitsh has extensive executive experience in the financial services industries, particularly with respect to the marketing of investment products, having served as Senior Vice President, Partner and Director of Marketing for Wellington Management Company, LLP. Ms. Lukitsh has previously served as Chair of Wellington Management Portfolios (commingled investment pools designed for non-U.S. institutional investors) and as a director of other Wellington affiliates. In addition, she has previously served on the boards of directors of various non-profit organizations. She is also a Chartered Financial Analyst.
William E. Mayer — Mr. Mayer has significant executive and board experience with financial services and investment companies. Mr. Mayer, currently a partner at a private equity firm, also has significant executive experience and experience working in finance. Previously, Mr. Mayer was a professor and Dean of the College of Business and Management at the University of Maryland and was President and CEO of The First Boston Corporation.
David M. Moffett — Mr. Moffett has extensive executive and board of director experience, including serving on audit committees for public companies. Mr. Moffett was selected as CEO when the Federal Home Loan Mortgage Corporation was placed under conservatorship in 2008, and served as a consultant to its interim chief executive officer and the board of directors until 2009. Formerly, Mr. Moffett was the CFO of a large U.S. bank holding company where his responsibilities included trust and wealth management.
Charles R. Nelson — Dr. Nelson is an experienced investment company trustee, having served on the Board, and the boards of predecessor funds, since 1981. He served as Professor of Economics at the University of Washington from 1976 to 2011, he has written several books, authored numerous articles in economics and finance, and served on editorial boards of professional journals. He is a Fellow of the Econometric Society and his contributions were the subject of a conference at the Federal Reserve Bank of Atlanta in 2006. Additionally, he is an experienced consultant on economic and statistical matters.
Statement of Additional Information – October 3, 2016 149

 

Table of Contents
John J. Neuhauser — Dr. Neuhauser is an experienced investment company trustee, having served on the Board since 1985 and on the boards of other investment companies. In addition to his board experience, Dr. Neuhauser has extensive executive experience. He is currently the President of Saint Michael’s College and has served in a variety of other leadership roles in higher education.
Patrick J. Simpson — Mr. Simpson is of counsel and formerly a partner in the Portland, Oregon office of Perkins Coie LLP, an international law firm. Mr. Simpson’s practice has included such relevant areas as corporate governance, corporate finance and securities law compliance for private and public companies.
Anne-Lee Verville — Ms. Verville has significant executive experience. Prior to her retirement in 1997, she held various leadership and executive roles with IBM Corporation. Ms. Verville has previously served on the board of directors for a public company and non-profit organizations.
William F. Truscott — Mr. Truscott has significant executive and board experience with financial services and investment companies. Mr. Truscott has served on the Board of Trustees of certain Columbia funds since 2001. He has served as chairman of the board of the Investment Manager since May 2010 and since February 2012 has served as its president. From 2001 to April 2010, Mr. Truscott served as the president, chairman of the board and chief investment officer of the Investment Manager. He has served as director of the Distributor since May 2010 and since February 2012 has served as its chief executive officer. From 2008 to April 2010, Mr. Truscott served as chairman of the board and chief executive officer of the Distributor.
Consultant to the Trustees:
J. Kevin Connaughton — Mr. Connaughton has significant executive and board experience with financial services and investment companies. Mr. Connaughton served as a senior officer of certain Columbia funds from 2003 through 2015. He served as the managing director and general manager of mutual fund products for the Investment Manager from 2010 through 2015.
Committees of the Board
The Board has organized the following standing committees to facilitate its work: the Audit Committee, the Governance Committee, the Advisory Fees & Expenses Committee, the Compliance Committee, the Investment Oversight Committees and the Product and Distribution Committee. These Committees are comprised solely of Independent Trustees and Mr. Connaughton (as Consultant to the Trustees). The table above describing each Trustee also includes their respective committee assignments. The duties of these committees are described below.
Board Governance Committee. The Governance Committee’s functions include recommending to the Board nominees for Independent Trustee positions and for appointments to various committees, overseeing the Board’s periodic evaluations of the effectiveness of the Board, reviewing and recommending to the Board governance and other policies and practices to be followed in carrying out the Trustees’ duties and responsibilities and reviewing and making recommendations to the Board regarding the compensation of the Independent Trustees.
The Governance Committee will consider nominees for Trustee recommended by shareholders provided that, as applicable, such recommendations are submitted by the date disclosed in a Fund’s proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the 1934 Act. Such shareholder recommendations must be in writing and should be sent to the attention of the Governance Committee in care of the Fund at 225 Franklin Street, Boston, MA 02110. Shareholder recommendations should include the proposed nominee’s biographical information (including business experience for the past ten years) and a description of the qualifications of the proposed nominee, along with a statement from the proposed nominee that he or she is willing to serve and meets the requirements to serve as an Independent Trustee, if applicable.
Compliance Committee. The Compliance Committee’s functions include, among other things, monitoring, supervising and assessing the performance of the Funds’ Chief Compliance Officer and reviewing his compensation, reviewing periodically and recommending changes to the codes of ethics and compliance policies of the Funds and its service providers, and reviewing each Fund’s portfolio execution.
Advisory Fees & Expenses Committee. The Advisory Fees & Expenses Committee’s functions include reviewing and making recommendations to the Board as to contracts requiring approval of a majority of the Independent Trustees and as to any other contracts or fee proposals that may be referred to the Advisory Fees & Expenses Committee by the Board.
Investment Oversight Committee. Each Independent Trustee also serves on an Investment Oversight Committee (IOC). Each IOC is responsible for monitoring, on an ongoing basis, a select group of Columbia Funds overseen by the Board and gives particular consideration to such matters as each Fund’s adherence to its investment mandates, historical performance, changes in investment processes and personnel, and proposed changes to investment objectives. Investment personnel who manage the Funds attend IOC meetings from time to time to assist each IOC in its review of the Funds.
Statement of Additional Information – October 3, 2016 150

 

Table of Contents
Audit Committee. The Audit Committee’s functions include making recommendations to the Board regarding the selection and performance of the independent registered public accounting firm, and reviewing matters relating to accounting and auditing practices and procedures, accounting records and the internal accounting controls of the Funds and certain service providers.
Product and Distribution Committee. The Product and Distribution Committee’s functions include, among other things, reviewing such matters relating to the marketing of the Funds and the distribution of the Fund’s shares, including matters relating to the design and positioning of Funds, marketing and distribution strategies for the Funds and the effectiveness and competitiveness of such strategies, as the Committee may deem appropriate.
The table below shows the number of times each committee met during each Fund’s most recent fiscal period. The Table is organized by fiscal year end.
Committee Meetings
Fiscal Period Audit
Committee
Governance
Committee
Advisory Fees
& Expenses
Committee
Compliance
Committee
Investment
Oversight
Committee
Product &
Distribution
Committee
For Fund with fiscal period
ending January 31
5 5 7 5 10 7
For Funds with fiscal period
ending March 31
5 5 7 5 10 6
For Funds with fiscal period
ending April 30
5 5 8 4 10 6
For Funds with fiscal period
ending May 31
4 4 7 4 8 5
For Funds with fiscal period
ending July 31
4 4 7 4 9 5
For Funds with fiscal period
ending August 31
4 4 6 4 8 5
For Funds with fiscal period
ending October 31
4 4 6 4 8 5
For Fund with fiscal period
ending December 31
4 4 6 4 8 5
Beneficial Equity Ownership
The tables below show, for each Trustee, the amount of Fund equity securities beneficially owned by the Trustee and the aggregate value of all investments in equity securities of all Funds in the Columbia Funds Complex overseen by the Trustee, including notional amounts through the Deferred Compensation Plan, where noted, stated as one of the following ranges: A = $0; B = $1-$10,000; C = $10,001-$50,000; D = $50,001-$100,000; and E = over $100,000. The information is provided as of December 31, 2015.
The tables only include ownership of Columbia Funds overseen by the Trustees; the Trustees and Officers may own shares of other Columbia Funds they do not oversee.
Independent Trustee Ownership
Fund Carrig Hacker Lukitsh Mayer Moffett Nelson Neuhauser Simpson Verville
Adaptive Risk Allocation Fund A E A A A A A A A
Alternative Beta Fund A A A A A A A A A
AMT-Free CT Intermediate Muni Bond Fund A A A A A A A A A
AMT-Free Intermediate Muni Bond Fund A A A A A E A A A
AMT-Free MA Intermediate Muni Bond Fund A A A A A A A A A
AMT-Free NY Intermediate Muni Bond Fund A A A A A A A A A
AMT-Free OR Intermediate Muni Bond Fund A A A A A A A A A
AP – Alternatives Fund A A A A A A A A A
AP – Directional Alternatives Fund A A A A A A A A A
AP – Growth Fund A A A A A A A A A
Statement of Additional Information – October 3, 2016 151

 

Table of Contents
Fund Carrig Hacker Lukitsh Mayer Moffett Nelson Neuhauser Simpson Verville
AP – Small Cap Equity Fund A A A A A A A A A
AP – Total Return Bond Fund A A A A A A A A A
Balanced Fund A A A A A A A D E (a)
Bond Fund A A A A A A A A C (a)
CA Tax-Exempt Fund A A A A A A A A A
Contrarian Core Fund E A A A A A A A A
Corporate Income Fund D (a) A A A A E A A A
Disciplined Small Core Fund A A A A A A A A A
Diversified Absolute Return Fund A A A A A A A A A
Diversified Real Return Fund A A A A A A A A A
Dividend Income Fund E (a) A A A A A A E (a) E (a)
Emerging Markets Fund A E A A A A A E (a) A
Global Dividend Opportunity Fund A A A A A A A A A
Global Energy and Natural Resources Fund A A A A A A A D (a) A
Global Technology Growth Fund A A E A A A A A A
Greater China Fund A E A A A A A A A
High Yield Municipal Fund A A A A A A A A A
Large Cap Growth Fund D A A A A E A E (a) E (a)
Mid Cap Growth Fund A A A A A E A B A
Multi-Asset Income Fund A A A A A A A A A
NY Tax-Exempt Fund A A A A A A A A A
Pacific/Asia Fund A A A A A A A A A
Real Estate Equity Fund A A A A A A A E (a) A
Select Large Cap Growth Fund D E A A E (a) A A A A
Small Cap Growth Fund I A A A A A A A E (a) A
Small Cap Value Fund I A A A A A A D E (a) A
Strategic Income Fund A A A A A A A A D (a)
Tax-Exempt Fund A A A A A A E A A
Total Return Bond Fund A A A A A E A E (a) A
U.S. Social Bond Fund A A A A A A A A A
U.S. Treasury Index Fund A A A A A A A A A
Ultra Short Term Bond Fund A A A A A A A A A
Aggregate Dollar Range of Equity Securities in all Funds in the Columbia Funds Complex Overseen by the Trustee E (a) E E A E (a) E E E (a) E (a)
(a) Includes the value of compensation payable under a Deferred Compensation Plan that is determined as if the amounts deferred had been invested, as of the date of deferral, in shares of one or more funds in the Columbia Funds Complex overseen by the Trustee as specified by the Trustee.
Consultant to the Trustees Ownership
Fund Connaughton
Adaptive Risk Allocation Fund A
Alternative Beta Fund A
AMT-Free CT Intermediate Muni Bond Fund A
AMT-Free Intermediate Muni Bond Fund A
AMT-Free MA Intermediate Muni Bond Fund A
Statement of Additional Information – October 3, 2016 152

 

Table of Contents
Fund Connaughton
AMT-Free NY Intermediate Muni Bond Fund A
AMT-Free OR Intermediate Muni Bond Fund A
AP – Alternatives Fund A
AP – Directional Alternatives Fund A
AP – Growth Fund A
AP – Small Cap Equity Fund A
AP – Total Return Bond Fund A
Balanced Fund C
Bond Fund A
CA Tax-Exempt Fund A
Contrarian Core Fund E
Corporate Income Fund A
Disciplined Small Core Fund A
Diversified Absolute Return Fund A
Diversified Real Return Fund A
Dividend Income Fund A
Emerging Markets Fund D
Global Dividend Opportunity Fund A
Global Energy and Natural Resources Fund A
Global Technology Growth Fund A
Greater China Fund A
High Yield Municipal Fund A
Large Cap Growth Fund A
Mid Cap Growth Fund A
Multi-Asset Income Fund A
NY Tax-Exempt Fund A
Pacific/Asia Fund A
Real Estate Equity Fund A
Select Large Cap Growth Fund E
Small Cap Growth Fund I A
Small Cap Value Fund I A
Strategic Income Fund E
Tax-Exempt Fund A
Total Return Bond Fund A
U.S. Social Bond Fund A
U.S. Treasury Index Fund A
Ultra Short Term Bond Fund A
Aggregate Dollar Range of Equity Securities in all Funds in the
Columbia Funds Complex Overseen by the Consultant
E
Interested Trustee Ownership
Fund Truscott
Adaptive Risk Allocation Fund E
Alternative Beta Fund E
AMT-Free CT Intermediate Muni Bond Fund A
Statement of Additional Information – October 3, 2016 153

 

Table of Contents
Fund Truscott
AMT-Free Intermediate Muni Bond Fund A
AMT-Free MA Intermediate Muni Bond Fund A
AMT-Free NY Intermediate Muni Bond Fund A
AMT-Free OR Intermediate Muni Bond Fund A
AP – Alternatives Fund A
AP – Directional Alternatives Fund A
AP – Growth Fund A
AP – Small Cap Equity Fund A
AP – Total Return Bond Fund A
Balanced Fund A
Bond Fund A
CA Tax-Exempt Fund A
Contrarian Core Fund E (a)
Corporate Income Fund A
Disciplined Small Core Fund A
Diversified Absolute Return Fund C
Diversified Real Return Fund A
Dividend Income Fund A
Emerging Markets Fund C
Global Dividend Opportunity Fund A
Global Energy and Natural Resources Fund A
Global Technology Growth Fund A
Greater China Fund A
High Yield Municipal Fund E
Large Cap Growth Fund D
Mid Cap Growth Fund A
Multi-Asset Income Fund A
NY Tax-Exempt Fund A
Pacific/Asia Fund A
Real Estate Equity Fund A
Select Large Cap Growth Fund E
Small Cap Growth Fund I A
Small Cap Value Fund I A
Strategic Income Fund E
Tax-Exempt Fund A
Total Return Bond Fund D
U.S. Social Bond Fund A
U.S. Treasury Index Fund D
Ultra Short Term Bond Fund A
Aggregate Dollar Range of Equity Securities in all Funds in the
Columbia Funds Complex Overseen by the Trustee
E (a)
(a) Includes notional investments through a deferred compensation account. Mr. Truscott’s deferred compensation plan is separate from that of the Independent Trustees and Mr. Connaughton (as Consultant to the Trustees).
Statement of Additional Information – October 3, 2016 154

 

Table of Contents
Compensation
Total compensation. The following table shows the total compensation paid to Independent Trustees and Mr. Connaughton (as Consultant to the Trustees) for their services from all the Funds in the Columbia Funds Complex overseen by the Trustee for the fiscal year ended May 31, 2016.
Mr. Truscott is not compensated for his services on the Board.
Trustee Name Total Cash Compensation
from the Columbia
Funds
Complex
Paid to Trustee (a)
Amount Deferred
from Total
Compensation (b)
Janet L. Carrig $240,500 $240,500
Douglas A. Hacker $357,000 $0
Nancy T. Lukitsh $245,500 $0
William E. Mayer $228,000 $0
David M. Moffett $238,500 $238,500
Charles R. Nelson $229,000 $0
John J. Neuhauser $252,000 $0
Patrick J. Simpson $250,500 $105,500
Anne-Lee Verville $245,500 $0
J. Kevin Connaughton (c) $76,000 $0
(a) Includes any portion of cash compensation Trustees elected to defer during the fiscal period.
(b) The Trustees may elect to defer a portion of the total cash compensation payable. Additional information regarding the Deferred Compensation Plan is described below.
(c) For the period from March 1, 2016 (when Mr. Connaughton was appointed consultant to the Trustees) to May 31, 2016. Mr. Connaughton receives compensation from the Funds for serving as an independent consultant to the Trustees at an annual rate of $228,000.
In addition to the above compensation, all Independent Trustees and Mr. Connaughton (as Consultant to the Trustees) receive reimbursements for reasonable expenses related to their attendance at meetings of the Board or standing committees, which are not included in the amounts shown.
Independent Trustees and Mr. Connaughton (as Consultant to the Trustees) did not accrue any pension or retirement benefits as part of Fund expenses, nor will they receive any annual benefits upon retirement.
Statement of Additional Information – October 3, 2016 155

 

Table of Contents
Deferred Compensation Plan
Under the terms of the Deferred Fee Agreement (the Deferred Compensation Plan), each eligible Trustee may elect, on an annual basis, to defer receipt of all or a portion of compensation payable to him or her for service as a Trustee for that calendar year (expressly, a Trustee may elect to defer his/her annual retainer, his/her attendance fees, or both components, which together comprise total compensation for service). Fees deferred by a Trustee are credited to a book reserve account (the Deferral Account) established by the Columbia Funds, the value of which is derived from the rate of return of one or more Columbia Funds selected by the Trustee (with accruals to the Deferral Account beginning at such time as a Trustee’s fund elections having been established, and proceeds for service having been paid into such account, and terminating at such time as when proceeds become payable to such Trustee under the Deferred Compensation Plan). Trustees may change their fund elections only in accordance with the provisions of the Deferred Compensation Plan.
Distributions from a Trustee’s Deferral Account will be paid by check, either in a lump sum or in annual installments. Payments made in annual installments are disbursed over a period of up to ten years, following such time as a Trustee may qualify to receive such payments. If a deferring Trustee dies prior to or after the commencement of the disbursement of amounts accrued in his/her Deferral Account, the balance of the account will be distributed to his/her designated beneficiary either in lump sum or in annual payments as established by such Trustee himself/herself, his/her beneficiary or his/her estate. Amounts payable under the Deferred Compensation Plan are not funded or secured in any way, and each deferring Trustee has the status of a general unsecured creditor of the Columbia Fund(s) from which compensation has been deferred.
Compensation from each Fund . The following table shows the compensation paid to Independent Trustees and Mr. Connaughton (as Consultant to the Trustees) from each Fund during its last fiscal period, as well as the amount deferred from each Fund, which is included in the total.
Fund Aggregate Compensation from Fund
Independent Trustees   Consultant
to
Trustees
Janet L.
Carrig (a)
Douglas A.
Hacker
Nancy T.
Lukitsh
William E.
Mayer
David M.
Moffett (b)
Charles R.
Nelson
John J.
Neuhauser
Patrick J.
Simpson (c)
Anne-Lee
Verville (d)
J. Kevin
Connaughton (e)
 
For Funds with fiscal period ending January 31
Diversified Real Return Fund $1,374 $2,039 $1,412 $1,302 $1,365 $1,317 $1,441 $1,441 $1,403 N/A  
Amount Deferred $1,374 $0 $0 $0 $1,365 $0 $0 $603 $0 N/A  
For Funds with fiscal period ending March 31
AP - Growth Fund $5,697 $8,289 $5,821 $5,386 $5,567 $5,436 $5,937 $5,888 $5,734 $630  
Amount Deferred $5,697 $0 $0 $0 $5,567 $0 $0 $2,519 $0 $0  
Pacific/Asia Fund $1,841 $2,717 $1,893 $1,746 $1,812 $1,766 $1,932 $1,912 $1,862 $145  
Amount Deferred $1,841 $0 $0 $0 $1,812 $0 $0 $786 $0 $0  
Select Large Cap Growth Fund $14,928 $22,139 $15,370 $14,162 $14,707 $14,324 $15,688 $15,532 $15,146 $1,194  
Amount Deferred $14,928 $0 $0 $0 $14,707 $0 $0 $6,314 $0 $0  
For Funds with fiscal period ending April 30
AP - Directional Alternatives Fund (f) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A  
Amount Deferred N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A  
Bond Fund $2,502 $3,721 $2,543 $2,371 $2,480 $2,355 $2,596 $2,580 $2,554 $782  
Amount Deferred $2,502 $0 $0 $0 $2,480 $0 $0 $1,434 $0 $0  
Corporate Income Fund $3,982 $5,919 $4,046 $3,775 $3,947 $3,748 $4,129 $4,106 $4,065 $1,216  
Amount Deferred $3,982 $0 $0 $0 $3,947 $0 $0 $1,568 $0 $0  
Multi-Asset Income Fund $1,528 $2,275 $1,554 $1,448 $1,517 $1,439 $1,586 $1,576 $1,560 $492  
Amount Deferred $1,528 $0 $0 $0 $1,517 $0 $0 $647 $0 $0  
Small Cap Value Fund I $2,964 $4,412 $3,011 $2,810 $2,939 $2,790 $3,073 $3,056 $3,028 $850  
Amount Deferred $2,964 $0 $0 $0 $2,939 $0 $0 $1,252 $0 $0  
Total Return Bond Fund $7,958 $11,839 $8,092 $7,545 $7,876 $7,493 $8,258 $8,208 $8,207 $2,500  
Amount Deferred $7,958 $0 $0 $0 $7,876 $0 $0 $3,377 $0 $0  
U.S. Treasury Index Fund $2,277 $3,401 $2,322 $2,160 $2,271 $2,147 $2,371 $2,352 $2,326 $828  
Amount Deferred $2,277 $0 $0 $0 $2,271 $0 $0 $959 $0 $0  
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund $2,208 $3,279 $2,255 $2,093 $2,190 $2,104 $2,316 $2,302 $2,254 $715  
Amount Deferred $2,208 $0 $0 $0 $2,190 $0 $0 $969 $0 $0  
Statement of Additional Information – October 3, 2016 156

 

Table of Contents
Fund Aggregate Compensation from Fund
Independent Trustees   Consultant
to
Trustees
Janet L.
Carrig (a)
Douglas A.
Hacker
Nancy T.
Lukitsh
William E.
Mayer
David M.
Moffett (b)
Charles R.
Nelson
John J.
Neuhauser
Patrick J.
Simpson (c)
Anne-Lee
Verville (d)
J. Kevin
Connaughton (e)
 
Alternative Beta Fund $1,691 $2,513 $1,727 $1,604 $1,678 $1,611 $1,773 $1,762 $1,727 $540  
Amount Deferred $1,691 $0 $0 $0 $1,678 $0 $0 $740 $0 $0  
Diversified Absolute Return Fund $1,614 $2,399 $1,650 $1,530 $1,604 $1,539 $1,694 $1,683 $1,648 $533  
Amount Deferred $1,614 $0 $0 $0 $1,604 $0 $0 $708 $0 $0  
Dividend Income Fund $18,018 $26,725 $18,379 $17,079 $17,889 $17,146 $18,863 $18,759 $18,386 $5,523  
Amount Deferred $18,018 $0 $0 $0 $17,889 $0 $0 $7,912 $0 $0  
HY Municipal Fund $3,047 $4,527 $3,113 $2,889 $3,025 $2,904 $3,196 $3,176 $3,111 $999  
Amount Deferred $3,047 $0 $0 $0 $3,025 $0 $0 $1,336 $0 $0  
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund $2,324 $3,635 $2,435 $2,253 $2,450 $2,276 $2,498 $2,457 $2,383 N/A  
Amount Deferred $2,324 $0 $0 $0 $1,501 $0 $0 $460 $0 N/A  
Large Cap Growth Fund $7,967 $12,425 $8,347 $7,720 $8,396 $7,804 $8,561 $8,424 $8,165 N/A  
Amount Deferred $7,967 $0 $0 $0 $5,192 $0 $0 $1,621 $0 N/A  
Tax-Exempt Fund $9,538 $14,918 $9,993 $9,246 $10,055 $9,342 $10,251 $10,084 $9,779 N/A  
Amount Deferred $9,538 $0 $0 $0 $6,152 $0 $0 $1,893 $0 N/A  
U.S. Social Bond Fund (g) $325 $491 $355 $310 $342 $333 $362 $362 $332 N/A  
Amount Deferred $325 $0 $0 $0 $342 $0 $0 $153 $0 N/A  
Ultra Short Term Bond Fund $4,786 $7,498 $5,013 $4,642 $5,046 $4,686 $5,144 $5,056 $4,908 N/A  
Amount Deferred $4,786 $0 $0 $0 $2,995 $0 $0 $901 $0 N/A  
For Funds with fiscal period ending August 31
AP - Alternatives Fund $2,960 $4,381 $3,043 $2,839 $3,092 $2,840 $3,123 $3,083 $3,006 N/A  
Amount Deferred $2,960 $0 $0 $0 $2,157 $0 $0 $824 $0 N/A  
AP - Small Cap Equity Fund $2,928 $4,271 $2,984 $2,800 $3,044 $2,790 $3,059 $3,035 $2,960 N/A  
Amount Deferred $2,928 $0 $0 $0 $2,192 $0 $0 $895 $0 N/A  
AP - Total Return Bond Fund $10,990 $16,205 $11,280 $10,534 $11,466 $10,534 $11,575 $11,444 $11,148 N/A  
Amount Deferred $10,990 $0 $0 $0 $8,134 $0 $0 $3,182 $0 N/A  
Balanced Fund $6,522 $9,547 $6,670 $6,240 $6,788 $6,236 $6,838 $6,782 $6,600 N/A  
Amount Deferred $6,522 $0 $0 $0 $4,969 $0 $0 $2,004 $0 N/A  
Contrarian Core Fund $12,581 $18,441 $12,882 $12,042 $13,099 $12,038 $13,208 $13,089 $12,735 N/A  
Amount Deferred $12,581 $0 $0 $0 $9,516 $0 $0 $3,782 $0 N/A  
Disciplined Small Core Fund $3,403 $5,078 $3,513 $3,271 $3,564 $3,274 $3,609 $3,550 $3,465 N/A  
Amount Deferred $3,403 $0 $0 $0 $2,394 $0 $0 $877 $0 N/A  
Emerging Markets Fund $4,456 $6,595 $4,582 $4,275 $4,654 $4,275 $4,704 $4,642 $4,525 N/A  
Amount Deferred $4,456 $0 $0 $0 $3,233 $0 $0 $1,231 $0 N/A  
Global Dividend Opportunity Fund $3,142 $4,660 $3,234 $3,016 $3,284 $3,017 $3,321 $3,274 $1,464 N/A  
Amount Deferred $3,142 $0 $0 $0 $2,044 $0 $0 $852 $0 N/A  
Global Energy and Natural Resources Fund $2,043 $3,031 $2,102 $1,961 $2,136 $1,961 $2,159 $2,128 $2,077 N/A  
Amount Deferred $2,043 $0 $0 $0 $1,461 $0 $0 $554 $0 N/A  
Global Technology Growth Fund $1,971 $2,902 $2,021 $1,888 $2,055 $1,888 $2,074 $2,051 $1,998 N/A  
Amount Deferred $1,971 $0 $0 $0 $1,467 $0 $0 $1,171 $0 N/A  
Greater China Fund $1,703 $2,517 $1,749 $1,634 $1,778 $1,633 $1,796 $1,773 $1,729 N/A  
Amount Deferred $1,703 $0 $0 $0 $1,244 $0 $0 $477 $0 N/A  
Mid Cap Growth Fund $5,983 $8,868 $6,155 $5,742 $6,252 $5,742 $6,320 $6,232 $6,079 N/A  
Amount Deferred $5,983 $0 $0 $0 $4,281 $0 $0 $1,634 $0 N/A  
Small Cap Growth Fund I $2,904 $4,340 $2,996 $2,793 $3,043 $2,791 $3,080 $3,026 $2,959 N/A  
Amount Deferred $2,904 $0 $0 $0 $1,982 $0 $0 $723 $0 N/A  
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund $1,710 $2,516 $1,757 $1,640 $1,699 $1,640 $1,793 $1,781 $1,735 N/A  
Statement of Additional Information – October 3, 2016 157

 

Table of Contents
Fund Aggregate Compensation from Fund
Independent Trustees   Consultant
to
Trustees
Janet L.
Carrig (a)
Douglas A.
Hacker
Nancy T.
Lukitsh
William E.
Mayer
David M.
Moffett (b)
Charles R.
Nelson
John J.
Neuhauser
Patrick J.
Simpson (c)
Anne-Lee
Verville (d)
J. Kevin
Connaughton (e)
 
Amount Deferred $1,710 $0 $0 $0 $1,527 $0 $0 $565 $0 N/A  
AMT-Free Intermediate Muni Bond Fund $5,670 $8,341 $5,826 $5,437 $5,625 $5,438 $5,944 $5,906 $5,754 N/A  
Amount Deferred $5,670 $0 $0 $0 $5,072 $0 $0 $1,896 $0 N/A  
AMT-Free MA Intermediate Muni Bond Fund $1,977 $2,909 $2,031 $1,896 $1,964 $1,896 $2,072 $2,059 $2,006 N/A  
Amount Deferred $1,977 $0 $0 $0 $1,765 $0 $0 $654 $0 N/A  
AMT-Free NY Intermediate Muni Bond Fund $1,925 $2,831 $1,977 $1,845 $1,911 $1,845 $2,017 $2,004 $1,953 N/A  
Amount Deferred $1,925 $0 $0 $0 $1,719 $0 $0 $639 $0 N/A  
CA Tax-Exempt Fund $2,364 $3,478 $2,428 $2,267 $2,344 $2,266 $2,477 $2,461 $2,399 N/A  
Amount Deferred $2,364 $0 $0 $0 $2,111 $0 $0 $786 $0 N/A  
NY Tax-Exempt Fund $1,745 $2,568 $1,793 $1,674 $1,733 $1,673 $1,829 $1,817 $1,771 N/A  
Amount Deferred $1,745 $0 $0 $0 $1,558 $0 $0 $577 $0 N/A  
Strategic Income Fund $5,546 $8,149 $5,695 $5,320 $5,486 $5,315 $5,809 $5,771 $5,627 N/A  
Amount Deferred $5,546 $0 $0 $0 $4,918 $0 $0 $2,645 $0 N/A  
For Funds with fiscal period ending December 31
Real Estate Equity Fund $2,447 $3,641 $2,518 $2,321 $2,437 $2,348 $2,570 $2,568 $2,501 N/A  
Amount Deferred $2,447 $0 $0 $0 $2,437 $0 $0 $946 $0 N/A  
(a) As of December 31, 2015, the value of Ms. Carrig’s account under the deferred compensation plan was $900,488.
(b) As of December 31, 2015, the value of Mr. Moffett's account under the deferred compensation plan was $245,269.
(c) As of December 31, 2015, the value of Mr. Simpson’s account under the deferred compensation plan was $2,002,201.
(d) As of December 31, 2015, the value of Ms. Verville’s account under the deferred compensation plan was $733,630.
(e) Payments to Mr. Connaughton are for the period from March 1, 2016 (when he was first appointed consultant to the Trustees) through the applicable fiscal year end. Mr. Connaughton receives compensation from the Funds for serving as an independent consultant to the Trustees at an annual rate of $228,000.
(f) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(g) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
Statement of Additional Information – October 3, 2016 158

 

Table of Contents
BROKERAGE ALLOCATION AND RELATED PRACTICES
General Brokerage Policy, Brokerage Transactions and Broker Selection
Subject to policies established by the Board, as well as the terms of the Investment Management Services Agreement, Management Agreement and Subadvisory Agreement, as applicable, the Investment Manager (and/or the investment subadviser(s) who makes the day-to-day investment decisions for all or a portion of a Fund’s net assets) is responsible for decisions to buy and sell securities and other instruments and assets for a Fund, for the selection of broker-dealers, for the execution of a Fund’s transactions and for the allocation of brokerage commissions in connection with such transactions. The Investment Manager effects transactions for the Fund consistent with its duty to seek best execution of client (including Fund) orders under the circumstances of the particular transaction. Purchases and sales of securities on a securities exchange are effected through broker-dealers who charge negotiated commissions for their services. Orders may be directed to any broker-dealer to the extent and in the manner permitted by applicable law and by the policies and procedures of the Investment Manager and/or any investment subadvisers.
In the over-the-counter market, securities generally are traded on a “net” basis with dealers acting as principals for their own accounts without stated commissions, although the price of a security usually includes a profit to the dealer. In underwritten offerings, securities are bought at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the underwriter’s “concession” or “discount.” On occasion, certain money market instruments may be bought directly from an issuer, in which case no commissions or discounts are paid.
The Investment Manager effects security transactions for the Funds consistent with its duty to seek best execution of client (including the Funds) orders under the circumstances of the particular transaction. In seeking such execution, the Investment Manager will use its best judgment in evaluating the terms of a transaction, and will give consideration to various relevant factors, including, without limitation, the size and type of the transaction, the nature and character of the market for the security or other instrument or asset, the confidentiality, speed and certainty of effective execution required for the transaction, the general execution and operational capabilities of the broker-dealer, the reputation, reliability, experience and financial condition of the broker-dealer, the value and quality of the services rendered by the broker-dealer in this instance and other transactions and the reasonableness of the spread or commission, if any. Research services received from broker-dealers supplement the Investment Manager’s own research and may include the following types of information: statistical and background information on industry groups and individual companies; forecasts and interpretations with respect to U.S. and foreign economies, securities, markets, specific industry groups and individual companies; information on political developments; Fund management strategies; performance information on securities and other instruments and assets and information concerning prices of same; and information supplied by specialized services to the Investment Manager and to the Board with respect to the performance, investment activities and fees and expenses of other funds. Such information may be communicated electronically, orally or in written form.
Broker-dealers may, from time to time, arrange meetings with management of companies and provide access to consultants who supply research information. The outside research is useful to the Investment Manager since, in certain instances, the broker-dealers utilized by the Investment Manager may follow a different universe of issuers and other matters than those that the Investment Manager’s staff follow. In addition, this research provides the Investment Manager with a different perspective on investment matters, even if the securities research obtained relates to issuers followed by the Investment Manager.
Research services that are provided to the Investment Manager by broker-dealers are available for the benefit of all accounts managed or advised by the Investment Manager. In some cases, the research services are available only from the broker-dealer providing such services. In other cases, the research services may be obtainable from alternative sources. Broker-dealer research typically supplements rather than replaces the Investment Manager’s own research, tending to improve the quality of its investment advice. However, to the extent that the Investment Manager would have bought any such research services had such services not been provided by broker-dealers, the expenses of such services to the Investment Manager could be considered to have been reduced accordingly. Certain research services furnished by broker-dealers may be useful to the clients of the Investment Manager other than the Funds. Conversely, any research services received by the Investment Manager through the placement of transactions of other clients may be of value to the Investment Manager in fulfilling its obligations to the Funds. The Investment Manager is of the opinion that this material is beneficial in supplementing its research and analysis; and, therefore, it may benefit the Funds by improving the quality of the Investment Manager’s investment advice. The advisory fees paid by the Funds are not reduced because the Investment Manager receives such services.
Under Section 28(e) of the 1934 Act, the Investment Manager shall not be “deemed to have acted unlawfully or to have breached its fiduciary duty” solely because under certain circumstances it has caused the account to pay a higher commission than the lowest available. To obtain the benefit of Section 28(e), the Investment Manager must make a good faith determination that the commissions paid are “reasonable in relation to the value of the brokerage and research services provided by such member, broker, or dealer, viewed in terms of either that particular transaction or his overall responsibilities with respect to the accounts
Statement of Additional Information – October 3, 2016 159

 

Table of Contents
as to which he exercises investment discretion.” Accordingly, the price to a Fund in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the portfolio execution services offered. Some broker-dealers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by the Investment Manager’s clients, including the Funds.
The Investment Manager does not consider sales of shares of the Funds as a factor in the selection of broker-dealers through which to execute securities transactions on behalf of the Funds. On a periodic basis, the Investment Manager makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions, including review by an independent third-party evaluator. The review evaluates execution, operational efficiency, and research services.
Commission rates are established pursuant to negotiations with broker-dealers based on the quality and quantity of execution services provided by broker-dealers in light of generally prevailing rates. On exchanges on which commissions are negotiated, the cost of transactions may vary among different broker-dealers. Transactions on foreign stock exchanges involve payment of brokerage commissions that generally are fixed. Transactions in both foreign and domestic over-the-counter markets generally are principal transactions with dealers, and the costs of such transactions involve dealer spreads rather than brokerage commissions. With respect to over-the-counter transactions, the Investment Manager, where possible, will deal directly with dealers who make a market in the securities involved, except in those circumstances in which better prices and execution are available elsewhere.
The Investment Manager or a subadviser, if applicable, may use step-out transactions. A “step-out” is an arrangement in which the Investment Manager or subadviser executes a trade through one broker-dealer but instructs that broker-dealer to step-out all or a part of the trade to another broker-dealer. The second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. The Investment Manager or subadviser may receive research products and services in connection with step-out transactions.
Use of Fund commissions may create potential conflicts of interest between the Investment Manager or subadviser and a Fund. However, the Investment Manager and each subadviser has policies and procedures in place intended to mitigate these conflicts and ensure that the use of fund commissions falls within the “safe harbor” of Section 28(e) of the 1934 Act. Some products and services may be used for both investment decision-making and non-investment decision-making purposes (“mixed use” items). The Investment Manager and each subadviser, to the extent it has mixed use items, has procedures in place to assure that Fund commissions pay only for the investment decision-making portion of a mixed-use item.
Some broker-dealers with whom the Investment Manager’s Fixed Income Department executes trades provide the Fixed Income Department with proprietary research products and services, though the Fixed Income Department does not put in place any client commission arrangements with such broker-dealers. However, such research may be considered by the Fixed Income Department when determining which broker-dealers to include on its approved broker-dealer list. It is the Investment Manager’s policy not to execute a fixed income trade with a broker-dealer at a lower bid/higher offer than that provided by another broker-dealer in consideration of the value of research products and services received by the Fixed Income Department.
In certain instances, there may be securities that are suitable for a Fund as well as for one or more of the other clients of the Investment Manager. Investment decisions for the Funds and for the Investment Manager’s other clients are made with the goal of achieving their respective investment objectives. A particular security may be bought or sold for only one client even though it may be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security. Some simultaneous transactions are inevitable when a number of accounts receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are engaged simultaneously in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. In some cases, this policy could have a detrimental effect on the price or volume of the security in a particular transaction that may affect the Funds.
The Investment Manager operates several separate trading desks in different geographic locations in the United States. The trading desks support different portfolio management teams managing a variety of accounts and products. Nevertheless, the equity desks are functionally and operationally integrated so as to operate as one virtual desk. The fixed income desks, however, function and operate separately but can provide support to each other to assure the continuation of services if necessary. By operating the fixed income trading desks in this manner, the Funds may forego certain opportunities including the aggregation of trades across accounts that trade on different trading desks, which could result in one trading desk competing with another in the market for similar trades. In addition, it is possible that the separate fixed income trading desks may be on opposite sides of a trade at the same time. While the trading desks operate in several locations, the desks do have linkages in oversight and reporting lines and are generally conducted under similar policies and procedures. In addition, certain fixed income portfolio managers currently have the authority to execute trades themselves.
Statement of Additional Information – October 3, 2016 160

 

Table of Contents
As the Investment Manager seeks to enhance its investment capabilities and services to its clients, including the Funds, the Investment Manager may engage certain of its investment advisory affiliates (Participating Affiliates) around the world to provide a variety of services. For example, the Investment Manager may engage Participating Affiliates and their personnel to provide (jointly or in coordination with the Investment Manager) services relating to client relations, investment monitoring, account administration, trading and discretionary investment management (including portfolio management and risk management) to certain accounts the Investment Manager manages, including the Funds, other pooled vehicles and separately managed accounts. In some circumstances, a Participating Affiliate may delegate responsibility for providing those services to another Participating Affiliate. In addition, the Investment Manager may provide certain similar services to its Participating Affiliates for accounts they manage.
The Investment Manager believes that harnessing the collective expertise of the firm and its Participating Affiliates will benefit its clients. In this regard, the Investment Manager has certain portfolio management and client servicing teams at both the firm and at Participating Affiliates (through subadvisory or other intercompany arrangements) operating jointly to provide a better client experience. These joint teams use expanded and shared capabilities that the Investment Manager and its Participating Affiliates provide, including the sharing of research and other information by investment personnel ( e.g. , portfolio managers and analysts) across the firm and at its Participating Affiliates relating to economic perspectives, market analysis and equity and fixed income securities analysis.
Participating Affiliates may provide certain advisory and trading-related services to certain of the Investment Manager’s accounts, including the Funds. The Investment Manager may also provide similar services to certain accounts of Participating Affiliates. The Investment Manager believes that local trading in certain local markets will benefit its clients, including the Funds. However, such services may result in potential conflicts of interest to such accounts.
The Investment Manager has portfolio management teams in its multiple geographic locations that may share research information regarding leveraged loans. The Investment Manager operates separate and independent trading desks in these locations for the purpose of purchasing and selling leveraged loans. As a result, the Investment Manager does not aggregate orders in leveraged loans across portfolio management teams. For example, funds and other client accounts being managed by these portfolio management teams may purchase and sell the same leveraged loan in the secondary market on the same day at different times and at different prices. There is also the potential for a particular account or group of accounts, including a Fund, to forego an opportunity or to receive a different allocation (either larger or smaller) than might otherwise be obtained if the Investment Manager were to aggregate trades in leveraged loans across the portfolio management teams. Although the Investment Manager does not aggregate orders in leveraged loans across its portfolio management teams in the multiple geographic locations, it operates in this structure subject to its duty to seek best execution.
The Funds may participate, if and when practicable, in bidding for the purchase of portfolio securities directly from an issuer in order to take advantage of the lower purchase price available to members of a bidding group. A Fund will engage in this practice, however, only when the Investment Manager, in its sole discretion, believes such practice to be otherwise in such Fund’s interests.
The Funds will not execute portfolio transactions through, or buy or sell portfolio securities from or to the Investment Manager and its affiliates acting as principal (including repurchase and reverse repurchase agreements), except to the extent permitted by applicable law, regulation or order. However, the Investment Manager is authorized to allocate buy and sell orders for portfolio securities to certain broker-dealers and financial institutions, including, in the case of agency transactions, broker-dealers and financial institutions that are affiliated with Ameriprise Financial. To the extent that a Fund executes any securities trades with an affiliate of Ameriprise Financial, such Fund does so in conformity with Rule 17e-1 under the 1940 Act and the procedures that such Fund has adopted pursuant to the rule. In this regard, for each transaction, the Board will determine that the transaction is effected in accordance with the Funds’ Rule 17e-1 procedures, which require: (i) the transaction resulted in prices for and execution of securities transactions at least as favorable to the particular Fund as those likely to be derived from a non-affiliated qualified broker-dealer; (ii) the affiliated broker-dealer charged the Fund commission rates consistent with those charged by the affiliated broker-dealer in similar transactions to clients comparable to the Fund and that are not affiliated with the broker-dealer in question; and (iii) the fees, commissions or other remuneration paid by the Fund did not exceed 2% of the sales price of the securities if the sale was effected in connection with a secondary distribution, or 1% of the purchase or sale price of such securities if effected in other than a secondary distribution.
Certain affiliates of Ameriprise Financial may have deposit, loan or commercial banking relationships with the corporate users of facilities financed by industrial development revenue bonds or private activity bonds bought by certain of the Funds. Ameriprise Financial or certain of its affiliates may serve as trustee, custodian, tender agent, guarantor, placement agent, underwriter, or in some other capacity, with respect to certain issues of securities. Under certain circumstances, a Fund may buy securities from a member of an underwriting syndicate in which an affiliate of Ameriprise Financial is a member. The Funds have adopted procedures pursuant to Rule 10f-3 under the 1940 Act, and intend to comply with the requirements of Rule 10f-3, in connection with any purchases of securities that may be subject to Rule 10f-3.
Statement of Additional Information – October 3, 2016 161

 

Table of Contents
Given the breadth of the Investment Manager’s investment management activities, investment decisions for the Funds are not always made independently from those other investment companies and accounts advised or managed by the Investment Manager. To the extent permitted by law, when a purchase or sale of the same security is made at substantially the same time on behalf of one or more of the Funds and another investment portfolio, investment company or account, the Investment Manager may aggregate the securities to be sold or bought for the Funds with those to be sold or bought for other investment portfolios, investment companies or accounts in executing transactions, and such transactions will be averaged as to price and available investments allocated as to amount in a manner which the Investment Manager believes to be equitable to the Funds and such other investment portfolio, investment company or account. In some instances, this investment procedure may adversely affect the price paid or received by a Fund or the size of the position obtained or sold by the Fund.
See Investment Management and Other Services – Other Roles and Relationships of Ameriprise Financial and its Affiliates – Certain Conflicts of Interest for more information about these and other conflicts of interest.
Brokerage Commissions
The following charts reflect the amounts of brokerage commissions paid by the Funds for the three most recently completed fiscal years. In certain instances, the Funds may pay brokerage commissions to broker-dealers that are affiliates of Ameriprise Financial. As indicated above, all such transactions involving the payment of brokerage commissions to affiliates are done in compliance with Rule 17e-1 under the 1940 Act.
Aggregate Brokerage Commissions Paid by the Funds
The following chart reflects the aggregate amount of brokerage commissions paid by the Funds for the three most recently completed fiscal years. Differences, year to year, in the amount of brokerage commissions paid by a Fund were primarily the result of increased market volatility as well as shareholder purchase and redemption activity in the Fund. The table is organized by fiscal year end.
Total Brokerage Commissions
  Total Brokerage Commissions
Fund 2016 2015 2014
For Funds with fiscal period ending January 31
Diversified Real Return Fund $530 $932 (a) N/A
For Funds with fiscal period ending March 31
AP – Growth Fund 1,540,259 1,048,675 $603,846
Pacific/Asia Fund 456,905 510,601 975,653
Select Large Cap Growth Fund 2,716,236 2,312,302 2,355,987
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (b) N/A N/A N/A
Bond Fund 23,846 15,224 14,153
Corporate Income Fund 54,070 59,212 18,989
Multi-Asset Income Fund 22,078 42,481 (c) N/A
Small Cap Value Fund I 1,960,857 2,305,255 2,220,756
Total Return Bond Fund 167,980 72,702 62,945
U.S. Treasury Index Fund 0 0 0
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 239,119 210,129 38,958
Alternative Beta Fund 46,588 23,795 (d) N/A
Diversified Absolute Return Fund 2,293,997 618,976 (e) N/A
Dividend Income Fund 1,853,862 2,285,197 2,025,676
HY Municipal Fund 0 0 0
Fund 2015 2014 2013
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund 0 0 0
Statement of Additional Information – October 3, 2016 162

 

Table of Contents
  Total Brokerage Commissions
Fund 2015 2014 2013
Large Cap Growth Fund $1,344,066 $2,033,118 $2,900,260
Tax-Exempt Fund 0 0 0
U.S. Social Bond Fund 0 (f) N/A N/A
Ultra Short Term Bond Fund 0 0 0
For Funds with fiscal period ending August 31
AP – Alternatives Fund 1,427,187 922,515 544,925
AP – Small Cap Equity Fund 1,967,401 1,184,871 965,684
AP – Total Return Bond Fund 210,419 176,614 149,453
Balanced Fund 827,182 710,397 524,505
Contrarian Core Fund 2,566,680 2,340,216 1,494,935
Disciplined Small Core Fund 821,155 638,076 800,017
Emerging Markets Fund 4,498,397 4,414,146 3,805,177
Global Dividend Opportunity Fund 1,119,280 1,393,143 890,272
Global Energy and Natural Resources Fund 265,939 188,876 373,043
Global Technology Growth Fund 333,197 238,290 347,976
Greater China Fund 268,667 372,496 390,131
Mid Cap Growth Fund 2,311,420 2,780,196 3,171,321
Small Cap Growth Fund I 1,711,624 3,823,650 2,759,776
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 0 0 0
AMT-Free Intermediate Muni Bond Fund 0 0 0
AMT-Free MA Intermediate Muni Bond Fund 0 0 0
AMT-Free NY Intermediate Muni Bond Fund 0 0 0
CA Tax-Exempt Fund 0 0 0
NY Tax-Exempt Fund 0 0 0
Strategic Income Fund 129,182 185,392 143,363
For Funds with fiscal period ending December 31
Real Estate Equity Fund 284,239 354,039 816,359
(a) For the period from March 11, 2014 (commencement of operations) to January 31, 2015.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) For the period from March 27, 2015 (commencement of operations) to April 30, 2015.
(d) For the period from January 27, 2015 (commencement of operations) to May 31, 2015.
(e) For the period from February 19, 2015 (commencement of operations) to May 31, 2015.
(f) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
Brokerage Commissions Paid to Brokers Affiliated with the Investment Manager
Affiliates of the Investment Manager may engage in brokerage and other securities transactions on behalf of a Fund according to procedures adopted by the Board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the Board, the same conditions apply to transactions with broker-dealer affiliates of any Fund subadviser. The Investment Manager will use an affiliate only if (i) the Investment Manager determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement or Management Agreement, as applicable.
No brokerage commissions were paid by the Funds in the last three fiscal periods to brokers affiliated with the Funds' Investment Manager or any subadvisers.
Statement of Additional Information – October 3, 2016 163

 

Table of Contents
Directed Brokerage
The Funds or the Investment Manager, through an agreement or understanding with a broker-dealer, or otherwise through an internal allocation procedure, may direct, subject to applicable legal requirements, the Funds' brokerage transactions to a broker-dealer because of the research services it provides the Funds or the Investment Manager.
Reported numbers include third party soft dollar commissions and portfolio manager directed commissions directed for research. The Investment Manager also receives proprietary research from brokers, but these amounts have not been included in the table.
During each Fund’s most recent applicable fiscal year (or period), the Funds directed certain brokerage transactions and paid related commissions in the amounts as follows:
Brokerage Directed for Research
  Brokerage directed for research
Fund Amount of Transactions Amount of Commissions Imputed or Paid
For Funds with fiscal period ending January 31
Diversified Real Return Fund $88,872 $90
For Funds with fiscal period ending March 31
AP – Growth Fund 1,517,665,346 420,972
Pacific/Asia Fund 52,449,273 63,914
Select Large Cap Growth Fund 3,248,841,086 798,945
For Funds with fiscal period ending April 30
AP – Directional Alternatives Fund (b) N/A N/A
Bond Fund 0 0
Corporate Income Fund 0 0
Multi-Asset Income Fund 4,258,586 2,616
Small Cap Value Fund I 368,327,131 604,735
Total Return Bond Fund 0 0
U.S. Treasury Index Fund 0 0
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund 20,967,719 26,939
Alternative Beta Fund 0 0
Diversified Absolute Return Fund 15,020,515 5,985
Dividend Income Fund 2,538,520,190 1,162,507
HY Municipal Fund 0 0
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund 0 0
Large Cap Growth Fund 2,194,385,745 665,395
Tax-Exempt Fund 0 0
U.S. Social Bond Fund 0 (c) 0 (c)
Ultra Short Term Bond Fund 0 0
For Funds with fiscal period ending August 31
AP – Alternatives Fund 1,314,459,711 428,582
AP – Small Cap Equity Fund 357,152,180 443,402
AP – Total Return Bond Fund 0 0
Balanced Fund 1,346,771,333 417,435
Contrarian Core Fund 3,908,521,081 1,197,988
Statement of Additional Information – October 3, 2016 164

 

Table of Contents
  Brokerage directed for research
Fund Amount of Transactions Amount of Commissions Imputed or Paid
Disciplined Small Core Fund $184,278,973 $211,314
Emerging Markets Fund 398,474,755 596,411
Global Dividend Opportunity Fund 432,925,203 339,121
Global Energy and Natural Resources Fund 147,279,852 103,633
Global Technology Growth Fund 39,219,131 25,114
Greater China Fund 33,625,006 36,811
Mid Cap Growth Fund 1,172,846,382 592,009
Small Cap Growth Fund I 358,655,661 308,335
For Funds with fiscal period ending October 31
AMT-Free CT Intermediate Muni Bond Fund 0 0
AMT-Free Intermediate Muni Bond Fund 0 0
AMT-Free MA Intermediate Muni Bond Fund 0 0
AMT-Free NY Intermediate Muni Bond Fund 0 0
CA Tax-Exempt Fund 0 0
NY Tax-Exempt Fund 0 0
Strategic Income Fund 2,655 3
For Funds with fiscal period ending December 31
Real Estate Equity Fund 91,002,083 48,002
(a) For the period from March 11, 2014 (commencement of operations) to January 31, 2015.
(b) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
(c) For the period from March 26, 2015 (commencement of operations) to July 31, 2015.
Securities of Regular Broker-Dealers
In certain cases, the Funds, as part of their principal investment strategies, or otherwise as a permissible investment, will invest in the common stock or debt obligations of the regular broker-dealers that the Investment Manager uses to transact brokerage for the Funds.
As of each Fund’s most recent applicable fiscal year (or period) end, the Funds owned securities of their “regular brokers or dealers” or their parents, as defined in Rule 10b-1 under the 1940 Act, as shown in the table below:
Investments in Securities of Regular Brokers or Dealers
Fund Issuer Value of securities owned
at end of fiscal period
For Funds with fiscal period ending January 31, 2016
Diversified Real Return None N/A
For Funds with fiscal period ending March 31, 2016
AP – Growth Fund None N/A
Pacific/Asia Fund None N/A
Select Large Cap Growth Fund None N/A
Statement of Additional Information – October 3, 2016 165

 

Table of Contents
Fund Issuer Value of securities owned
at end of fiscal period
For Funds with fiscal period ending April 30, 2016
AP – Directional Alternatives Fund (a) N/A N/A
Bond Fund Chase Issuance Trust $864,660
Citigroup, Inc. $8,173,803
Citigroup Commercial Mortgage Trust $1,426,646
Citigroup Mortgage Loan Trust, Inc. $815,117
Credit Suisse Mortgage Capital Certificates $352,138
GS Mortgage Securities Trust $977,456
JPMorgan Chase & Co. $3,029,070
JPMorgan Chase Capital XXI $180,469
JPMorgan Chase Commercial Mortgage Securities Trust $1,556,227
LB-UBS Commercial Mortgage Trust $1,115,309
Merrill Lynch Mortgage Investors Trust $3,393
Morgan Stanley Re-Remic Trust $2,097,122
Morgan Stanley Bank of America Merrill Lynch Trust $503,594
PNC Financial Services Group, Inc.(The) $2,099,960
Corporate Income Fund Citigroup, Inc. $5,845,638
E*TRADE Financial Corp. $815,632
Morgan Stanley $1,593,005
Multi-Asset Income Fund Citigroup, Inc. $249,900
Citigroup Mortgage Loan Trust, Inc. $1,490,311
Credit Suisse First Boston International AG $3,022,230
Credit Suisse Mortgage Capital Certificates $1,644,143
E*TRADE Financial Corp. $113,366
Goldman Sachs International $18,268
JPMorgan Chase & Co. $376,038
JPMorgan Chase Bank $3,035,460
Morgan Stanley $3,065,220
PNC Financial Services Group, Inc.(The) $23,938
Small Cap Value Fund I None N/A
Statement of Additional Information – October 3, 2016 166

 

Table of Contents
Fund Issuer Value of securities owned
at end of fiscal period
Total Return Bond Fund Citigroup, Inc. $15,906,677
Citigroup Commercial Mortgage Trust $20,254,717
Citigroup Mortgage Loan Trust, Inc. $27,150,573
Credit Suisse Mortgage Capital Certificates $28,255,172
Credit Suisse Commercial Mortgage Trust $2,165,029
Credit Suisse Securities (USA) LLC $8,191,332
E*TRADE Financial Corp. $2,532,524
JPMorgan Chase & Co. $33,293,837
JPMorgan Chase Bank NA $10,852,634
JPMorgan Chase Capital XXI $14,965,985
JPMorgan Commercial Mortgage-Backed Securities Trust $2,383,965
JPMorgan Resecuritization Trust $6,719,898
LB-UBS Commercial Mortgage Trust $7,213,513
Merrill Lynch Capital Trust I $2,208,300
Merrill Lynch Mortgage Investors Trust $22,188
Banc of America Merrill Lynch Commercial Mortgage Securities Trust $6,849,813
Banc of America Merrill Lynch Re-Remic Trust $914,601
Morgan Stanley Bank of America Merrill Lynch Trust $5,409,616
Morgan Stanley Capital I Trust $4,395,273
Morgan Stanley Re-Remic Trust $10,227,733
PNC Bank NA $3,525,164
U.S. Treasury Index Fund None N/A
For Funds with fiscal period ending May 31, 2016
Adaptive Risk Allocation Fund None N/A
Alternative Beta Fund None N/A
Diversified Absolute Return Fund Affiliated Managers Group, Inc. $(121,638)
TD Ameritrade Holding Corp. $(78,114)
Citigroup, Inc. $215,246
Credit Suisse Mortgage Capital Certificates $1,091,648
Eaton Vance Corp. $(40,214)
Franklin Resources, Inc. $(387,282)
Banc of America Merrill Lynch Re-Remic Trust $493,307
Morgan Stanley $101,406
Raymond James & Associates $(379,874)
Dividend Income Fund JPMorgan Chase & Co. $252,372,982
PNC Financial Services Group, Inc.(The) $117,812,915
High Yield Municipal Fund None N/A
For Funds with fiscal period ending July 31, 2015
AMT-Free OR Intermediate Muni Bond Fund None N/A
Large Cap Growth Fund TD Ameritrade Holding Corp. $25,979,129
The Goldman Sachs Group, Inc. $26,638,593
Tax-Exempt Fund None N/A
U.S. Social Bond Fund Morgan Stanley $252,638
Statement of Additional Information – October 3, 2016 167

 

Table of Contents
Fund Issuer Value of securities owned
at end of fiscal period
Ultra Short Term Bond Fund Bear Stearns Commercial Mortgage Securities $5,305,038
Citigroup, Inc. $10,025,420
Credit Suisse Commercial Mortgage Trust $8,818,148
The Goldman Sachs Group, Inc. $12,997,491
JPMorgan Chase & Co. $7,642,635
JPMorgan Chase Bank $7,485,150
LB-UBS Commercial Mortgage Trust $27,048,772
Banc of America Merrill Lynch Commercial Mortgage, Inc. $9,886,605
Morgan Stanley $10,215,890
Morgan Stanley Capital $4,993,941
Statement of Additional Information – October 3, 2016 168

 

Table of Contents
Fund Issuer Value of securities owned
at end of fiscal period
For Funds with fiscal period ending August 31, 2015
AP – Alternatives Fund Citigroup, Inc. $2,795,720
AP – Small Cap Equity Fund Westwood Holdings Group, Inc. $6,033,937
AP – Total Return Bond Fund Ameritrade Holding Corp. (subsidiary) $2,516,975
Chase Issuance Trust $31,222,462
Citigroup, Inc. $37,253,158
Citigroup Commercial Mortgage Trust $2,208,956
Citigroup Mortgage Loan Trust, Inc. $14,270,515
Citigroup Capital XIII $5,767,785
Credit Suisse Mortgage Capital Certificates $20,202,045
Credit Suisse Commercial Mortgage Trust $7,141,363
Credit Suisse Securities (USA) LLC $2,684,243
E*TRADE Financial Corp. $252,075
GS Mortgage Securities Trust $1,770,033
The Goldman Sachs Group, Inc. $29,996,414
Jefferies Group LLC $4,925,226
Jefferies Resecuritization Trust $288,850
JPMorgan Chase & Co. $18,679,944
JPMorgan Chase Bank $9,113,307
JPMorgan Chase Capital XXI $18,225,712
JPMorgan Chase Capital XXIII $6,170,000
JPMorgan Chase Commercial Mortgage Securities Trust $26,492,971
JPMorgan Mortgage Acquisition Corp $1,021,426
JPMorgan Mortgage Trust $2,470,852
JPMorgan Resecuritization Trust $5,434,306
LB-UBS Commercial Mortgage Trust $5,115,834
Lehman XS Trust $10,477,775
Merrill Lynch/Countrywide Commercial Mortgage Trust $3,911,560
Banc of America Merrill Lynch Commercial Mortgage, Inc. $5,501,538
Morgan Stanley $16,754,569
Morgan Stanley Capital I, Inc. $14,565,849
Morgan Stanley Mortgage Loan Trust $6,548,437
Morgan Stanley Re-Remic Trust $8,699,548
Morgan Stanley Resecuritization Trust $1,967,979
PNC Bank NA $1,420,214
PNC Financial Services Group, Inc.(The) $2,272,738
PNC Funding Corp. $2,839,082
Raymond James Financial, Inc. (subsidiary) $3,410,334
Stifel Financial Corp. $742,081
UBS-Citigroup Commercial Mortgage Trust $4,019,515
Statement of Additional Information – October 3, 2016 169

 

Table of Contents
Fund Issuer Value of securities owned
at end of fiscal period
Balanced Fund Bear Stearns Commercial Mortgage Securities $3,396,904
The Bear Stearns Companies LLC $5,121,516
Citigroup, Inc. $48,907,150
Citigroup Commercial Mortgage Trust $2,515,179
Citigroup/Deutsche Bank Commercial Mortgage Trust $6,983,345
Credit Suisse $2,490,075
E*TRADE Financial Corp. $310,605
GS Mortgage Securities Trust $2,636,310
The Goldman Sachs Group, Inc. $34,576,276
JPMorgan Chase & Co. $59,113,533
JPMorgan Chase Commercial Mortgage Securities Trust $3,604,265
JPMorgan Resecuritization Trust $1,036,067
LB-UBS Commercial Mortgage Trust $5,528,143
Morgan Stanley $4,987,699
Morgan Stanley Capital I, Trust $18,239,730
Morgan Stanley Re-Remic Trust $7,217,034
PNC Bank NA $3,869,236
Contrarian Core Fund Citigroup, Inc. $129,786,387
The Goldman Sachs Group, Inc. $87,559,436
JPMorgan Chase & Co. $177,934,421
Disciplined Small Core Fund None N/A
Emerging Markets Fund None N/A
Global Dividend Opportunity Fund None N/A
Global Energy and Natural Resources Fund None N/A
Global Technology Growth Fund None N/A
Greater China Fund None N/A
Mid Cap Growth Fund Affiliated Managers Group, Inc. $12,236,057
Small Cap Growth Fund I None N/A
For Funds with fiscal period ending October 31, 2015
AMT-Free CT Intermediate Muni Bond Fund None N/A
AMT-Free Intermediate Muni Bond Fund None N/A
AMT-Free MA Intermediate Muni Bond Fund None N/A
AMT-Free NY Intermediate Muni Bond Fund None N/A
CA Tax-Exempt Fund None N/A
NY Tax-Exempt Fund None N/A
Strategic Income Fund Citigroup Mortgage Loan Trust, Inc. $37,588,368
Credit Suisse Mortgage Capital Certificates $98,777,087
Credit Suisse Securities (USA) LLC $21,113,368
E*TRADE Financial Corp. $3,075,469
GS Mortgage Securities Trust $23,558,522
Jefferies Resecuritization Trust $1,934,279
JPMorgan Chase Commercial Mortgage Securities Trust $3,170,765
Banc of America Merrill Lynch Commercial Mortgage, Inc. $8,041,436
Banc of America Merrill Lynch Re-Remic Trust $9,804,376
For Funds with fiscal period ending December 31, 2015
Real Estate Equity Fund None N/A
Statement of Additional Information – October 3, 2016 170

 

Table of Contents
(a) The Fund is expected to commence operations on or about October 12, 2016, and therefore has no reporting information for periods prior to such date.
Statement of Additional Information – October 3, 2016 171

 

Table of Contents
OTHER PRACTICES
Performance Disclosure
Effective beginning with performance reporting for the December 31, 2011 year end, in presenting performance information for newer share classes, if any, of a Fund, the Fund typically includes, for periods prior to the offering of such share classes, the performance of the Fund’s oldest share class (except as otherwise disclosed), adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable, based on the expense ratios of those share classes for the Fund’s most recently completed fiscal year for which data was available at December 31, 2011 or, for Funds and classes first offered after January 1, 2011, the expected expense differential at the time the newer share class is first offered. Actual expense differentials across classes will vary over time. The performance of the Fund’s newer share classes would have been substantially similar to the performance of the Fund’s oldest share class because all share classes of a Fund are invested in the same portfolio of securities, and would have differed only to the extent that the classes do not have the same sales charges and/or expenses (and any differences in expenses between share classes may change over time).
Prior to December 31, 2011, in presenting performance information for a newer share class of a Fund, the Fund would typically include, for periods prior to the offering of such newer share class, the performance of an older share class, the class-related operating expense structure of which was most similar to that of the newer share class, and for periods prior to the initial offering of such older share class, would include the performance of successively older share classes with successively less similar expense structures. Such performance information was not restated to reflect any differences in expenses between share classes and if such differences had been reflected, the performance shown might have been lower. Because, prior to December 31, 2011, the Funds used a different methodology for presenting performance information for a newer share class, such performance information published before December 31, 2011 may differ from corresponding performance information published after December 31, 2011.
For certain Funds, performance shown includes the returns of a predecessor to the Fund. The table below identifies the predecessor fund for certain of these Funds and shows the periods when performance shown is that of the predecessor fund or a predecessor to that fund.
Fund   Predecessor Fund   For periods prior to:
Bond Fund   Excelsior Core Bond Fund, a series of Excelsior Funds, Inc.   March 31, 2008
Emerging Markets Fund   Excelsior Emerging Markets Fund, a series of Excelsior Funds, Inc.   March 31, 2008
Global Energy and Natural Resources Fund   Excelsior Energy and Natural Resources Fund, a series of Excelsior Funds, Inc.   March 31, 2008
Pacific/Asia Fund   Excelsior Pacific/Asia Fund, a series of Excelsior Funds, Inc.   March 31, 2008
Select Large Cap Growth Fund   Excelsior Large Cap Growth Fund, a series of Excelsior Funds, Inc.   March 31, 2008
Portfolio Turnover
A change in the securities held by a Fund is known as “portfolio turnover.” High portfolio turnover involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales may also result in adverse tax consequences to a Fund’s shareholders. The trading costs and tax effects associated with portfolio turnover may adversely affect a Fund’s performance. For each Fund’s portfolio turnover rate, see the Fees and Expenses of the Fund — Portfolio Turnover section in the prospectuses for that Fund.
In any particular year, market conditions may result in greater rates than are presently anticipated. The rate of a Fund’s turnover may vary significantly from time to time depending on, among other factors, economic, market and other conditions.
See below for an explanation of any significant variation in a Fund’s portfolio turnover rates over the two most recently completed fiscal years:
For Total Return Bond Fund, during the fiscal year ended April 30, 2016, the Fund experienced a higher rate of portfolio turnover than during the previous fiscal year. This was due to changes made to the Fund’s principal investment strategy, which became effective on February 19, 2016, and to strategic investment decisions based on market factors.
For Diversified Absolute Return Fund, during the fiscal year ended May 31, 2016, the Fund experienced a higher rate of portfolio turnover than during the previous fiscal year. This was largely due to the fact that the fiscal year ended May 31, 2016, was the Fund’s first full fiscal year.
Statement of Additional Information – October 3, 2016 172

 

Table of Contents
Disclosure of Portfolio Holdings Information
The Board and the Investment Manager believe that the investment ideas of the Investment Manager and any subadviser with respect to portfolio management of a Fund should seek to benefit the Fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating Fund trading strategies. However, the Board also believes that selective disclosure of a Fund’s portfolio holdings can, under appropriate circumstances, be made for purposes beneficial to the Fund and its shareholders or for other purposes under conditions that are designed to protect the interests of the Fund and its shareholders.
The Board has therefore adopted policies and procedures relating to disclosure of the Funds’ portfolio securities. These policies and procedures are intended to protect the confidentiality of Fund portfolio holdings information and generally prohibit the release of such information until such information is made available to the general public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the Fund not to provide or permit others to provide portfolio holdings on a selective basis, and the Investment Manager does not intend to selectively disclose portfolio holdings or expect that such holdings information will be selectively disclosed, except where necessary for the Fund’s operation or where there are other legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the Funds and their shareholders.
Although the Investment Manager seeks to limit the selective disclosure of portfolio holdings information and such selective disclosure is monitored under the Fund’s compliance program for conformity with the policies and procedures, there can be no assurance that these policies will protect the Fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may the Investment Manager, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information.
Public Disclosures
The Funds’ portfolio holdings are currently disclosed to the public through filings with the SEC and postings on the Funds’ website. The information is available on the Funds’ website as described below.
For equity, alternative and flexible funds (other than the equity funds identified below) and funds-of-funds (equity and fixed income), a complete list of Fund portfolio holdings as of month-end is posted approximately, but no earlier than, 15 calendar days after such month-end.
For Funds formerly subadvised by Marsico Capital, Columbia Small Cap Growth Fund I and Columbia Variable Portfolio – Small Company Growth Fund, a complete list of Fund portfolio holdings as of month-end is posted approximately, but no earlier than, 30 calendar days after such month-end.
For fixed-income Funds (other than money market funds), a complete list of Fund portfolio holdings as of calendar quarter-end is posted approximately, but no earlier than, 30 calendar days after such quarter-end.
For money market Funds, a complete list of Fund portfolio holdings as of month-end is posted no later than five business days after such month-end. Such month-end holdings are continuously available on the website for at least six months, together with a link to an SEC webpage where a user of the website may obtain access to the Fund’s most recent 12 months of publicly available filings on Form N-MFP. Money market Fund portfolio holdings information posted on the website, at minimum, includes with respect to each holding, the name of the issuer, the category of investment ( e.g. , Treasury debt, government agency debt, asset backed commercial paper, structured investment vehicle note), the CUSIP number (if any), the principal amount, the maturity date (as determined under Rule 2a-7 for purposes of calculating weighted average maturity), the final maturity date (if different from the maturity date previously described), coupon or yield and the value. The money market Funds will also disclose on the website its overall weighted average maturity, weighted average life maturity, percentage of daily liquid assets, percentage of weekly liquid assets and daily inflows and outflows.
Portfolio holdings of Funds owned solely by the Investment Manager or its affiliates are not disclosed on the website. A complete schedule of each Fund’s portfolio holdings is available semiannually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws. Shareholders may obtain each Fund’s Form N-CSR and N-Q filings on the SEC’s website at www.sec.gov. In addition, each Fund’s Form N-CSR and N-Q filings may be reviewed and copied at the SEC’s public reference room in Washington, D.C. You may call the SEC at 202.551.8090 for information about the SEC’s website or the operation of the public reference room.
In addition, the Investment Manager makes publicly available information regarding certain Fund’s largest five to fifteen holdings, as a percentage of the market value of the Funds’ portfolios as of a month-end. This holdings information is made publicly available through the website columbiathreadneedle.com/us, approximately 15 calendar days following the month-end. The scope of the information that is made available on the Funds’ websites pursuant to the Funds’ policies may change from time to time without prior notice.
Statement of Additional Information – October 3, 2016 173

 

Table of Contents
The Investment Manager may also disclose more current portfolio holdings information as of specified dates on the Funds’ website.
The Funds, the Investment Manager and their affiliates may include portfolio holdings information that already has been made public through a website posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that the information is disclosed no earlier than when the information is disclosed publicly on the funds’ website or no earlier than the time a fund files such information in a publicly available SEC filing required to include such information.
Other Disclosures
The Funds’ policies and procedures provide that no disclosures of the Funds’ portfolio holdings may be made prior to the portfolio holdings information being made available to the general public unless (i) the Funds have a legitimate business purpose for making such disclosure, (ii) the Funds or their authorized agents authorize such non-public disclosure of information, and (iii) the party receiving the non-public information enters into an appropriate confidentiality agreement or is otherwise subject to a confidentiality obligation.
In determining the existence of a legitimate business purpose for making portfolio disclosures, the following factors, among others, are considered: (i) any prior disclosure must be consistent with the anti-fraud provisions of the federal securities laws and the fiduciary duties of the Investment Manager; (ii) any conflicts of interest between the interests of Fund shareholders, on the one hand, and those of the Investment Manager, the Funds’ Distributor or any affiliated person of a Fund, the Investment Manager or Distributor on the other; and (iii) any prior disclosure to a third party, although subject to a confidentiality agreement, would not make conduct lawful that is otherwise unlawful.
Fund complete portfolio holdings may be disclosed between and among the following persons (collectively, Affiliates and Agents) for legitimate business purposes within the scope of their official duties and responsibilities, subject to Fund policies and procedures designed to prevent the misuse of inside information, by agreement, or under applicable laws, rules, and regulations: (1) persons who are subject to the Code of Ethics or policies and procedures designed to prevent the misuse of inside information; (2) an investment adviser, distributor, administrator, transfer agent, or custodian to the Fund; (3) an accounting firm, an auditing firm, or outside legal counsel retained by the Investment Manager or its affiliates, or the Fund; (4) an investment adviser to whom complete portfolio holdings are disclosed for due diligence purposes when the adviser is in merger or acquisition talks with a the Investment Manager or its parent company; and (5) a newly hired subadviser to whom complete portfolio holdings are disclosed prior to the time it commences its duties.
The frequency with which complete portfolio holdings may be disclosed between and among Affiliates and Agents, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed between and among the Affiliates and Agents, is determined by such Affiliates and Agents based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings information to be disclosed, the risk of harm to the Funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure between and among Affiliates and Agents varies and may be as frequent as daily, with no lag. Any disclosure of Fund complete portfolio holdings to any Affiliates and Agents as previously described may also include a list of the other investment positions that make up the Fund, such as cash investments and derivatives.
The Funds also disclose portfolio holdings information as required by federal, state or international securities laws, and may disclose portfolio holdings information in response to requests by governmental authorities, or in connection with litigation or potential litigation, a restructuring of a holding, where such disclosure is necessary to participate or explore participation in a restructuring of the holding ( e.g. , as part of a bondholder group), or to the issuer of a holding, pursuant to a request of the issuer or any other party who is duly authorized by the issuer.
In certain limited situations, the Funds may provide portfolio holdings to an institutional client (or its custodian or other agent) when the client is effecting a redemption in-kind from a Fund and the Investment Manager believes that such disclosure will not be harmful to the Fund. In these situations, the Investment Manager makes it clear through non-disclosure agreements or other means that the recipient must ensure that the confidential information is used only as necessary to effect the redemption-in-kind and will maintain the information in a manner designed to protect against unauthorized access or misuse.
The Board has adopted policies to ensure that the Fund’s portfolio holdings information is only disclosed in accordance with these policies. Before any selective disclosure of portfolio holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee (“PHC”). The PHC, which is chaired by the Funds’ Chief Compliance Officer, is comprised of members from the Investment Manager’s legal department and compliance department, and the Funds’ President. The PHC is authorized by the Board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of a Fund and its shareholders, to consider any potential conflicts of interest between the Fund, the Investment Manager, and its affiliates, and to safeguard against improper use of holdings information. Factors
Statement of Additional Information – October 3, 2016 174

 

Table of Contents
considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure may be authorized. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by the Funds’ President, Chief Compliance Officer or General Counsel/Chief Legal Officer or their respective designees. On at least an annual basis, the PHC reviews the approved recipients of selective disclosure and may require a resubmission of the request, in order to re-authorize certain ongoing arrangements. These procedures are intended to be reasonably designed to protect the confidentiality of Fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the Fund’s shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above.
Ongoing Portfolio Holdings Disclosure Arrangements:
The Funds currently have ongoing arrangements with certain approved recipients with respect to the disclosure of portfolio holdings information prior to such information being made public. Portfolio holdings information disclosed to such recipients is current as of the time of its disclosure, is disclosed to each recipient solely for purposes consistent with the services described below and has been authorized in accordance with the policy. No compensation or consideration is received in exchange for this information. In addition to the daily information provided to a Fund’s custodians, subcustodians, Investment Manager and subadvisers, the following disclosure arrangements are in place:
Identity of Recipient   Conditions/restrictions on use of information   Frequency of
Disclosure
Recipients under arrangements with the Funds or Investment Manager:    
Barclays Capital   Used for analytics including risk and attribution assessment.   Daily
BlackRock   Used for fixed income trading and decision support.   Daily
Bloomberg   Used for portfolio analytics, statistical analysis and independent research.   Daily, Monthly and Quarterly
Bolger, Inc.   Used for commercial printing.   As Needed
Boston Investors Communications Group, LLC (BICG)   Used for writing services that require disclosing portfolio holdings in advance of their dissemination to the general public.   Monthly
Capital Markets Services (CMS) Group   Used for intraday post-trade information when equity exposures (either via futures or options trades) are modified beyond certain limits for CVP – Managed Volatility Funds.   As Needed
Catapult   Used to print Columbia Fund factsheets.   As Needed
Citigroup   Used for mortgage decision support.   Daily
DH Corporation   Used to send trade messages via SWIFT, to custodians.   Daily
Elevation Exhibits & Events   Used for trade show exhibits.   As Needed
Equifax   Used to ensure that Columbia Management does not violate the Office of Foreign Assets Control (OFAC) sanction requirements.   Daily
Ernst & Young, LLP   Used to analyze PFIC investments.   Monthly
Eva Dimensions   Used as a research service for small cap stock.   As Needed
Eze Software Group   Used to facilitate the evaluation of commission rates and to provide flexible commission reporting.   Daily
Statement of Additional Information – October 3, 2016 175

 

Table of Contents
Identity of Recipient   Conditions/restrictions on use of information   Frequency of
Disclosure
FactSet Research Systems, Inc.   Used for provision of quantitative analytics, charting and fundamental data and for portfolio analytics. Used also to cover product and marketing developments related to index funds, ETFs, index derivatives, and other sophisticated investment strategies.   Daily or Monthly
Harte-Hanks   Used for printing of prospectuses, factsheets, annual and semi-annual reports.   As Needed
Institutional Shareholder Services Inc. (ISS)   Used for proxy voting administration and research on proxy matters.   Daily
Intex Solutions Inc.   Used to provide mortgage analytics.   Periodic
Investment Technology Group, Inc.   Used to evaluate and assess trading activity, execution and practices.   Quarterly
Investor Tools   Used for municipal bond analytics, research and decision support.   As Needed
JDP Marketing Services   Used to write or edit Columbia Fund shareholder reports, quarterly fund commentaries, and communications, including shareholder letters and management’s discussion of Columbia Fund performance.   Monthly, as needed
John Roberts, Inc.   Used for commercial printing.   Daily, Monthly and Quarterly
Kendall Press   Used for commercial printing.   As Needed
Kynex   Used to provide portfolio attribution reports for the Columbia Convertible Securities Fund. Used also for portfolio analytics.   Daily
Malaspina Communications   Used to facilitate writing management’s discussion of Columbia Fund performance for Columbia Fund shareholder reports and periodic marketing communications.   Monthly
Markit   Used for an asset database for analytics and investor reporting. Used to reconcile client commission trades with broker-dealers.   As Needed and Monthly
Merrill Corporation   Used to provide Edgar filing and typesetting services, as well as printing of prospectuses, factsheets, annual and semi-annual reports.   As Needed
MoneyMate   Used to report returns and analytics to client facing materials.   Monthly
Morningstar   Used for independent research and ranking of funds. Used also for statistical analysis.   Monthly, Quarterly or As Needed
MSCI Inc.   Used as a hosted portfolio management platform designed for research, reporting, strategy development, portfolio construction and performance and risk attribution, and used for risk analysis and reporting.   Daily
Print Craft   Used to assemble kits and mailing that include the fact sheets.   As Needed
Statement of Additional Information – October 3, 2016 176

 

Table of Contents
Identity of Recipient   Conditions/restrictions on use of information   Frequency of
Disclosure
RegEd, Inc.   Used to review external and certain internal communications prior to dissemination.   Daily
R.R. Donnelley & Sons Company   Used to provide Edgar filing and typesetting services, and printing of prospectuses, factsheets, annual and semi-annual reports.   As Needed
SEI Investment Company   Used for trading wrap accounts and to reconcile wrap accounts.   Daily
SS&C Technologies, Inc.   Used to translate account positions for reconciliations.   Daily
SunGard Investment Systems LLC   Used as portfolio accounting system.   Daily
Sustainalytics US Inc.   Used to support the investment process for Columbia U.S. Social Bond Fund.   At least Monthly
Thomson Reuters   Used for statistical analysis.   Monthly
Threadneedle Investments   Used by portfolio managers and research analysts in supporting certain management strategies, and by shared support partners (legal, operations, compliance, risk, etc.) to provide Fund maintenance and development.   As Needed
Universal Wilde   Used to provide printing and mailing services for prospectuses, annual and semi-annual reports, and supplements.   As Needed
Visions, Inc.   Used for commercial printing.   Daily, Monthly and Quarterly
Wilshire Associates, Inc.   Used to provide daily performance attribution reporting based on daily holdings to the investment and investment analytics teams.   Daily
Wolters Kluwer   Used to perform tax calculations specific to wash sales and used to analyze tax straddles (diminution of risk).   Monthly

    
Identity of Recipient   Conditions/restrictions on use of information   Frequency of
Disclosure
Recipients under arrangements with subadvisers:    
Advent Software Inc.   Used by certain subadvisers for portfolio management information systems.   Daily
Advisory Compliance Associates Group   Used by certain subadvisers for best execution analysis.   Quarterly
Bloomberg   Used by certain subadvisers for internal reporting and portfolio analysis, and for analytical and statistical information.   Daily
Capital IQ   Used by certain subadvisers for internal reporting and portfolio analysis.   Daily
Charles River   Used by certain subadvisers for order management.   Daily
DDM Marketing & Communications   Used by certain subadvisers for marketing and reporting.   Quarterly
Electra Information Systems, Inc.   Used by certain subadvisers for portfolio holdings reconciliation.   Daily
Ernst & Young, LLP   Used by certain subadvisers to provide general audit services.   Semi-annually
eVestment OMNI   Used by certain subadvisers for marketing and reporting.   Quarterly
Statement of Additional Information – October 3, 2016 177

 

Table of Contents
Identity of Recipient   Conditions/restrictions on use of information   Frequency of
Disclosure
FactSet Research Systems, Inc.   Used by certain subadvisers for analytical and statistical information, and for internal reporting and portfolio analysis.   Daily
Financial Recovery Technologies Services   Used by certain subadvisers for class action monitoring.   Quarterly
Glass Lewis   Used by certain subadvisers for proxy voting services.   Daily
Infinit-O   Used by certain subadvisers for reconciling cash and positions.   Daily
Institutional Shareholder Services Inc. (“ISS”)   Used by certain subadvisers for proxy voting services.   Daily
MSCI Barra   Used by certain subadvisers for portfolio analytics and analysis. Used by certain subadvisers for internal reporting and portfolio analysis.   Daily
Northern Trust   Used by certain subadvisers for settlement, accounting, reconciliation and performance.   Daily
Omgeo, LLC   Used by certain subadvisers for trade settlement.   Daily
Sustainalytics   Used by certain subadvisers for internal reporting and portfolio analysis.   Daily
William O’Neil   Used by certain subadvisers for research, analytical and statistical information.   Daily
In addition, portfolio holdings information may be provided from time to time to the Funds’ counsel, counsel to the independent trustees and the Funds’ independent auditors in connection with the services they provide to the Funds or the trustees. Portfolio holdings information may also be provided to affiliates of the Investment Manager to monitor risks and various holdings limitations that must be aggregated with affiliated funds and accounts, among other purposes. The Investment Manager and the subadvisers use a variety of broker-dealers and other agents to effect securities transactions on behalf of the Funds. These broker-dealers may become aware of the Funds’ intentions, transactions and positions in performing their functions.
Additional Shareholder Servicing Payments
The Funds, along with the Transfer Agent, the Distributor and the Investment Manager, may pay amounts to Servicing Agents, including other Ameriprise Financial affiliates, for providing the types of services that would typically be provided directly by a mutual fund’s transfer agent. The level of payments made to Servicing Agents may vary. A number of factors may be considered in determining payments to a Servicing Agent, including, without limitation, the nature of the services provided to shareholders or retirement plan participants that invest in the Funds through retirement plans. These services may include sub-accounting, sub-transfer agency or similar recordkeeping services, shareholder or participant reporting, shareholder or participant transaction processing, shareholder or participant tax monitoring and reporting, and/or the provision of call center support (additional shareholder services). These payments for shareholder servicing support vary by Servicing Agent.
The Board has authorized each Fund to pay up to the lesser of the amount charged by the Servicing Agent for such services or a channel-specific cap established by the Board from time to time that ranges between 0.12% and 0.25% of Fund assets. For certain distribution channels, the reimbursement is set at a per account amount for accounts of intermediaries that charge a per account fee. The amounts in excess of the amount reimbursed by a Fund are borne by the Transfer Agent, the Investment Manager and/or their affiliates. These payments are in addition to the annual transfer agency fees paid by a Fund to the Transfer Agent, as described in the Investment Management and Other Services – Other Services Provided – The Transfer Agent section above, and may include payments to Selling Agents that charge networking fees for certain services provided in connection with the maintenance of shareholder accounts through the NSCC. With respect to Class K and Class R5 shares, the annual rate for annual transfer agency fees and reimbursement of fees for additional shareholder services is currently capped at 0.05%. With respect to Class I and Class Y shares, the Transfer Agent does not pay Servicing Agents for shareholder services and the Fund does not pay the Transfer Agent for any shareholder services provided by Servicing Agents. Payments for these additional shareholder services are made by a Fund to the Transfer Agent who in turn makes payments to the Selling Agent or
Statement of Additional Information – October 3, 2016 178

 

Table of Contents
Servicing Agent for the provision of such services. The Funds’ Transfer Agent, Distributor and/or their affiliates will pay, from its or their own resources, amounts in excess of the amount paid by the Funds to Selling Agents or Servicing Agents in connection with the provision of these additional shareholder services and other services.
Prior to October 1, 2016, the Funds paid a fee with respect to (a) Class A, Class B, Class C, Class R, Class R4, Class T, Class W and Class Z shares at the annual rate of 0.18% (0.19% prior to April 1, 2016; and 0.20% prior to October 1, 2015) of the average aggregate value of shares maintained in omnibus accounts (other than omnibus accounts for which American Enterprise Investment Services Inc. is the broker of record or accounts where the beneficial owner is a customer of Ameriprise Financial Services, Inc., for which the transfer agent was reimbursed $16 annually, calculated monthly based on the total number of positions in which accounts at the end of such month) and (b) Class K and Class R5 shares of 0.05% of the average aggregate value of shares maintained in omnibus accounts, provided that total transfer agency fees for Class K and Class R5 shares, including reimbursements, did not exceed 0.05%. (Neither Class I shares nor Class Y shares were subject to these fees relating to omnibus accounts.)
In addition, the Transfer Agent and/or other Ameriprise Financial affiliates may make lump sum payments to selected Servicing Agents receiving shareholder servicing payments in reimbursement of printing costs for literature for participants, account maintenance fees or fees for establishment of the Funds on the Selling Agent’s or Servicing Agent’s system or other similar services.
As of September 2016, the Transfer Agent and/or other Ameriprise Financial affiliates had agreed to make shareholder servicing payments with respect to the Funds to the Servicing Agents or their affiliates shown below.
Recipients of Shareholder Servicing Payments with Respect to the Funds from the Transfer Agent and/or other Ameriprise Financial Affiliates
ADP Broker-Dealer, Inc.
American Enterprise Investment Services Inc.*
American United Life Insurance Co.
Ameriprise Financial Services, Inc.*
Ascensus, Inc.
AXA Advisors
AXA Equitable Life Insurance
Bank of America, N.A.
Benefit Plan Administrators
Benefit Trust
BMO Harris Bank (f/k/a Marshall & Illsley Trust Company)
BNY Mellon, N.A.
Charles Schwab & Co., Inc.
Charles Schwab Trust Co.
Davenport & Company
Daily Access Concepts, Inc.
Digital Retirement Solutions
Edward D. Jones & Co., LP
ExpertPlan
Fidelity Brokerage Services, Inc.
Fidelity Investments Institutional Operations Co.
First Clearing, LLC
First Mercantile Trust Co.
Guardian Insurance and Annuity Company Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Co. of New York
Goldman Sachs & Co.
GWFS Equities, Inc.
Hartford Life Insurance Company
HD Vest
Hewitt Associates LLC
ICMA Retirement Corporation
Janney Montgomery Scott, Inc.
JJB Hilliard Lyons
JP Morgan Chase Bank
John Hancock Life Insurance Company (USA)
John Hancock Life Insurance Company of New York
John Hancock Trust Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Lincoln Retirement Services
LPL Financial Corporation
Massachusetts Mutual Life Insurance Company
Mercer HR Services, LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mid Atlantic Capital Corporation
Minnesota Life Insurance Co.
Morgan Stanley Smith Barney
MSCS Financial Services Division of Broadridge Business Process Outsourcing LLC
National Financial Services
Nationwide Investment Services
Newport Retirement Services, Inc.
New York State Deferred Compensation Plan
Oppenheimer & Co., Inc.
Plan Administrators, Inc.
PNC Bank
Principal Life Insurance Company of America
Prudential Insurance Company of America
Prudential Retirement Insurance & Annuity Company
Pershing LLC
Raymond James & Associates
RBC Capital Markets
Reliance Trust
Robert W. Baird & Co., Inc.
Sammons Retirement Solutions
SEI Private Trust Company
Standard Insurance Company
Stifel Nicolaus & Co.
 
 
Statement of Additional Information – October 3, 2016 179

 

Table of Contents
TD Ameritrade Clearing, Inc.
TD Ameritrade Trust Company
The Retirement Plan Company
Teachers Insurance and Annuity Association of America
Transamerica Advisors Life Insurance Company
Transamerica Advisors Life Insurance Company of New York
Transamerica Financial Life Insurance Company
T. Rowe Price Group, Inc.
UBS Financial Services, Inc.
Unified Trust Company, N.A.
Upromise Investments, Inc.
US Bank NA
Vanguard Group, Inc.
VALIC Retirement Services Company
Voya Retirement Insurance and Annuity Company
Voya Institutional Plan Services, LLP
Voya Investments Distributors, LLC
Voya Financial Partners, LLC
Wells Fargo Advisors, LLC
Wells Fargo Bank, N.A.
Wilmington Trust Retirement & Institutional Services Company
Xerox HR Solutions

* Ameriprise Financial affiliate
The Transfer Agent and/or other Ameriprise Financial affiliates may enter into similar arrangements with other financial intermediaries from time to time. Therefore, the preceding list is subject to change at any time without notice.
Statement of Additional Information – October 3, 2016 180

 

Table of Contents
Additional Selling Agent Payments
Selling Agents may receive different commissions, sales charge reallowances and other payments with respect to sales of different classes of shares of the Funds. These other payments may include servicing payments to retirement plan administrators and other institutions at rates up to those described above under Other Practices — Additional Shareholder Servicing Payments.
The Distributor and other Ameriprise Financial affiliates may pay additional compensation to selected Selling Agents, including other Ameriprise Financial affiliates, under the categories described below. These categories are not mutually exclusive, and a single Selling Agent may receive payments under all categories. A Selling Agent also may receive payments described above under Other Practices — Additional Shareholder Servicing Payments . These payments may create an incentive for a Selling Agent or its representatives to recommend or offer shares of a Fund to its customers. The amount of payments made to Selling Agents may vary. In determining the amount of payments to be made, the Distributor and other Ameriprise Financial affiliates may consider a number of factors, including, without limitation, asset mix and length of relationship with the Selling Agent, the size of the customer/shareholder base of the Selling Agent, the manner in which customers of the Selling Agent make investments in the Funds, the nature and scope of marketing support or services provided by the Selling Agent (as described more fully below) and the costs incurred by the Selling Agent in connection with maintaining the infrastructure necessary or desirable to support investments in the Funds.
These additional payments by the Distributor and other Ameriprise Financial affiliates are made pursuant to agreements between the Distributor and other Ameriprise Financial affiliates and Selling Agents, and do not change the price paid by investors for the purchase of a share, the amount a Fund will receive as proceeds from such sales or the distribution fees and expenses paid by the Fund as shown under the heading Fees and Expenses of the Fund in the Fund’s prospectuses.
Marketing/Sales Support Payments
The Distributor, the Investment Manager and their affiliates may make payments, from their own resources, to certain Selling Agents, including other Ameriprise Financial affiliates, for marketing/sales support services relating to the Funds, including, but not limited to, business planning assistance, educating Selling Agent personnel about the Funds and shareholder financial planning needs, placement on the Selling Agent’s preferred or recommended fund list or otherwise identifying the Funds as being part of a complex to be accorded a higher degree of marketing support than complexes not making such payments, access to sales meetings, sales representatives and management representatives of the Selling Agent, client servicing, systems infrastructure support and data analytics. Not all Selling Agents receive Marketing Support Payments. These payments are generally based upon one or more of the following factors: average net assets of the Funds distributed by the Distributor attributable to that Selling Agent, gross sales of the Columbia Funds distributed by the Distributor attributable to that Selling Agent, reimbursement of ticket charges (fees that a Selling Agent firm charges its representatives for effecting transactions in Fund shares) or a negotiated lump sum payment.
While the financial arrangements may vary for each Selling Agent, the marketing support payments to each Selling Agent generally are expected to be between 0.05% and 0.40% on an annual basis for payments based on average net assets of the Funds attributable to the Selling Agent, and between 0.05% and 0.25% on an annual basis for firms receiving a payment based on gross sales of the Funds attributable to the Selling Agent. The Distributor and other Ameriprise Financial affiliates may make payments in materially larger amounts or on a basis materially different from those described above when dealing with certain Selling Agents. Such increased payments may enable the Selling Agents to offset credits that they may provide to their customers.
As of September 2016, the Distributor, the Investment Manager or their affiliates had agreed to make marketing support payments with respect to the Funds to the Selling Agents or their affiliates shown below.
Recipients of Marketing Support Payments with Respect to the Funds from the Distributor and/or other Ameriprise Financial Affiliates
AIG Advisor Group
Ameriprise Financial Services, Inc.*
AXA Advisors, LLC
Bank of America, N.A.
Cetera Financial Group, Inc.
Citigroup Global Markets Inc./Citibank
Commonwealth Financial Network
First Clearing, LLC
Great West Life Insurance
J.J.B. Hilliard, W.L. Lyons, Inc.
Lincoln Financial Advisors Corp.
LPL Financial Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley Smith Barney
Northwestern Mutual Investment Services, LLC
Oppenheimer & Co., Inc.
PNC Investments
Raymond James & Associates, Inc.
Raymond James Financial Services, Inc.
RBC Capital Markets
UBS Financial Services Inc.
Unified Trust Company, N.A.
Statement of Additional Information – October 3, 2016 181

 

Table of Contents
US Bancorp Investments, Inc.
Vanguard Marketing Corp.
Voya Financial Advisors, LLC
Wells Fargo Advisors, LLC
Wells Fargo Advisors Financial Network, LLC

* Ameriprise Financial affiliate
The Distributor, the Investment Manager and their affiliates may enter into similar arrangements with other Selling Agents from time to time. Therefore, the preceding list is subject to change at any time without notice.
Other Payments
From time to time, the Distributor, from its own resources and not as an expense of the Fund, may provide additional compensation to certain Selling Agents that sell or arrange for the sale of shares of the Funds to the extent not prohibited by laws or the rules of any self-regulatory agency, such as the Financial Industry Regulatory Authority (FINRA). Such compensation provided by the Distributor may include financial assistance to Selling Agents that enable the Distributor to participate in and/or present at Selling Agent-sponsored conferences or seminars, sales or training programs for invited registered representatives and other Selling Agent employees, Selling Agent entertainment and other sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. The Distributor makes payments for entertainment events it deems appropriate, subject to the Distributor’s internal guidelines and applicable law. These payments may vary depending upon the nature of the event. Your Selling Agent may charge you fees or commissions in addition to those disclosed in this SAI. You should consult with your Selling Agent and review carefully any disclosure your Selling Agent provides regarding its services and compensation. Depending on the financial arrangement in place at any particular time, a Selling Agent and its financial consultants may have a financial incentive for recommending a particular fund or a particular share class over other funds or share classes. See Investment Management and Other Services — Other Roles and Relationships of Ameriprise Financial and its Affiliates — Certain Conflicts of Interest for more information.
Statement of Additional Information – October 3, 2016 182

 

Table of Contents
CAPITAL STOCK AND OTHER SECURITIES
Description of the Trust's Shares
The Trust may issue an unlimited number of full and fractional shares of beneficial interest of each Fund, without par value, and to divide or combine the shares of any series into a greater or lesser number of shares of that Fund without thereby changing the proportionate beneficial interests in that Fund and to divide such shares into classes. Most of the Funds are authorized to issue multiple classes of shares. Such classes are designated as Class A, Class B, Class C, Class E, Class F, Class I, Class K, Class R, Class R4, Class R5, Class T, Class W, Class Y and Class Z. A Fund offers only those classes of shares listed on the cover of its prospectuses. Each share of a class of a Fund represents an equal proportional interest in that Fund with each other share in the same class and is entitled to such distributions out of the income earned on the assets belonging to that Fund as are declared in the discretion of the Board. However, different share classes of a Fund pay different distribution amounts because each share class has different expenses. Each time a distribution is made, the net asset value per share of the share class is reduced by the amount of the distribution.
Subject to certain limited exceptions discussed in each Fund’s prospectuses and in this SAI, a Fund may no longer be accepting new investments from current shareholders or prospective investors in general or with respect to one or more classes of shares. The Funds, however, may at any time and without notice, accept new investments in general or with respect to one or more previously closed classes of shares.
Restrictions on Holding or Disposing of Shares
There are no restrictions on the right of shareholders to retain or dispose of the Funds' shares, other than the possible future termination of the Funds or the relevant class. The Funds or any class of shares of the Funds may be terminated by reorganization into another mutual fund or by liquidation and distribution of their assets. Unless terminated by reorganization or liquidation, the Funds and classes will continue indefinitely.
Shareholder Liability
The Trust is organized as a business trust under Massachusetts law. Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Trust’s Declaration of Trust disclaims any shareholder liability for acts or obligations of the Funds and the Trust and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by a Fund or the Trustees. The Declaration of Trust provides for indemnification out of Fund property for all loss and expense of any shareholder held personally liable for the obligations of a Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances (which are considered remote) in which a Fund would be unable to meet its obligations and the disclaimer was inoperative. The risk of a Fund incurring financial loss on account of another series of the Trust also is believed to be remote, because it would be limited to circumstances in which the disclaimer was inoperative and the other series of the Trust was unable to meet its obligations.
Dividend Rights
The shareholders of a Fund are entitled to receive any dividends or other distributions declared for the Fund. No shares have priority or preference over any other shares of the Funds with respect to distributions. Distributions will be made from the assets of the Funds, and will be paid pro rata to all shareholders of each Fund (or class) according to the number of shares of each Fund (or class) held by shareholders on the record date. The amount of income dividends per share may vary between separate share classes of the Funds based upon differences in the way that expenses are allocated between share classes pursuant to a multiple class plan.
Voting Rights and Shareholder Meetings
Shareholders have the power to vote only as expressly granted under the 1940 Act or under Massachusetts business trust law. Each whole share (or fractional share) outstanding on the record date shall be entitled to a number of votes on any matter on which it is entitled to vote equal to the net asset value of the share (or fractional share) in U.S. dollars determined at the close of business on the record date (for example, a share having a net asset value of $10.50 would be entitled to 10.5 votes).
Shareholders have no independent right to vote on any matter, including the creation, operation, dissolution or termination of the Trust. Shareholders have the right to vote on other matters only as the Board authorizes. Currently, the 1940 Act requires that shareholders have the right to vote, under certain circumstances, to: (i) elect Trustees; (ii) approve investment advisory agreements; (iii) approve a change in subclassification of a Fund; (iv) approve any change in fundamental investment policies; (v) approve a distribution plan under Rule 12b-1 under the 1940 Act; and (vi) to terminate the independent accountant. With respect to matters that affect one class but not another, shareholders vote as a class; for example, the approval of a distribution plan applicable to that class is voted on by holders of that class of shares. Subject to the foregoing, all shares of a Trust have equal voting rights and will be voted in the aggregate, and not by Fund, except where voting by Fund is required by law or where
Statement of Additional Information – October 3, 2016 183

 

Table of Contents
the matter involved only affects one Fund. For example, a change in a Fund’s fundamental investment policy affects only one Fund and would be voted upon only by shareholders of the Fund involved. Additionally, approval of an investment advisory agreement or, if shareholder approval is required under exemptive relief, investment subadvisory agreement, since it only affects one Fund, is a matter to be determined separately by each Fund. Approval by the shareholders of one Fund is effective as to that Fund whether or not sufficient votes are received from the shareholders of the other series to approve the proposal as to those Funds. Shareholders are entitled to one vote for each whole share held and a proportional fractional vote for each fractional vote held, on matters on which they are entitled to vote. Fund shareholders do not have cumulative voting rights. The Trust is not required to hold, and has no present intention of holding, annual meetings of shareholders. Special meetings may be called for certain purposes.
Previously, the Trust had voluntarily undertaken to adhere to certain governance measures contemplated by an SEC settlement order with respect to the Trust’s prior investment adviser in 2005. Over the past several years, the SEC has adopted many rules under the 1940 Act and the Investment Advisers Act of 1940 to strengthen fund governance and compliance oversight of funds and their investment advisers. Accordingly, although the Trust may continue to follow certain governance practices noted in the 2005 settlement order, it will do so as the Board deems appropriate and not pursuant to any voluntary undertakings. In this regard, the Board has determined that it is unnecessary to commit to holding a meeting of shareholders to elect trustees at least every five years. Instead, the Board will convene meetings of shareholders to elect trustees as required by the 1940 Act or as deemed appropriate by the Board.
Liquidation Rights
In the event of the liquidation or dissolution of the Trust or a Fund, all shares have equal rights and shareholders of a Fund are entitled to a proportionate share of the assets of the Fund that are available for distribution and to a distribution of any general assets not attributable to a particular Fund that are available for distribution in such manner and on such basis as the Board may determine.
Preemptive Rights
There are no preemptive rights associated with Fund shares.
Conversion Rights
Conversion features and exchange privileges, if applicable, are described in the Funds’ prospectuses and Appendix S to this SAI.
Redemptions
Each Fund’s dividend, distribution and redemption policies can be found in its prospectuses. However, the Board may suspend the right of shareholders to sell shares when permitted or required to do so by law or compel sales of shares in certain cases.
Sinking Fund Provisions
The Trust has no sinking fund provisions.
Calls or Assessment
All Fund shares are issued in uncertificated form only and when issued will be fully paid and non-assessable by its Trust.
Conduct of the Trust's Business
Forum Selection. The Trust’s Bylaws provide that the sole and exclusive forums for any shareholder (including a beneficial owner of shares) to bring (i) any action or proceeding brought on behalf of the Trust, (ii) any action asserting a claim for breach of a fiduciary duty owed by any Trustee, officer or employee, if any, of the Trust to the Trust or the Trust’s shareholders, (iii) any action asserting a claim against the Trust or any of its Trustees, officers or employees arising pursuant to any provision of the statutory or common law of the Commonwealth of Massachusetts or any federal securities law, in each case as amended from time to time, or the Trust’s Declaration of Trust or Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be within the federal or state courts in the Commonwealth of Massachusetts.
This forum selection provision may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder finds favorable for disputes with the Trust and/or any of its Trustees, officers, employees or service providers. If a court were to find the forum selection provision contained in the Bylaws to be inapplicable or unenforceable in an action, the Trust may incur additional costs associated with resolving such action in other jurisdictions.
Derivative and Direct Claims of Shareholders. The Trust’s Bylaws contain provisions regarding derivative and direct claims of shareholders. As used in the Bylaws, a “direct” shareholder claim refers to (i) a claim based upon alleged violations of a shareholder’s individual rights independent of any harm to the Trust, including a shareholder’s voting rights under the Bylaws; rights to receive a dividend payment as may be declared from time to time; rights to inspect books and records; or other similar rights personal to the shareholder and independent of any harm to the Trust; and (ii) a claim for which a direct shareholder action
Statement of Additional Information – October 3, 2016 184

 

Table of Contents
is expressly provided under the U.S. federal securities laws. Any other claim asserted by a shareholder, including without limitation any claims purporting to be brought on behalf of the Trust or involving any alleged harm to the Trust, is considered a “derivative” claim as used in the Bylaws.
A shareholder may not bring or maintain any court action or other proceeding asserting a derivative claim or any claim asserted on behalf of the Trust or involving any alleged harm to the Trust without first making demand on the Trustees requesting the Trustees to bring or maintain such action, proceeding or claim. The requirement to make such demand shall not be excused under any circumstances, including claims of alleged interest on the part of the Trustees, unless the shareholder makes a specific showing that irreparable nonmonetary injury to the Trust would otherwise result.
A shareholder may not bring or maintain a court action or other proceeding asserting a direct claim against the Trust, the Trustees, or officers predicated upon an express or implied right of action under the Declaration of Trust or U.S. federal securities laws (excepting direct shareholder actions expressly provided by U.S. federal securities laws), unless the shareholder has obtained authorization from the Trustees to bring the action. The requirement of authorization shall not be excused under any circumstances, including claims of alleged interest on the part of the Trustees.
The Trustees shall consider any demand or request for authorization to bring or maintain a court action, proceeding or claim within 90 days of its receipt by the Trust . In their sole discretion, the Trustees may submit the matter to a vote of shareholders of the Trust or of any series or class of shares, as appropriate. Any decision by the Trustees to settle or to authorize (or not to settle or to authorize) such court action, proceeding or claim, or to submit the matter to a vote of shareholders, shall be binding upon the shareholder seeking authorization.
Any person purchasing or otherwise holding any interest in shares of beneficial interest of the Trust will be deemed to have notice of and consented to the foregoing provisions. These provisions may limit a shareholder’s ability to bring a claim against the Trustees, officers or other employees of the Trust and/or its service providers.
Statement of Additional Information – October 3, 2016 185

 

Table of Contents
Purchase, Redemption and Pricing of Shares
Purchase and Redemption
An investor may buy, sell and transfer shares in the Funds utilizing the methods, and subject to the restrictions, described in the Funds’ prospectuses. The following information supplements information in the Funds’ prospectuses.
Purchases of shares of the Funds may be effected on a Business Day. The Trust and the Distributor reserve the right to reject any purchase order. The issuance of shares is recorded on the books of the Trust, and share certificates are not issued. Purchase orders for shares in the Funds that are received by the Distributor or by the Transfer Agent before the end of the Business Day (typically 4:00 p.m., Eastern time) are priced according to the net asset value determined on that day but are not executed until 4:00 p.m., Eastern time, on the Business Day on which immediately available funds in payment of the purchase price are received by the Fund’s Custodian.
The Funds have authorized one or more broker-dealers to accept buy and sell orders on the Funds’ behalf. These broker-dealers are authorized to designate other intermediaries to accept buy and sell orders on the Funds’ behalf. The Funds will be deemed to have received a buy or sell order when an authorized broker-dealer, or, if applicable, a broker-dealer’s authorized designee, accepts the order. Customer orders will be priced at each Fund’s net asset value next computed after they are accepted by an authorized broker-dealer or the broker’s authorized designee.
Should a Fund stop selling shares, the Board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute these costs fairly among all shareholders.
The Trust also may make payment for sales in readily marketable securities or other property if it is appropriate to do so in light of the Trust’s responsibilities under the 1940 Act.
Under the 1940 Act, the Funds may suspend the right of redemption or postpone the date of payment for shares during any period when (i) trading on the NYSE is restricted by applicable rules and regulations of the SEC; (ii) the NYSE is closed for other than customary weekend and holiday closings; (iii) the SEC has by order permitted such suspension; (iv) an emergency exists as determined by the SEC. (The Funds may also suspend or postpone the recordation of the transfer of their shares upon the occurrence of any of the foregoing conditions).
The Trust has elected to be governed by Rule 18f-1 under the 1940 Act, as a result of which each Fund is obligated to redeem shares, subject to the exceptions listed above, with respect to any one shareholder during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of the net asset value of each Fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the Fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the Fund as determined by the Board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should a Fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash.
The timing and magnitude of cash inflows from investors buying Fund shares could prevent a Fund from always being fully invested. Conversely, the timing and magnitude of cash outflows to investors redeeming Fund shares could require large ready reserves of uninvested cash to meet shareholder redemptions. Either situation could adversely impact a Fund’s performance.
Anti-Money Laundering Compliance
The Funds are required to comply with various anti-money laundering laws and regulations. Consequently, the Funds may request additional required information from you to verify your identity. Your application will be rejected if it does not contain your name, social security number, date of birth and permanent street address. If at any time the Funds believe a shareholder may be involved in suspicious activity or if certain account information matches information on government lists of suspicious persons, the Funds may choose not to establish a new account or may be required to “freeze” a shareholder’s account. The Funds also may be required to provide a governmental agency with information about transactions that have occurred in a shareholder’s account or to transfer monies received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency. In some circumstances, the law may not permit the Funds to inform the shareholder that it has taken the actions described above.
Pay-out Plans
You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will
Statement of Additional Information – October 3, 2016 186

 

Table of Contents
automatically be reinvested, unless you elect to receive them in cash. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law.
Applications for a systematic investment in a class of a Fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those Funds is in effect. Occasional investments, however, may be accepted.
To start any of these plans, please consult your financial intermediary. Your authorization must be received at least five days before the date you want your payments to begin. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it.
Offering Price
The share price of each Fund is based on each Fund’s net asset value (NAV) per share, which is calculated separately for each class of shares as of the end of the Business Day.
The value of each Fund’s portfolio securities is determined in accordance with the Trust’s valuation procedures, which are approved by the Board. Except as described below under “Fair Valuation of Portfolio Securities,” the Fund’s portfolio securities are typically valued using the following methodologies:
Equity Securities. Equity securities (including common stocks, preferred stocks, convertible securities, warrants and ETFs) listed on an exchange are valued at the closing price on their primary exchange (which, in the case of foreign securities, may be a foreign exchange) or, if a closing price is not readily available, at the mean of the closing bid and asked prices. Over-the-counter equity securities not listed on any national exchange but included in the NASDAQ National Market System are valued at the NASDAQ Official Closing Price or, if the official closing price is not readily available, at the mean between the closing bid and asked prices. Equity securities and ETFs that are not listed on any national exchange and are not included in the NASDAQ National Market System are valued at the mean between the closing bid and asked prices. Shares of other open-end investment companies (other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Fixed Income Securities. Debt securities with remaining maturities of 60 days or less are valued at their amortized cost value if such value is approximately the same as market value or at market value (based on market-based prices); or, if market value is not available, fair value. Amortized cost is determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. The value of debt securities with remaining maturities in excess of 60 days is the market price, which may be obtained from a pricing service or, if a market-based price is not available from a pricing service, a bid quote from a broker-dealer. Short-term variable rate demand notes are typically valued at their par value. Other debt securities are typically valued using an evaluated bid provided by a pricing service. If pricing information is unavailable from a pricing service or is not believed to be reflective of market value, then a bid quote from a broker-dealer may be used to value the securities. Newly issued debt securities may be valued at purchase price for up to two days following purchase or at fair value if the purchase price is not believed to be reflective of market value.
Futures, Options and Other Derivatives. Futures and options on futures are valued based on the settle price at the close of regular trading on their principal exchange or, in the absence of transactions, they are valued at the mean of the closing bid and asked prices closest to the last reported sale price. Listed options are valued at the mean of the closing bid and asked prices. If market quotations are not readily available, futures and options are valued using quotations from broker-dealers. Customized derivative products are valued at a price provided by a pricing service or, if such a price is unavailable, a broker quote or at a price derived from an internal valuation model.
Repurchase and Reverse Repurchase Agreements. Repurchase and reverse repurchase agreements are generally valued at a price equal to the amount of cash invested in the repurchase agreement, or borrowed in the reverse repurchase agreement, respectively, at the time of valuation.
Bank Loans. Bank loans purchased in the primary market are typically valued at acquisition cost for up to two days, and are then valued using a market quotation from a pricing service or quote from a broker-dealer, or if such quotes are unavailable, fair value. For bank loans trading in the secondary market, prices are obtained from a pricing service and are based upon the average of one or more indicative bids from broker-dealers. ​
Private Placement Securities. Private placement securities requiring fair valuation are typically valued utilizing prices from broker-dealers or using internal analysis and any issuer-provided financial information.
Foreign Currencies. Foreign currencies, securities denominated in foreign currencies and payables/receivables denominated in foreign currencies are valued in U.S. dollars utilizing spot exchange rates at the close of regular trading on the NYSE. Forward foreign currency contracts are valued in U.S. dollars utilizing the applicable forward currency exchange rate as of the close of regular trading on the NYSE.
Statement of Additional Information – October 3, 2016 187

 

Table of Contents
Fair Valuation of Portfolio Securities. In the event that (i) market quotations or valuations from other sources are not readily available, such as when trading is halted or securities are not actively traded; (ii) market quotations or valuations from other sources are not reflective of market value (i.e., such prices or values are deemed unreliable in the judgment of the Investment Manager); or (iii) a significant event has been recognized in relation to a security or class of securities that is not reflected in market quotations or valuations from other sources, such as when an event impacting a foreign security occurs after the closing of the security’s foreign exchange but before the closing of the NYSE, a fair value for each such security is determined in accordance with valuation procedures approved by the Board. The fair value of a security is likely to be different from the quoted or published price and fair value determinations often require significant judgment.
In general, any relevant factors may be taken into account in determining fair value, including but not limited to the following, among others: the fundamental analytical data relating to the security; the value of other financial instruments, including derivative securities traded on other markets or among dealers; trading volumes on markets, exchanges, or among dealers; values of baskets of securities traded on other markets, exchanges, or among dealers; changes in interest rates; observations from financial institutions; government actions or pronouncements; other news events; information as to any transactions or offers with respect to the security; price and extent of public trading in similar securities of the issuer or comparable companies; nature and expected duration of the event, if any, giving rise to the valuation issue; pricing history; the relative size of the position in the portfolio; internal models; and other relevant information.
With respect to securities traded on foreign markets, relevant factors may include, but not be limited to, the following: the value of foreign securities traded on other foreign markets; ADR and/or GDR trading; closed-end fund trading; foreign currency exchange activity and prices; and the trading of financial products that are tied to baskets of foreign securities, such as certain exchange-traded index funds. A systematic independent fair value pricing service assists in the fair valuation process for foreign securities in order to adjust for possible changes in value that may occur between the close of the foreign exchange and the time at which a Fund’s NAV is determined. Although the use of this service is intended to decrease opportunities for time zone arbitrage transactions, there can be no assurance that it will successfully decrease arbitrage opportunities.
Statement of Additional Information – October 3, 2016 188

 

Table of Contents
TAXATION
The following information supplements and should be read in conjunction with the section in the Funds’ prospectuses entitled Distributions and Taxes . The prospectuses generally describe the U.S. federal income tax treatment of distributions by the Funds. This section of the SAI provides additional information concerning U.S. federal income taxes. It is based on the Code, applicable U.S. Treasury Regulations, judicial authority, and administrative rulings and practice, all as in effect as of the date of this SAI and all of which are subject to change, including changes with retroactive effect. Except as specifically set forth below, the following discussion does not address any state, local or foreign tax matters. The Funds may or may not invest in all of the securities or other instruments described in this Taxation section. Please see the Funds' prospectuses for information about a Fund's investments, as well as each Fund’s semiannual and annual shareholder reports.
A shareholder’s tax treatment may vary depending upon his or her particular situation. This discussion applies only to shareholders holding Fund shares as capital assets within the meaning of the Code. Except as otherwise noted, it may not apply to certain types of shareholders who may be subject to special rules, such as insurance companies, tax-exempt organizations, shareholders holding Fund shares through tax-advantaged accounts (such as 401(k) Plan Accounts or Individual Retirement Accounts, variable annuity contracts or variable life insurance contracts), financial institutions, broker-dealers, entities that are not organized under the laws of the United States or a political subdivision thereof, persons who are neither citizens nor residents of the United States, shareholders holding Fund shares as part of a hedge, straddle, or conversion transaction, and shareholders who are subject to the U.S. federal alternative minimum tax.
The Trust has not requested and will not request an advance ruling from the IRS as to the U.S. federal income tax matters described below. The IRS could adopt positions contrary to those discussed below and such positions could be sustained. In addition, the following discussion and the discussions in the prospectuses address only some of the U.S. federal income tax considerations generally affecting investments in the Funds. Prospective shareholders are urged to consult with their own tax advisors and financial planners regarding the U.S. federal tax consequences of an investment in a Fund, the application of state, local, or foreign laws, and the effect of any possible changes in applicable tax laws on their investment in the Funds.
Qualification as a Regulated Investment Company
It is intended that each Fund qualify as a “regulated investment company” under Subchapter M of Subtitle A, Chapter 1 of the Code. Each Fund will be treated as a separate entity for U.S. federal income tax purposes. Thus, the provisions of the Code applicable to regulated investment companies generally will apply separately to each Fund, even though each Fund is a series of the Trust. Furthermore, each Fund will separately determine its income, gains, losses, and expenses for U.S. federal income tax purposes.
In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders under the Code, each Fund must, among other things, derive at least 90% of its gross income each taxable year generally from (i) dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income attributable to its business of investing in such stock, securities or foreign currencies (including, but not limited to, gains from options, futures or forward contracts) and (ii) net income derived from an interest in a qualified publicly traded partnership, as defined below. In general, for purposes of this 90% gross income requirement, income derived from a partnership (other than a qualified publicly traded partnership) will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized directly by the regulated investment company. However, 100% of the net income derived from an interest in a qualified publicly traded partnership (generally, defined as a partnership (x) the interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, and (y) that derives less than 90% of its gross income from the qualifying income described in clause (i) above) will be treated as qualifying income. In general, such entities will be treated as partnerships for federal income tax purposes if they meet the passive income requirement under Code Section 7704(c)(2). Certain of a Fund’s investments in master limited partnerships (MLPs) and ETFs, if any, may qualify as interests in qualified publicly traded partnerships. In addition, although in general the passive loss rules do not apply to a regulated investment company, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership.
Each Fund must also diversify its holdings so that, at the end of each quarter of the Fund’s taxable year: (i) at least 50% of the fair market value of its total assets consists of (A) cash and cash items (including receivables), U.S. Government securities and securities of other regulated investment companies, and (B) other securities, of any one issuer (other than those described in clause (A)) to the extent such securities do not exceed 5% of the value of the Fund’s total assets and are not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the Fund’s total assets is invested in, including through corporations in which the Fund owns a 20% or more voting stock interest, the securities of any one issuer
Statement of Additional Information – October 3, 2016 189

 

Table of Contents
(other than those described in clause (i)(A)), the securities (other than securities of other regulated investment companies) of two or more issuers the Fund controls and which are engaged in the same, similar, or related trades or businesses, or the securities of one or more qualified publicly traded partnerships.
In addition, for purposes of meeting this diversification requirement, the term “outstanding voting securities of such issuer” includes the equity securities of a qualified publicly traded partnership and in the case of a Fund’s investments in loan participations, the Fund shall treat both the financial intermediary and the issuer of the underlying loan as an issuer. The qualifying income and diversification requirements described above may limit the extent to which a Fund can engage in certain derivative transactions, as well as the extent to which it can invest in MLPs and certain commodity-linked ETFs.
In addition, each Fund generally must distribute to its shareholders at least 90% of its investment company taxable income for the taxable year, which generally includes its ordinary income and the excess of any net short-term capital gain over net long-term capital loss, and at least 90% of its net tax-exempt interest income (if any) for the taxable year.
If a Fund qualifies as a regulated investment company that is accorded special tax treatment, it generally will not be subject to U.S. federal income tax on any of the investment company taxable income and net capital gain ( i.e. , the excess of net long-term capital gain over net short-term capital loss) it distributes to its shareholders. Each Fund generally intends to distribute at least annually substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction) and its net capital gain. However, no assurance can be given that a Fund will not be subject to U.S. federal income taxation. Any investment company taxable income or net capital gain retained by a Fund will be subject to tax at regular corporate rates.
If a Fund retains any net capital gain, it will be subject to a tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice mailed within 60 days of the close of the Fund’s taxable year to its shareholders, who (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax paid by the Fund on such undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of a Fund will be increased by an amount equal under current law to the difference between the amount of undistributed capital gains included in the shareholder’s gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence.
In determining its net capital gain, including in connection with determining the amount available to support a Capital Gain Dividend (as defined below), its taxable income, and its earnings and profits, a regulated investment company generally may elect to treat part or all of any post-October capital loss (defined as any net capital loss, if any, attributable to the portion of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable to such portion, if any, of the taxable year) or late-year ordinary loss (generally, the sum of its (i) net ordinary loss from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year after October 31 and its (ii) other net ordinary loss attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable year.
In order to comply with the distribution requirements described above applicable to regulated investment companies, a Fund generally must make the distributions in the same taxable year that it realizes the income and gain, although in certain circumstances, a Fund may make the distributions in the following taxable year in respect of income and gains from the prior taxable year. Shareholders generally are taxed on any distributions from a Fund in the year they are actually distributed. If a Fund declares a distribution to shareholders of record in October, November or December of one calendar year and pays the distribution in January of the following calendar year, however, the Fund and its shareholders will be treated as if the Fund paid the distribution on December 31 of the earlier year.
If a Fund were to fail to meet the income, diversification or distribution tests described above, the Fund could in some cases cure such failure including by paying a fund-level tax or interest, making additional distributions, or disposing of certain assets. If the Fund were ineligible to or otherwise did not cure such failure for any year, or were otherwise to fail to qualify and be eligible for treatment as a regulated investment company accorded special tax treatment under the Code, it would be taxed in the same manner as an ordinary corporation without any deduction for its distributions to shareholders. In this case, all distributions from the Fund’s current and accumulated earnings and profits (including any distributions of its net tax-exempt income and net long-term capital gains) to its shareholders would be taxable to shareholders as dividend income. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company.
Excise Tax
If a Fund fails to distribute by December 31 of each calendar year at least the sum of 98% of its ordinary income for that year (excluding capital gains and losses) and 98.2% of its capital gain net income (adjusted for net ordinary losses) for the 1-year period ending on October 31 of that year (or November 30 or December 31 of that year if the Fund is permitted to elect and so
Statement of Additional Information – October 3, 2016 190

 

Table of Contents
elects), and any of its ordinary income and capital gain net income from previous years that were not distributed during such years, the Fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For these purposes, ordinary gains and losses from the sale, exchange, or other taxable disposition of property that would be properly taken into account after October 31 of a calendar year (or November 30 or December 31 if the Fund is permitted to elect and so elects) are generally treated as arising on January 1 of the following calendar year. For purposes of the excise tax, a Fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. Each Fund generally intends to actually distribute or be deemed to have distributed substantially all of its ordinary income and capital gain net income, if any, by the end of each calendar year and, thus, expects not to be subject to the excise tax. However, no assurance can be given that a Fund will not be subject to the excise tax. Moreover, a Fund reserves the right to pay an excise tax rather than make an additional distribution when circumstances warrant (for example, if the amount of excise tax to be paid is deemed de minimis by a Fund).
Capital Loss Carryovers
Capital losses in excess of capital gains (“net capital losses”) are not permitted to be deducted against a Fund’s net investment income. Instead, potentially subject to certain limitations, a Fund is able to carry forward a net capital loss from any taxable year to offset its capital gains, if any, realized during a subsequent taxable year.
If a Fund incurs or has incurred net capital losses in taxable years beginning after December 22, 2010 (“post-2010 losses”), those losses will be carried forward to one or more subsequent taxable years without expiration; any such carryover losses will retain their character as short-term or long-term. If a Fund incurred net capital losses in a taxable year beginning on or before December 22, 2010 (“pre-2011 losses”), the Fund is permitted to carry such losses forward for eight taxable years; in the year to which they are carried over, such losses are treated as short-term capital losses that first offset short-term capital gains, and then offset any long-term capital gains. The Fund must use any post-2010 losses, which will not expire, before it uses any pre-2011 losses. This increases the likelihood that pre-2011 losses will expire unused at the conclusion of the eight-year carryover period.
Capital gains that are offset by carried forward capital losses are not subject to fund-level U.S. federal income taxation, regardless of whether they are distributed to shareholders. Accordingly, the Funds do not expect to distribute any capital gains so offset. The Funds cannot carry back or carry forward any net operating losses (defined as deductions and ordinary losses in excess of ordinary income).
The total capital loss carryovers below include post-October losses, if applicable.
Capital Loss Carryovers
Fund Total
Capital Loss
Carryovers
Amount Expiring in   Amount not Expiring
2016 2017 2018 2019   Short-term Long-term
For Funds with fiscal period ending January 31
Diversified Real Return Fund $717,755 $0 $0 $0 $0   $10,800 $706,955
For Funds with fiscal period ending March 31
Pacific/Asia Fund $3,989,621 $0 $0 $3,573,332 $416,289   $0 $0
For Funds with fiscal period ending April 30
Corporate Income Fund $31,534,840 $0 $0 $0 $0   $12,564,309 $18,970,531
Multi-Asset Income Fund $3,628,691 $0 $0 $0 $0   $3,628,691 $0
For Funds with fiscal period ending May 31
Adaptive Risk Allocation Fund $4,118,122 $0 $0 $0 $0   $4,118,122 $0
Alternative Beta Fund $6,311,800 $0 $0 $0 $0   $5,826,674 $485,126
Diversified Absolute Return Fund $1,249,633 $0 $0 $0 $0   $386,927 $862,706
HY Municipal Fund $72,071,451 $0 $17,741,445 $35,721,468 $4,244,605   $2,054,931 $12,309,002
For Funds with fiscal period ending July 31
AMT-Free OR Intermediate Muni Bond Fund $1,378,898 $0 $0 $0 $0   $1,378,898 $0
Tax-Exempt Fund $45,506,818 $24,820,789 $0 $6,621,391 $14,064,638   $0 $0
U.S. Social Bond Fund $9,878 $0 $0 $0 $0   $9,878 $0
Ultra Short Term Bond Fund $24,604,182 $213,699 $2,249,159 $1,023,617 $11,369,928   $3,417,204 $6,330,575
Statement of Additional Information – October 3, 2016 191

 

Table of Contents
Fund Total
Capital Loss
Carryovers
Amount Expiring in   Amount not Expiring
2016 2017 2018 2019   Short-term Long-term
For Funds with fiscal period ending August 31
Global Dividend Opportunity Fund $8,531,694 $0 $8,531,694 $0 $0   $0 $0
Mid Cap Growth Fund $27,659,954 $27,659,954 $0 $0 $0   $0 $0
Small Cap Growth Fund I $2,033,760 $2,033,760 $0 $0 $0   $0 $0
For Funds with fiscal period ending October 31
AMT-Free Intermediate Muni Bond Fund $9,618,022 $0 $832,773 $62,558 $0   $8,722,691 $0
AMT-Free NY Intermediate Muni Bond Fund $808,455 $0 $808,455 $0 $0   $0 $0
For Funds with fiscal period ending December 31
Real Estate Equity Fund $13,840,472 $8,814,909 $5,025,563 $0 N/A   $0 $0
Equalization Accounting
Each Fund may use the so-called “equalization method” of accounting to allocate a portion of its “accumulated earnings and profits,” which generally equals a Fund’s undistributed net investment income and realized capital gains, with certain adjustments, to redemption proceeds. This method permits a Fund to achieve more balanced distributions for both continuing and redeeming shareholders. Although using this method generally will not affect a Fund’s total returns, it may reduce the amount of income and gains that the Fund would otherwise distribute to continuing shareholders by reducing the effect of redemptions of Fund shares on Fund distributions to shareholders. The IRS has not sanctioned the particular equalization method used by the Funds, and thus a Fund’s use of this method may be subject to IRS scrutiny.
Taxation of Fund Investments
In general, realized gains or losses on the sale of securities held by a Fund will be treated as capital gains or losses, and long-term capital gains or losses if the Fund has held or is deemed to have held the securities for more than one year at the time of disposition.
If a Fund purchases a debt obligation with original issue discount (OID) (generally a debt obligation with an issue price less than its stated principal amount, such as a zero-coupon bond), the Fund may be required to annually include in its income a portion of the OID as ordinary income, even though the Fund will not receive cash payments for such discount until maturity or disposition of the obligation, and depending on market conditions and the credit quality of the bond, might not ever receive cash for such discount. OID on tax-exempt bonds is generally not subject to U.S. federal income tax (but may be subject to the U.S. federal alternative minimum tax or "AMT," as that term is defined below).
Inflation-protected bonds generally can be expected to produce OID income as their principal amounts are adjusted upward for inflation. In general, gains recognized on the disposition of (or the receipt of any partial payment of principal on) a debt obligation (including a municipal obligation) purchased by a Fund at a market discount, generally at a price less than its principal amount, will be treated as ordinary income to the extent of the portion of market discount which accrued, but was not previously recognized pursuant to an available election, during the term that the Fund held the debt obligation.
A Fund generally will be required to make distributions to shareholders representing the OID or market discount (if an election is made by the Fund to include market discount over the holding period of the applicable debt obligation) on debt securities that is currently includible in income, even though the cash representing such income may not have been received by the Fund, and depending on market conditions and the credit quality of the bond, might not ever be received. Cash to pay such distributions may be obtained from borrowing or from sales proceeds of securities held by a Fund which the Fund otherwise might have continued to hold; obtaining such cash might be disadvantageous for the Fund. In addition, payment-in-kind securities similarly will give rise to income which is required to be distributed and is taxable even though a Fund receives no cash interest payment on the security during the year. A portion of the interest paid or accrued on certain high-yield discount obligations (such as high-yield corporate debt securities) may not (and interest paid on debt obligations owned by a Fund that are considered for tax purposes to be payable in the equity of the issuer or a related party will not) be deductible to the issuer, possibly affecting the cash flow of the issuer.
If a Fund invests in debt obligations that are in the lowest rating categories or are unrated, including debt obligations of issuers not currently paying interest or who are in default, special tax issues may exist for the Fund. Tax rules are not entirely clear about issues such as: (1) whether a Fund should recognize market discount on a debt obligation and, if so, (2) the amount of market discount the Fund should recognize, (3) when a Fund may cease to accrue interest, OID or market discount, (4) when and to what extent deductions may be taken for bad debts or worthless securities and (5) how payments received on obligations in
Statement of Additional Information – October 3, 2016 192

 

Table of Contents
default should be allocated between principal and income. These and other related issues will be addressed by a Fund when, as and if it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status and eligibility for treatment as a regulated investment company and does not become subject to U.S. federal income or excise tax.
Very generally, when a Fund purchases a bond at a price that exceeds the redemption price at maturity – that is, at a premium – the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if a Fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS, the Fund reduces the current interest taxable income from the bond by the amortized premium and reduces its tax basis in the bond by the amount of such offset; upon the disposition or maturity of such bonds acquired on or after January 4, 2013, a Fund is permitted to deduct any remaining premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require a Fund to reduce its tax basis and the tax-exempt interest available for exempt-interest dividends to shareholders by the amount of the amortized premium.
If an option granted by a Fund is sold, lapses or is otherwise terminated through a closing transaction, such as a repurchase by the Fund of the option from its holder, the Fund generally will realize a short-term capital gain or loss, depending on whether the premium income is greater or less than the amount paid by the Fund in the closing transaction, unless the option is subject to Section 1256 of the Code, described below. Some capital losses realized by a Fund in the sale, exchange, exercise or other disposition of an option may be deferred if they result from a position that is part of a “straddle,” discussed below. If securities are sold by a Fund pursuant to the exercise of a covered call option granted by it, the Fund generally will add the premium received to the sale price of the securities delivered in determining the amount of gain or loss on the sale. If securities are purchased by a Fund pursuant to the exercise of a put option granted by it, the Fund generally will subtract the premium received from its cost basis in the securities purchased.
Some regulated futures contracts, foreign currency contracts, and non-equity, listed options that may be used by a Fund will be deemed “Section 1256 contracts.” A Fund will be required to “mark to market” any such contracts held at the end of the taxable year by treating them as if they had been sold on the last day of that year at market value. Sixty percent of any net gain or loss realized on all dispositions of Section 1256 contracts, including deemed dispositions under the “mark-to-market” rule, generally will be treated as long-term capital gain or loss, and the remaining 40% will be treated as short-term capital gain or loss, although certain foreign currency gains and losses from such contracts may be treated as entirely ordinary income or loss as described below. These provisions may require a Fund to recognize income or gains without a concurrent receipt of cash. Transactions that qualify as designated hedges are exempt from the mark-to-market rule and the “60%/40%” rule and may require the Fund to defer the recognition of losses on certain futures contracts, foreign currency contracts, and non-equity options.
Foreign exchange gains and losses realized by a Fund in connection with certain transactions involving foreign currency-denominated debt securities, certain options, futures contracts, forward contracts and similar instruments relating to foreign currencies, or payables or receivables denominated in a foreign currency are subject to Section 988 of the Code, which generally causes such gains and losses to be treated as ordinary income or loss and may affect the amount and timing of recognition of the Fund’s income. Under future U.S. Treasury Regulations, any such transactions that are not directly related to a Fund’s investments in stock or securities (or its options contracts or futures contracts with respect to stock or securities) may have to be limited in order to enable the Fund to satisfy the 90% qualifying income test described above. If the net foreign exchange loss exceeds a Fund’s net investment company taxable income (computed without regard to such loss) for a taxable year, the resulting ordinary loss for such year will not be available as a carryover and thus cannot be deducted by the Fund or its shareholders in future years.
Offsetting positions held by a Fund involving certain derivative instruments, such as forward, futures and options contracts, may be considered, for U.S. federal income tax purposes, to constitute “straddles.” “Straddles” are defined to include “offsetting positions” in actively traded personal property. The tax treatment of “straddles” is governed by Section 1092 of the Code which, in certain circumstances, overrides or modifies the provisions of Section 1256. If a Fund is treated as entering into a “straddle” and at least one (but not all) of the Fund’s positions in derivative contracts comprising a part of such straddle is governed by Section 1256 of the Code, described above, then such straddle could be characterized as a “mixed straddle.” A Fund may make one or more elections with respect to “mixed straddles.” Depending upon which election is made, if any, the results with respect to a Fund may differ. Generally, to the extent the straddle rules apply to positions established by a Fund, losses realized by the Fund may be deferred to the extent of unrealized gain in any offsetting positions. Moreover, as a result of the straddle rules, short-term capital loss on straddle positions may be recharacterized as long-term capital loss, and long-term capital gain may be characterized as short-term capital gain. In addition, the existence of a straddle may affect the holding period of the offsetting positions. As a result, the straddle rules could cause distributions that would otherwise constitute “qualified dividend income” or qualify for the dividends-received deduction to fail to satisfy the applicable holding period requirements (as described below). Furthermore, the Fund may be required to capitalize, rather than deduct currently, any interest expense and carrying charges applicable to a position that is part of a straddle, including any interest on indebtedness incurred or continued to purchase or carry any positions that are part of a straddle. The application of the straddle rules to certain offsetting Fund positions can
Statement of Additional Information – October 3, 2016 193

 

Table of Contents
therefore affect the amount, timing, and character of distributions to shareholders, and may result in significant differences from the amount, timing and character of distributions that would have been made by the Fund if it had not entered into offsetting positions in respect of certain of its portfolio securities.
If a Fund enters into a “constructive sale” of any appreciated financial position in stock, a partnership interest, or certain debt instruments, the Fund will be treated as if it had sold and immediately repurchased the property and must recognize gain (but not loss) with respect to that position. A constructive sale of an appreciated financial position occurs when a Fund enters into certain offsetting transactions with respect to the same or substantially identical property, including, but not limited to: (i) a short sale; (ii) an offsetting notional principal contract; (iii) a futures or forward contract; or (iv) other transactions identified in future U.S. Treasury Regulations. The character of the gain from constructive sales will depend upon a Fund’s holding period in the appreciated financial position. Losses realized from a sale of a position that was previously the subject of a constructive sale will be recognized when the position is subsequently disposed of. The character of such losses will depend upon a Fund’s holding period in the position beginning with the date the constructive sale was deemed to have occurred and the application of various loss deferral provisions in the Code. Constructive sale treatment does not apply to certain closed transactions, including if such a transaction is closed on or before the 30th day after the close of the Fund’s taxable year and the Fund holds the appreciated financial position unhedged throughout the 60-day period beginning with the day such transaction was closed.
The amount of long-term capital gain a Fund may recognize from certain derivative transactions with respect to interests in certain pass-through entities is limited under the Code’s constructive ownership rules. The amount of long-term capital gain is limited to the amount of such gain the Fund would have had if the Fund directly invested in the pass-through entity during the term of the derivative contract. Any gain in excess of this amount is treated as ordinary income. An interest charge is imposed on the amount of gain that is treated as ordinary income.
If a Fund makes a distribution of income received by the Fund in lieu of dividends (a “substitute payment”) with respect to securities on loan pursuant to a securities lending transaction, such income will not constitute qualified dividend income to individual shareholders and will not be eligible for the dividends-received deduction for corporate shareholders. Similar consequences may apply to repurchase and other derivative transactions. Similarly, to the extent that the Funds make distributions of income received by such Fund in lieu of tax-exempt interest with respect to securities on loan, such distributions will not constitute exempt-interest dividends (defined below) to shareholders.
In addition, a Fund’s transactions in securities and certain types of derivatives ( e.g., options, futures contracts, forward contracts and swap agreements) may be subject to other special tax rules, such as the wash sale rules or the short-sale rules, the effect of which may be to accelerate income to the Fund, defer losses to the Fund, cause adjustments in the holding periods of the Fund’s securities, convert long-term capital gains into short-term capital gains, and/or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders.
Certain of a Fund’s investments in derivative instruments and foreign currency-denominated instruments, as well as any of its foreign currency transactions and hedging activities, are likely to produce a difference between its book income and its taxable income. If a Fund’s book income exceeds the sum of its taxable income and net tax-exempt income (if any), the distribution (if any) of such excess generally will be treated as (i) a dividend to the extent of the Fund’s remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter, as a return of capital to the extent of the recipient’s basis in its shares, and (iii) thereafter, as gain from the sale or exchange of a capital asset. If a Fund’s book income is less than the sum of its taxable income and net tax-exempt income (if any), the Fund could be required to make distributions exceeding book income to qualify for treatment as a regulated investment company that is accorded special tax treatment.
Rules governing the U.S. federal income tax aspects of derivatives, including swap agreements and certain commodity-linked investments, are in a developing stage and are not entirely clear in certain respects. Accordingly, while each Fund intends to account for such transactions in a manner it deems to be appropriate, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether a Fund has made sufficient distributions, and otherwise satisfied the relevant requirements to maintain its qualification as a regulated investment company and avoid fund-level tax. Certain requirements that must be met under the Code in order for a Fund to qualify as a regulated investment company may limit the extent to which a Fund will be able to engage in certain derivatives or commodity-linked transactions.
Certain of the Funds employ a multi-manager approach in which the Investment Manager and one or more investment subadvisers each provide day-to-day portfolio management for a portion (or “sleeve”) of the Fund’s assets. Due to this multi-manager approach, certain of these Funds’ investments may be more likely to be subject to one or more special tax rules (including, but not limited to, wash sale, constructive sale, short sale, and straddle rules) that may affect the timing, character and/or amount of a Fund’s distributions to shareholders.
Statement of Additional Information – October 3, 2016 194

 

Table of Contents
Any investment by a Fund in equity securities of a REIT may result in the Fund’s receipt of cash in excess of the REIT’s earnings; if the Fund distributes these amounts, these distributions could constitute a return of capital to Fund shareholders for U.S. federal income tax purposes. Dividends received by a Fund from a REIT generally will not constitute qualified dividend income and will not qualify for the dividends-received deduction.
A Fund may invest directly or indirectly in residual interests in REMICs or equity interests in taxable mortgage pools (TMPs). Under an IRS notice, and U.S. Treasury Regulations that have yet to be issued but may apply retroactively, a portion of a Fund’s income (including income allocated to the Fund from a REIT, a regulated investment company or other pass-through entity) that is attributable to a residual interest in a REMIC or an equity interest in a TMP (referred to in the Code as an “excess inclusion”) will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as a Fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related interest directly. As a result, the Fund may not be a suitable investment for certain tax-exempt shareholders, as noted under Tax-Exempt Shareholders below.
In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income (UBTI) to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or certain other tax-exempt entities) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign shareholder, will not qualify for any reduction in U.S. federal withholding tax.
Some amounts received by a Fund from its investments in MLPs will likely be treated as returns of capital because of accelerated deductions available with respect to the activities of MLPs. On the disposition of an investment in such an MLP, the Fund will likely realize taxable income in excess of economic gain from that asset (or, in later periods, if a Fund does not dispose of the MLP, the Fund will likely realize taxable income in excess of cash flow received by the Fund from the MLP), and the Fund must take such income into account in determining whether the Fund has satisfied its regulated investment company distribution requirements. The Fund may have to borrow or liquidate securities to satisfy its distribution requirements and meet its redemption requests, even though investment considerations might otherwise make it undesirable for the Fund to borrow money or sell securities at the time. In addition, distributions attributable to gain from the sale of MLPs that are characterized as ordinary income under the Code’s recapture provisions will be taxable to Fund shareholders as ordinary income.
As noted above, certain of the ETFs and MLPs in which a Fund may invest qualify as qualified publicly traded partnerships. In such cases, the net income derived from such investments will constitute qualifying income for purposes of the 90% gross income requirement described earlier for qualification as a regulated investment company. If, however, such a vehicle were to fail to qualify as a qualified publicly traded partnership in a particular year, a Fund’s investment in that vehicle would be treated as an investment in a publicly traded partnership subject to taxation as a corporation, which would reduce the amount of income available for distribution by the vehicle to the Fund, and could adversely affect the Fund’s qualification for the asset diversification test, and thus could adversely affect the Fund’s ability to qualify as a regulated investment company for a particular year. In addition, as described above, the diversification requirement for regulated investment company qualification will limit a Fund’s investments in one or more vehicles that are qualified publicly traded partnerships to 25% of the Fund’s total assets as of the end of each quarter of the Fund’s taxable year.
“Passive foreign investment companies” (PFICs) are generally defined as foreign corporations where at least 75% of their gross income for their taxable year is income from passive sources (such as certain interest, dividends, rents and royalties, or capital gains) or at least 50% of their assets on average produce or are held for the production of such passive income. If a Fund acquires any equity interest in a PFIC, the Fund could be subject to U.S. federal income tax and interest charges on “excess distributions” received from the PFIC or on gain from the sale of such equity interest in the PFIC, even if all income or gain actually received by the Fund is timely distributed to its shareholders. Excess distributions and gain from the sale of interests in PFICs may be characterized as ordinary income even though, absent the application of PFIC rules, these amounts may otherwise have been classified as capital gain.
A Fund will not be permitted to pass through to its shareholders any credit or deduction for these special taxes and interest charges incurred with respect to a PFIC. Elections may be available that would ameliorate these adverse tax consequences, but such elections would require a Fund to include its share of the PFIC’s income and net capital gains annually, regardless of whether it receives any distribution from the PFIC (in the case of a “QEF election”), or to mark the gains (and to a limited extent losses) in its interests in the PFIC “to the market” as though the Fund had sold and repurchased such interests on the last day of the Fund’s taxable year, treating such gains and losses as ordinary income and loss (in the case of a “mark-to-market election”). The QEF and mark-to-market elections may require a Fund to recognize taxable income or gain without the concurrent receipt of cash and increase the amount required to be distributed by the Fund to avoid taxation. Making either of these elections therefore may require a Fund to liquidate other investments prematurely to meet the minimum distribution requirements
Statement of Additional Information – October 3, 2016 195

 

Table of Contents
described above, which also may accelerate the recognition of gain and adversely affect the Fund’s total return. Each Fund may attempt to limit and/or manage its holdings in PFICs to minimize tax liability and/or maximize returns from these investments but there can be no assurance that it will be able to do so. Moreover, because it is not always possible to identify a foreign corporation as a PFIC, a Fund may incur the tax and interest charges described above in some instances. Dividends paid by PFICs will not be eligible to be treated as qualified dividend income, as defined below.
A U.S. person, including a Fund, who owns (directly or indirectly) 10% or more of the total combined voting power of all classes of stock of a foreign corporation is a “U.S. Shareholder” for purposes of the controlled foreign corporation (“CFC”) provisions of the Code. Generally, a CFC is a foreign corporation that is owned (directly, indirectly, or constructively) more than 50% (measured by voting power or value) by U.S. Shareholders.
Each wholly-owned subsidiary of each of Alternative Beta Fund, AP – Alternatives Fund and Diversified Absolute Return Fund is expected to be a CFC in which the Fund owning the Subsidiary will be a U.S. Shareholder. As a U.S. Shareholder, such a Fund is required to include in gross income for U.S. federal income tax purposes all of a CFC’s “subpart F income,” whether or not such income is actually distributed by the CFC. Subpart F income generally includes net gains from the disposition of stocks or securities, receipts with respect to securities loans, net gains from transactions (including futures, forward, and similar transactions) in commodities, and net payments received with respect to equity swaps and similar derivatives. Subpart F income is treated as ordinary income, regardless of the character of the CFC’s underlying income. Net losses incurred by a CFC during a tax year do not flow through to the Fund and thus will not be available to offset income or capital gain generated from the Fund’s other investments. In addition, net losses incurred by a CFC during a tax year generally cannot be carried forward by the CFC to offset gains realized by it in subsequent taxable years. To the extent the Fund recognizes subpart F income in excess of actual cash distributions from a CFC, the Fund may be required to sell assets (including when it is not advantageous to do so) to generate the cash necessary to distribute as dividends to its shareholders all of its income and gains and therefore to eliminate any tax liability at the Fund level.
In addition, if any income earned by a Subsidiary were treated as “effectively connected” with the conduct of a trade or business in the United States (“effectively connected income” or “ECI”), such income would be subject to both a so-called “branch profits tax” of 30% and a federal income tax at the rates applicable to U.S. corporations, at the entity level. If, for U.S. federal income tax purposes, a Subsidiary were to earn ECI in connection with its direct investment activities, a portion or all of the Subsidiary’s income would be subject to these U.S. taxes. The Funds that own one or more Subsidiaries expect that, in general, the activities of the Subsidiaries will be conducted in such a manner that they will not be treated as engaged in a U.S. trade or business, but there can be no assurance that the entity will not recognize any effectively connected income. The imposition of U.S. taxes on ECI could significantly reduce shareholders’ returns on their investments in a Fund owning a Subsidiary subject to such taxes. The Fund does not expect that income from any Subsidiary will be eligible to be treated as qualified dividend income. In addition, the Fund does not expect that distributions from any Subsidiary will be eligible for the dividends-received deduction.
In addition to the investments described above, prospective shareholders should be aware that other investments made by a Fund may involve complex tax rules that may result in income or gain recognition by the Fund without corresponding current cash receipts. Although each Fund seeks to avoid significant noncash income, such noncash income could be recognized by a Fund, in which case the Fund may distribute cash derived from other sources in order to meet the minimum distribution requirements described above. In this regard, a Fund could be required at times to liquidate investments prematurely in order to satisfy its minimum distribution requirements, which may accelerate the recognition of gain and adversely affect the Fund’s total return.
Taxation of Distributions
Except for exempt-interest dividends (defined below) paid by a Fund, distributions paid out of a Fund’s current and accumulated earnings and profits, whether paid in cash or reinvested in the Fund, generally are deemed to be taxable distributions and must be reported by each shareholder who is required to file a U.S. federal income tax return. Dividends and distributions on a Fund’s shares are generally subject to U.S. federal income tax as described herein to the extent they do not exceed the Fund’s realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder’s investment. Such distributions are likely to occur in respect of shares purchased at a time when the Fund’s net asset value reflects either unrealized gains, or realized but undistributed income or gains. Such realized income and gains may be required to be distributed even when the Fund’s net asset value also reflects unrealized losses. For U.S. federal income tax purposes, a Fund’s earnings and profits, described above, are determined at the end of the Fund’s taxable year. Distributions in excess of a Fund’s current and accumulated earnings and profits will first be treated as a return of capital up to the amount of a shareholder’s tax basis in his or her Fund shares and then as capital gain. A return of capital is not taxable, but it reduces a shareholder’s tax basis in his or her Fund shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of his or her shares. A Fund may make distributions in excess of its earnings and profits to a limited extent, from time to time.
Statement of Additional Information – October 3, 2016 196

 

Table of Contents
For U.S. federal income tax purposes, distributions of investment income (except for exempt-interest dividends and qualified dividend income, each defined below) are generally taxable as ordinary income, and distributions of gains from the sale of investments that a Fund owned (or is deemed to have owned) for one year or less will be taxable as ordinary income. Distributions properly reported by a Fund as capital gain dividends (Capital Gain Dividends) will be taxable to shareholders as long-term capital gain (to the extent such distributions do not exceed the Fund’s actual net long-term capital gain for the taxable year), regardless of how long a shareholder has held Fund shares, and do not qualify as dividends for purposes of the dividends-received deduction or as qualified dividend income (defined below). Each Fund will report Capital Gain Dividends, if any, in written statements furnished to its shareholders.
Some states will not tax distributions made to individual shareholders that are attributable to interest a Fund earns on direct obligations of the U.S. Government if the Fund meets the state’s minimum investment or reporting requirements, if any. Investments in GNMA or FNMA securities, bankers’ acceptances, commercial paper, and repurchase agreements collateralized by U.S. government securities generally do not qualify for tax-free treatment. This exemption may not apply to corporate shareholders.
Sales and Exchanges of Fund Shares
Generally, if a shareholder sells or exchanges his or her Fund shares, he or she generally will realize a taxable capital gain or loss on the difference between the amount received for the shares (or deemed received in the case of an exchange) and his or her tax basis in the shares. This gain or loss will be long-term capital gain or loss if he or she has held (or is deemed to have held) such Fund shares for more than one year at the time of the sale or exchange, and short-term capital gain or loss otherwise.
If a shareholder incurs a sales charge in acquiring Fund shares and sells or exchanges those Fund shares within 90 days of having acquired such shares and if, as a result of having initially acquired those shares, he or she subsequently pays a reduced sales charge on a new purchase of shares of the Fund or a different regulated investment company, the sales charge previously incurred in acquiring the Fund’s shares generally shall not be taken into account (to the extent the previous sales charges do not exceed the reduction in sales charges on the new purchase) for the purpose of determining the amount of gain or loss on the disposition, but generally will be treated as having been incurred in the new purchase. This sales charge basis deferral rule shall apply only when a shareholder makes such new acquisition of Fund shares or shares of a different regulated investment company during the period beginning on the date the original Fund shares are disposed of and ending on January 31 of the calendar year following the calendar year the original Fund shares are disposed of. If a shareholder realizes a loss on a disposition of Fund shares, the loss generally will be disallowed under “wash sale” rules to the extent that he or she purchases (including through the reinvestment of dividends) substantially identical shares within the 61-day period beginning 30 days before and ending 30 days after the disposition. Any disallowed loss generally will be reflected in an adjustment to the tax basis of the purchased shares.
If a shareholder receives a Capital Gain Dividend or is deemed to receive a distribution of long-term capital gain with respect to any Fund share and such Fund share is held or treated as held for six months or less, then (unless otherwise disallowed) any loss on the sale or exchange of that Fund share will be treated as a long-term capital loss to the extent of the Capital Gain Dividend or deemed long-term capital gain distribution. If Fund shares are sold at a loss after being held for six months or less, the loss will generally be disallowed to the extent of any exempt-interest dividends (defined below) received on those shares. However, this loss disallowance does not apply with respect to redemptions of Fund shares with a holding period beginning after December 22, 2010 if such Fund declares substantially all of its net tax-exempt income as exempt-interest dividends on a daily basis, and pays such dividends on at least a monthly basis (as would typically be the case for tax-exempt money market funds).
Cost Basis Reporting
Each Fund generally is required to report to shareholders and the IRS gross proceeds on the sale, redemption or exchange of Fund shares. In addition, for shares purchased, including shares purchased through dividend reinvestment, on or after January 1, 2012 the Funds (or the shareholder’s Selling Agent, if Fund shares are held through a Selling Agent) generally are required to provide the shareholders and the IRS, upon the sale, redemption or exchange of Fund shares, with cost basis information about those shares as well as information about whether any gain or loss is short- or long-term and whether any loss is disallowed under the “wash sale” rules. This reporting is not required for Fund shares held in a retirement or other tax-advantaged account. With respect to Fund shares in accounts held directly with a Fund, each Fund will calculate and report cost basis using the Fund’s default method of average cost, unless the shareholder instructs the Fund to use a different calculation method. A Fund will not report cost basis for shares whose cost basis is uncertain or unknown to the Fund. Please visit the Columbia Funds’ website at www.columbiathreadneedle.com/us or contact the Funds at 800.345.6611 for more information regarding average cost basis reporting and other available methods for cost basis reporting and how to select or change a particular method or to choose specific shares to sell, redeem or exchange. If a shareholder retains Fund shares through a Selling Agent, he or she should contact their Selling Agent to learn about the Fund’s cost basis reporting default method and the reporting elections available to his or her account. The Funds do not recommend any particular method of determining cost basis. The shareholder should
Statement of Additional Information – October 3, 2016 197

 

Table of Contents
consult a tax advisor to determine which available cost basis method is best. When completing U.S. federal and state income tax returns, shareholders should carefully review the cost basis and other information provided and make any additional basis, holding period or other adjustments that may be required.
Foreign Taxes
Amounts realized by a Fund from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. If more than 50% of the value of a Fund’s total assets at the close of its taxable year consists of securities of foreign corporations, the Fund will be eligible to file an annual election with the IRS pursuant to which the Fund may pass through to its shareholders on a pro rata basis foreign income and similar taxes paid by the Fund with respect to foreign securities that the Fund has held for at least the minimum holding periods specified in the Code and such taxes may be claimed, subject to certain limitations, either as a tax credit or deduction by the shareholders. In some cases, a Fund may also be eligible to pass through to its shareholders the foreign taxes paid by underlying funds (as defined below) in which it invests that themselves elected to pass through such taxes to their shareholders, see Special Tax Considerations Pertaining to Funds-of-Funds below.

Certain Funds may qualify for and make the election; however, even if a Fund qualifies for the election for any year, it may determine not to make the election for such year. If a Fund does not so qualify or qualifies but does not so elect, then shareholders will not be entitled to claim a credit or deduction with respect to foreign taxes paid by or withheld from payments to the Fund. A Fund will notify its shareholders in written statements if it has elected for the foreign taxes paid by it to “pass through” for that year.
In general, if a Fund makes the election, the Fund itself will not be permitted to claim a credit or deduction for foreign taxes paid in that year, and the Fund’s dividends-paid deduction will be increased by the amount of foreign taxes paid that year. Fund shareholders generally shall include their proportionate share of the foreign taxes paid by the Fund in their gross income and treat that amount as paid by them for the purpose of the foreign tax credit or deduction, provided that any applicable holding period and other requirements have been met. If a shareholder claims a credit for foreign taxes paid, in general, the credit will be subject to certain limits. A deduction for foreign taxes paid may be claimed only by shareholders that itemize their deductions. Shareholders that are not subject to U.S. federal income tax, and those who invest in the Fund through tax-exempt accounts (including those who invest through IRAs or other tax-advantaged retirement plans), generally will receive no benefit from any tax credit or deduction passed through by the Fund.
Special Tax Considerations Pertaining to Tax-Exempt Funds
If, at the close of each quarter of a regulated investment company’s taxable year, at least 50% of the value of its total assets consists of obligations the interest on which is exempt from U.S. federal income tax under Section 103(a) of the Code, then the regulated investment company may qualify to pay “exempt-interest dividends” and pass through to its shareholders the tax-exempt character of its income from such obligations. Certain of the Funds intend to so qualify and are designed to provide shareholders with a high level of income in the form of exempt-interest dividends, which are generally exempt from U.S. federal income tax (each such qualifying Fund, a “Tax-Exempt Fund”). In some cases, a Fund may also be eligible to pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds (as defined below) in which it invests, see Special Tax Considerations Pertaining to Funds-of-Funds below.
Distributions by a Tax-Exempt Fund, other than those attributable to interest on the Tax-Exempt Fund’s tax-exempt obligations and properly reported as exempt-interest dividends, will be taxable to shareholders as ordinary income or long-term capital gain or, in some cases, could constitute a return of capital to shareholders. See Taxation of Distributions above. Each Tax-Exempt Fund will notify its shareholders in written statements of the portion of the distributions for the taxable year that constitutes exempt-interest dividends. The percentage of a shareholder’s income reported as tax-exempt for any particular distribution may be substantially different from the percentage of the Tax-Exempt Fund’s income that was tax-exempt during the period covered by the distribution. The deductibility of interest paid or accrued on indebtedness incurred by a shareholder to purchase or carry shares of a Tax-Exempt Fund may be limited. The portion of such interest that is non-deductible generally equals the amount of such interest times the ratio of a Tax-Exempt Fund’s exempt-interest dividends received by the shareholder to all of the Tax-Exempt Fund’s dividends received by the shareholder (excluding Capital Gain Dividends and any capital gains required to be included in the shareholder’s long term capital gains in respect of capital gains retained by the Tax-Exempt Fund, as described earlier).
Although exempt-interest dividends are generally exempt from U.S. federal income tax, there may not be a similar exemption under the laws of a particular state or local taxing jurisdiction. Thus, exempt-interest dividends may be subject to state and local taxes ; however, each state-specific Tax-Exempt Fund generally invests at least 80% of its net assets in municipal bonds that pay interest that is exempt not only from U.S. federal income tax, but also from the applicable state’s personal income tax (but not necessarily local taxes or taxes of other states).
Statement of Additional Information – October 3, 2016 198

 

Table of Contents
You should consult your tax advisor to discuss the tax consequences of your investment in a Tax-Exempt Fund. Tax-exempt interest on certain “private activity bonds” has been designated as a “tax preference item” and must be added back to taxable income for purposes of calculating U.S. federal alternative minimum tax (“AMT”). To the extent that a Tax-Exempt Fund invests in certain private activity bonds, its shareholders will be required to report that portion of the Tax-Exempt Fund’s distributions attributable to income from the bonds as a tax preference item in determining their U.S. federal AMT, if any. Shareholders will be notified of the tax status of distributions made by a Tax-Exempt Fund. Persons who may be “substantial users” (or “related persons” of substantial users) of facilities financed by private activity bonds should consult their tax advisors before purchasing shares in a Tax-Exempt Fund. In addition, exempt-interest dividends paid by a Tax-Exempt Fund to a corporate shareholder are, with very limited exceptions, included in the shareholder’s “adjusted current earnings” as part of its U.S. federal AMT calculation. As of the date of this SAI, individuals are subject to the U.S. federal AMT at a maximum rate of 28% and corporations at a maximum rate of 20%. Shareholders with questions or concerns about the U.S. federal AMT should consult their own tax advisors.
Ordinarily, a Tax-Exempt Fund relies on an opinion from the issuer’s bond counsel that interest on the issuer’s obligation will be exempt from U.S. federal income taxation. However, no assurance can be given that the IRS will not successfully challenge such exemption, which could cause interest on the obligation to be taxable and could jeopardize a Tax-Exempt Fund’s ability to pay exempt-interest dividends. Similar challenges may occur as to state-specific exemptions. Also, from time to time legislation may be introduced or litigation may arise that would change the treatment of exempt-interest dividends. Such litigation or legislation may have the effect of raising the state or other taxes payable by shareholders on such dividends. Shareholders should consult their tax advisors for the current law on exempt-interest dividends.
A shareholder who receives Social Security or railroad retirement benefits should consult his or her tax advisor to determine what effect, if any, an investment in a Tax-Exempt Fund may have on the federal taxation of such benefits. Exempt-interest dividends are included in income for purposes of determining the amount of benefits that are taxable.
Special Tax Considerations Pertaining to Funds-of-Funds
Certain Funds (each such fund, a Fund-of-Funds) invest their assets primarily in shares of other mutual funds, ETFs or other companies that are regulated investment companies (collectively, underlying funds). Consequently, their income and gains will normally consist primarily of distributions from underlying funds and gains and losses on the disposition of shares of underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, a Fund-of-Funds will not be able to benefit from those losses until (i) the underlying fund realizes gains that it can reduce by those losses, or (ii) the Fund-of-Funds recognizes its share of those losses (so as to offset distributions of capital gains from other underlying funds) when it disposes of shares of the underlying fund. Moreover, even when a Fund-of-Funds does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for U.S. federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, a Fund-of-Funds will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund).
In addition, in certain circumstances, the “wash sale” rules may apply to sales of underlying fund shares by a Fund-of-Funds. As discussed above, a wash sale occurs if shares of an underlying fund are sold by a Fund-of-Funds at a loss and the Fund-of-Funds acquires additional shares of that same underlying fund within the period beginning 30 days before and ending 30 days after the date of the sale. The wash-sale rules could defer losses of a Fund-of-Funds on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.
As a result of the foregoing rules, and certain other special rules, it is possible that the amounts of net investment income and net capital gain that a Fund-of-Funds will be required to distribute to shareholders will be greater than such amounts would have been had the Fund-of-Funds invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the character of distributions from a Fund-of-Funds ( e.g., long-term capital gain, exempt interest, eligibility for dividends-received deduction) will not necessarily be the same as it would have been had the Fund-of-Funds invested directly in the securities held by the underlying funds.
Depending on the percentage ownership of a Fund-of-Funds in an underlying fund before and after a redemption of underlying fund shares, the redemption of shares by the Fund-of-Funds of such underlying fund may cause the Fund-of-Funds to be treated as receiving a dividend in the full amount of the redemption proceeds instead of receiving a capital gain or loss on the redemption of shares of the underlying fund. This could be the case where a Fund-of-Funds holds a significant interest in an underlying fund that is not “publicly offered” (as defined in the Code) and redeems only a small portion of such interest. Dividend treatment of a redemption by a Fund-of-Funds would affect the amount and character of income required to be distributed by both the Fund-of-Funds and the underlying fund for the year in which the redemption occurred. It is possible that such a dividend would qualify as “qualified dividend income”; otherwise, it would be taxable as ordinary income and could cause shareholders of a Fund-of-Funds to recognize higher amounts of ordinary income than if the shareholders had held shares of the underlying fund directly.
Statement of Additional Information – October 3, 2016 199

 

Table of Contents
If a Fund-of-Funds receives dividends from an underlying fund, and the underlying fund reports such dividends as “qualified dividend income,” as discussed below, then the Fund-of-Funds is permitted, in turn, to report a portion of its distributions as “qualified dividend income,” provided the Fund-of-Funds meets the holding period and other requirements with respect to shares of the underlying fund. If a Fund-of-Funds receives dividends from an underlying fund, and the underlying fund reports such dividends as eligible for the dividends-received deduction, then the Fund-of-Funds is permitted, in turn, to report a portion of its distributions as eligible for the dividends-received deduction, provided the Fund-of-Funds meets the holding period and other requirements with respect to shares of the underlying fund.
If a Fund-of-Funds is a “qualified fund-of-funds” (a regulated investment company that invests at least 50% of its total assets in other regulated investment companies at the close of each quarter of its taxable year), it will be able to distribute exempt-interest dividends and thereby pass through to its shareholders the tax-exempt character of any interest received on tax-exempt obligations in which it directly invests or any exempt-interest dividends it receives from underlying funds in which it invests. For further considerations pertaining to exempt-interest dividends, see Special Tax Considerations Pertaining to Tax-Exempt Funds above.
Further, if a Fund-of-Funds is a qualified fund-of-funds, it will be able to elect to pass through to its shareholders any foreign income and other similar taxes paid by the Fund-of-Funds or paid by an underlying fund in which the Fund-of-Funds invests that itself elected to pass such taxes through to shareholders, so that shareholders of the Fund-of-Funds will be eligible to claim a tax credit or deduction for such taxes, subject to applicable limitations. However, even if a Fund-of-Funds qualifies to make the election for any year, it may determine not to do so. For further considerations pertaining to foreign taxes paid by a Fund, see Foreign Taxes above.
Finally, a Fund-of-Funds generally must look through its 20 percent voting interest in a corporation, including an underlying fund, to the underlying assets thereof for purposes of the diversification test; special rules potentially provide limited relief from the application of this rule where the Fund-of-Funds is a “qualified fund-of-funds.”
U.S. Federal Income Tax Rates
The maximum stated U.S. federal income tax rate applicable to individuals generally is 39.6% for ordinary income and 20% for net long-term capital gain (in each case, not including the 3.8% net investment income tax described below).
In general, “qualified dividend income” is income attributable to dividends received by a Fund from certain domestic and foreign corporations, as long as certain holding period and other requirements are met by the Fund with respect to the dividend-paying corporation’s stock and by the shareholders with respect to the Fund’s shares. If 95% or more of a Fund’s gross income (excluding net long-term capital gain over net short-term capital loss) constitutes qualified dividend income, all of its distributions (other than Capital Gain Dividends) will be generally treated as qualified dividend income in the hands of individual shareholders, as long as they have owned their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund’s ex-dividend date (or, in the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date) and meet certain other requirements specified in the Code. In general, if less than 95% of a Fund’s gross income is attributable to qualified dividend income, then only the portion of the Fund’s distributions that is attributable to qualified dividend income and reported as such in a timely manner will be so treated in the hands of individual shareholders who meet the aforementioned holding period requirements. Qualified dividend income is taxable to individual shareholders at tax rates applicable to long-term capital gain. The rules regarding the qualification of Fund distributions as qualified dividend income are complex, including the holding period requirements. Individual Fund shareholders therefore are urged to consult their own tax advisors and financial planners. Fixed income funds typically do not distribute significant amounts of qualified dividend income.
The maximum stated corporate U.S. federal income tax rate applicable to ordinary income and net capital gain currently is 35%. Actual marginal tax rates may be higher for some shareholders, for example, through reductions in deductions. Naturally, the amount of tax payable by any taxpayer will be affected by a combination of tax laws covering, for example, deductions, credits, deferrals, exemptions, sources of income and other matters. U.S. federal income tax rates are set to increase in future years under various “sunset” provisions of U.S. federal income tax laws.
The Code generally imposes a 3.8% net investment income tax on certain high-income individuals, trusts and estates. For individuals, the 3.8% tax applies to the lesser of (1) the amount (if any) by which the taxpayer’s modified adjusted gross income exceeds certain threshold amounts or (2) the taxpayer’s “net investment income.” For this purpose, “net investment income” generally includes, among other things, (i) distributions paid by a Fund of net investment income and capital gains (other than exempt-interest dividends)as described above, and (ii) any net gain recognized on the sale, redemption, exchange or other taxable disposition of Fund shares. Certain details of the implementation of the tax remain subject to future guidance. Shareholders are advised to consult their tax advisors regarding the possible implications of this additional tax on their investment in a Fund.
Statement of Additional Information – October 3, 2016 200

 

Table of Contents
Backup Withholding
Each Fund generally is required to withhold, and remit to the U.S. Treasury, subject to certain exemptions, an amount equal to 28% of all distributions and redemption proceeds (including proceeds from exchanges and redemptions in-kind) paid or credited to a Fund shareholder if (1) the shareholder fails to furnish the Fund with a correct “taxpayer identification number” (TIN) or has not certified to the Fund that withholding does not apply or (2) the IRS notifies the Fund that the shareholder’s TIN is incorrect or the shareholder is otherwise subject to backup withholding. These backup withholding rules may also apply to distributions that are properly reported as exempt-interest dividends (defined above). This backup withholding is not an additional tax imposed on the shareholder. The shareholder may apply amounts required to be withheld as a credit against his or her future U.S. federal income tax liability, provided that the required information is furnished to the IRS. If a shareholder fails to furnish a valid TIN upon request, the shareholder can also be subject to IRS penalties.
Tax-Deferred Plans
The shares of a Fund may be available for a variety of tax-deferred retirement and other tax-advantaged plans and accounts. Prospective investors should contact their tax advisors and financial planners regarding the tax consequences to them of holding Fund shares through such plans and/or accounts.
Corporate Shareholders
Subject to limitations and other rules, a corporate shareholder of a Fund may be eligible for the dividends-received deduction on Fund distributions attributable to dividends received by the Fund from domestic corporations, which, if received directly by the corporate shareholder, would qualify for such a deduction. For eligible corporate shareholders, the dividends-received deduction may be subject to certain reductions, and a distribution by a Fund attributable to dividends of a domestic corporation will be eligible for the deduction only if certain holding period and other requirements are met. For information regarding eligibility for the dividends-received deduction of dividend income derived by an underlying fund in which a Fund-of-Funds invests, see Special Tax Considerations Pertaining to Funds-of-Funds above. These requirements are complex; therefore, corporate shareholders of the Funds are urged to consult their own tax advisors and financial planners.
As discussed above, a portion of the interest paid or accrued on certain high-yield discount obligations that a Fund may own may not be deductible to the issuer. If a portion of the interest paid or accrued on these obligations is not deductible, that portion will be treated as a dividend. In such cases, if the issuer of the obligation is a domestic corporation, dividend payments by a Fund may be eligible for the dividends-received deduction to the extent of the dividend portion of such interest.
Foreign Shareholders
For purposes of this discussion, “foreign shareholders” generally include: (i) nonresident alien individuals, (ii) foreign trusts ( i.e. , a trust other than a trust with respect to which a U.S. court is able to exercise primary supervision over administration of that trust and one or more U.S. persons have authority to control substantial decisions of that trust), (iii) foreign estates ( i.e. , the income of which is not subject to U.S. tax regardless of source), and (iv) foreign corporations.
Distributions by a Fund made to foreign shareholders that are not “U.S. persons” within the meaning of the Code properly reported by a Fund as (1) Capital Gain Dividends, (2) short-term capital gain dividends, and (3) interest-related dividends, each as defined below, generally are not subject to withholding of U.S. federal income tax. In general, the Code defines (1) “short-term capital gain dividends” as distributions of net short-term capital gains in excess of net long-term capital losses and (2) “interest-related dividends” as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, in each case to the extent such distributions are properly reported as such by the Fund in a written notice to shareholders. The exceptions to withholding for Capital Gain Dividends and short-term capital gain dividends do not apply to (A) distributions to an individual foreign shareholder who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (B) distributions attributable to gain that is treated as effectively connected with the conduct by the foreign shareholder of a trade or business within the United States under special rules regarding the disposition of U.S. real property interests as described below. The exception to withholding for interest-related dividends does not apply to distributions to a foreign shareholder (A) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (B) to the extent that the dividend is attributable to certain interest on an obligation if the foreign shareholder is the issuer or is a 10% shareholder of the issuer, (C) that is within certain foreign countries that have inadequate information exchange with the United States, or (D) to the extent the dividend is attributable to interest paid by a person that is a related person of the foreign shareholder and the foreign shareholder is a controlled foreign corporation.
If a Fund invests in a RIC that pays Capital Gain Dividends, short-term capital gain dividends or interest-related dividends to the Fund, such distributions retain their character as not subject to withholding if properly reported when paid by the Fund to foreign shareholders.
Statement of Additional Information – October 3, 2016 201

 

Table of Contents
A Fund is permitted to report such part of its dividends as interest-related and/or short-term capital gain dividends as are eligible, but is not required to do so. In the case of shares held through an intermediary, the intermediary may withhold even if a Fund reports all or a portion of a payment as a short-term capital gain or interest-related dividend. Foreign shareholders should contact their intermediaries regarding the application of these rules to their accounts.
Distributions by a Fund to foreign shareholders other than Capital Gain Dividends, short-term capital gain dividends, and interest-related dividends (e.g., dividends attributable to foreign-source dividend and interest income or to short-term capital gains or U.S. source interest income to which the exception from withholding description above does not apply) are generally subject to U.S. federal income tax withheld at a rate of 30% (or lower applicable treaty rate).
In general, a foreign shareholder is not subject to U.S. federal income tax and withholding on gains (and is not allowed a deduction for losses) realized on the disposition of shares of a Fund unless: (i) such gain is effectively connected with the conduct by the foreign shareholder of a trade or business within the United States, (ii) in the case of a foreign shareholder that is an individual, the shareholder is present in the United States for a period or periods aggregating 183 days or more during the year of disposition and certain other conditions are met, or (iii) the special rules relating to gain attributable to the sale or exchange of “U.S. real property interests” (“USRPIs”) apply to the foreign shareholder’s sale of shares of the Fund (as described below).
Special rules apply if a Fund were a qualified investment entity ("QIE") because it is either a “U.S. real property holding corporation” (USRPHC) or would be a USRPHC but for the operation of certain exceptions to the definition of USRPIs described below.
Generally, a USRPHC is a domestic corporation that holds USRPIs the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporation’s USRPIs, interests in real property located outside the United States and other trade or business assets.
USRPIs are generally defined as any interest in U.S. real property and any interest (other than solely as a creditor) in a USRPHC or, very generally, an entity that has been a USRPHC in the last five years. A Fund that holds, directly or indirectly, significant interests in real estate investment trusts (“REITs”), may be a USRPHC. Interests in: (i) domestically controlled QIEs, including REITs and RICs that are QIEs, (ii) not-greater-than 10% interests in publicly traded classes of stock in REITs, and (iii) not-greater-than-5% interests in publicly traded classes of stock in RICs, generally are not USRPIs, but these exceptions do not apply for purposes of determining whether a Fund is a QIE.
If an interest in a Fund were a USRPI, the Fund would be required to withhold U.S. tax on the proceeds of a share redemption by a greater-than-5% foreign shareholder, in which case such foreign shareholder generally would also be required to file U.S. tax returns and pay any additional taxes due in connection with the redemption.
Moreover, if a Fund were a USRPHC or, very generally, had been one in the last five years, it would be required to withhold on amounts distributed to a greater-than-5% foreign shareholder to the extent such amounts would not be treated as a dividend, i.e., are in excess of the Fund’s current and accumulated “earnings and profits” for the applicable tax year. Such withholding generally is not required if the Fund is a domestically controlled QIE.
If a Fund is a QIE, under a special “look-through” rule, any distributions by the Fund to a greater-than-5% foreign shareholder (including, in certain cases, distributions made by the Fund in redemption of its shares) that are attributable directly or indirectly to (i) distributions received by the Fund from a lower-tier RIC or REIT that the Fund is required to treat as USRPI gain in its hands and (ii) gains realized on the disposition of USRPIs by the Fund will retain their character as gains realized from USRPIs in the hands of the Fund’s foreign shareholders and will be subject to U.S. tax withholding. In addition, such distributions could result in the foreign shareholder being required to file a U.S. income tax return and pay tax on the distributions at regular U.S. federal income tax rates. The consequences to a foreign shareholder, including the rate of such withholding and character of such distributions (e.g., as ordinary income or USRPI gain), would vary depending upon the extent of the foreign shareholder’s current and past ownership of a Fund.
Foreign shareholders of a Fund may also be subject to “wash sale” rules to prevent the avoidance of the foregoing tax-filing and payment obligations discussed above through the sale and repurchase of Fund shares.
Foreign shareholders should consult their tax advisers and, if holding shares through intermediaries, their intermediaries, concerning the application of these rules to their investment in a Fund.
Foreign shareholders with respect to whom income from a Fund is effectively connected with a trade or business conducted by the foreign shareholder within the United States will in general be subject to U.S. federal income tax on the income derived from the Fund at the graduated rates applicable to U.S. citizens, residents or domestic corporations, whether such income is received in cash or reinvested in shares of a Fund and, in the case of a foreign corporation, may also be subject to a branch profits tax. If a foreign shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject
Statement of Additional Information – October 3, 2016 202

 

Table of Contents
to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the United States. More generally, foreign shareholders who are residents in a country with an income tax treaty with the United States may obtain different tax results than those described herein, and are urged to consult their tax advisors.
In order to qualify for any exemptions from withholding described above or for lower withholding tax rates under income tax treaties, or to establish an exemption from backup withholding, a foreign shareholder must comply with applicable certification requirements relating to its foreign status (including, in general, furnishing an IRS Form W-8BEN, W-8BEN-E or substitute form). Foreign shareholders should consult their tax advisors in this regard.
Special rules (including withholding and reporting requirements) apply to foreign partnerships and those holding Fund shares through foreign partnerships. In addition, additional considerations may apply to foreign trusts and foreign estates. Investors holding Fund shares through foreign entities should consult their tax advisors about their particular situation.
A beneficial holder of shares who is a foreign person may be subject to state and local tax and to the U.S. federal estate tax in addition to the U.S. federal income tax referred to above.
Tax-Exempt Shareholders
Each Fund serves to “block” (that is, prevent the attribution to shareholders of) UBTI from being realized by tax-exempt shareholders. Notwithstanding this “blocking” effect, a tax-exempt shareholder could realize UBTI by virtue of its investment in a Fund if shares in the Fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b).
It is possible that a tax-exempt shareholder will also recognize UBTI if a Fund recognizes excess inclusion income (as described above) derived from direct or indirect investments in residual interests in REMICs or equity interests in TMPs. Furthermore, any investment in residual interests of a CMO that has elected to be treated as a REMIC can create complex tax consequences, especially if the Fund has state or local governments or other tax-exempt organizations as shareholders.
In addition, special tax consequences apply to charitable remainder trusts (CRTs) that invest in regulated investment companies that invest directly or indirectly in residual interests in REMICs or equity interests in TMPs. Under legislation enacted in December 2006, a CRT, as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a CRT will not recognize UBTI solely as a result of investing in a Fund to the extent that it recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a Fund and the Fund recognizes excess inclusion income, then the Fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest U.S. federal corporate income tax rate. The extent to which the IRS guidance remains applicable in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, each Fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder’s distributions for the year by the amount of the tax that relates to such shareholder’s interest in the Fund. Each Fund has not yet determined whether such an election will be made. CRTs are urged to consult their tax advisors concerning the consequences of investing in a Fund.
Tax Shelter Reporting Regulations
Under U.S. Treasury Regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on IRS Form 8886. Direct holders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult with their tax advisors to determine the applicability of these regulations in light of their individual circumstances.
Shareholder Reporting Obligations With Respect to Foreign Bank and Financial Accounts
Shareholders that are U.S. persons and own, directly or indirectly, more than 50% of a Fund could be required to report annually their “financial interest” in the Fund’s “foreign financial accounts,” if any, on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Shareholders should consult a tax advisor, and persons investing in the Fund through an intermediary should contact their intermediary, regarding the applicability to them of this reporting requirement.
Statement of Additional Information – October 3, 2016 203

 

Table of Contents
Other Reporting and Withholding Requirements
Sections 1471-1474 of the Code, and the U.S. Treasury Regulations and IRS guidance issued thereunder (collectively, “FATCA”), generally require a Fund to obtain information sufficient to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an “IGA”) between the United States and a foreign government, as described more fully below. If a shareholder of a Fund fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, the Fund is generally required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays, and after January 1, 2017 (which date, under recent Treasury guidance, is expected to be delayed until on or after January 1, 2019), 30% of certain Capital Gain Dividends and gross proceeds of the sale, redemption or exchange of Fund shares it pays. If a payment by a Fund is subject to FATCA withholding, the Fund is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (e.g., Capital Gain Dividends, short-term capital gain dividends and interest-related dividends).
Payments to a shareholder will generally not be subject to FATCA withholding, provided the shareholder provides a Fund with such certifications, waivers or other documentation or information as the Fund requires, including, to the extent required, with regard to such shareholder’s direct and indirect owners, to establish the shareholder’s FATCA status and otherwise to comply with these rules. In order to avoid withholding, a shareholder that is a “foreign financial institution” (“FFI”) must either (i) become a “participating FFI” by entering into a valid U.S. tax compliance agreement with the IRS, (ii) qualify for an exception from the requirement to enter into such an agreement, for example by becoming a “deemed-compliant FFI,” or (iii) be covered by an applicable IGA between the United States and a non-U.S. government to implement FATCA and improve international tax compliance. In any of these cases, the investing FFI generally will be required to provide its Fund with appropriate identifiers, certifications or documentation concerning its status.
A Fund may disclose the information that it receives from (or concerning) its shareholders to the IRS, non-U.S. taxing authorities or other parties as necessary to comply with applicable IGAs or other applicable law or regulation.
Each prospective investor is urged to consult its tax adviser regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor’s own situation, including investments through an intermediary.
The Subsidiary
Each of Alternative Beta Fund, AP – Alternatives Fund and Diversified Absolute Return Fund (for purposes of this section, the “Fund”) intends to invest a portion of its assets in one or more of its wholly-owned subsidiaries (previously defined collectively as the “Subsidiary”), which will be classified as a corporation for U.S. federal tax purposes. Foreign corporations, such as the Subsidiary, will generally not be subject to U.S. federal income tax unless it is deemed to be engaged in a United States trade or business. The Subsidiary intends to conduct its activities in a manner that is expected to meet the requirements of a safe harbor under Section 864(b)(2) of the Code under which the Subsidiary may engage in trading in stocks or securities or certain commodities for its own account without being deemed to be engaged in a United States trade or business. However, if certain of the Subsidiary’s activities were deemed not to be of the type described in the safe harbor, the activities of the Subsidiary may constitute a United States trade or business.
Even if the Subsidiary is not engaged in a United States trade or business, it may be subject to a U.S. withholding tax at a rate of 30% on all or a portion of its United States source gross income that is not effectively connected with a United States trade or business.
The Subsidiary will be treated as a CFC. The Fund will be treated as a “U.S. Shareholder” of the Subsidiary. As a result, the Fund will be required to include in its gross income all of the Subsidiary’s “subpart F income”. It is expected that all of the Subsidiary’s income will be “subpart F income”. “Subpart F income” is generally treated as ordinary income. If a net loss is realized by the Subsidiary, such loss is not generally available to offset the income of the Fund. The recognition by the Fund of the Subsidiary’s “subpart F income” will increase the Fund’s tax basis in the Subsidiary. Distributions by the Subsidiary to the Fund will not be taxable to the extent of its previously undistributed “subpart F income”, and will reduce the Fund’s tax basis in the subsidiary.
Statement of Additional Information – October 3, 2016 204

 

Table of Contents
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Management Ownership
As of August 31, 2016, the Trustees and Officers of the Trust, as a group, beneficially owned less than 1% of each class of shares of each Fund, except as set forth in the table below:
Fund Class Percentage of Class
Beneficially Owned
Adaptive Risk Allocation Fund Class R5 29.59%
Adaptive Risk Allocation Fund Class Z 4.22%
Alternative Beta Fund Class A 3.24%
Greater China Fund Class Z 1.39%
Principal Shareholders and Control Persons
The tables below identify the names, address and ownership percentage of each person who owns of record or is known by the Trust to own beneficially 5% or more of any class of a Fund’s outstanding shares (Principal Holders) or 25% or more of a Fund’s outstanding shares (Control Persons). A shareholder who beneficially owns more than 25% of a Fund’s shares is presumed to “control” the Fund, as that term is defined in the 1940 Act, and may have a significant impact on matters submitted to a shareholder vote. A shareholder who beneficially owns more than 50% of a Fund’s outstanding shares may be able to approve proposals, or prevent approval of proposals, without regard to votes by other Fund shareholders. Additional information about Control Persons, if any, is provided following the tables. The information provided for each Fund is as of a date no more than 30 days prior to the date of filing a post-effective amendment to the applicable Trust’s registration statement with respect to such Fund.
Funds with Fiscal Period Ending January 31:
Except as otherwise indicated, the information below is as of April 30, 2016:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Diversified Real Return Fund COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class A
20.01% 98.27% (a)
Class C 23.03%
Class R4 75.98%
Class R5 100.00%
Class W 100.00%
Class Z 99.85%
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
58.97% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
76.97% N/A
Class R4 24.02%
  STATE STREET BK & TR IRA
CAROLYN J MCCORD
1303 RAGAN DR
PLEASANT HILL MO 64080-1006
Class A
21.02% N/A
Funds with Fiscal Period Ending March 31:
Except as otherwise indicated, the information below is as of June 30, 2016:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
AP – Growth Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
100.00% 100.00%
Pacific/Asia Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
51.03% N/A
Statement of Additional Information – October 3, 2016 205

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class R4
70.79% 75.73% (a)
Class W 100.00%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
11.82% N/A
  JPMCB NA CUST FOR SC529 PLAN
COLUMBIA AGGRESSIVE GROWTH
529 PORTFOLIO
14201N DALLAS PKWY FL 13
DALLAS TX 75254
Class Z
35.18% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
19.05% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
50.89% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
28.66% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class Z
48.97% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
35.78% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
5.17% N/A
  NORTHERN TRUST AS TRUSTEE
FBO GRAND TRUNK WESTERN RR CO
PO BOX 92956
CHICAGO IL 60675-2956
Class Z
8.71% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
21.99% N/A
Class C 8.67%
Class R4 29.21%
  STATE STREET BK & TR IRA
JACK C MASSEY
4370 OLIVE BRANCH RD
GREENWOOD IN 46143-9667
Class C
5.20% N/A
Select Large Cap Growth Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
22.87% N/A
Class C 7.85%
Class W 99.98%
  ASCENSUS TRUST CO
PO BOX 10758
FARGO ND 58106-0758
Class R
22.28% N/A
Statement of Additional Information – October 3, 2016 206

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  CAPINCO
C/O US BANK NA
PO BOX 1787
MILWAUKEE WI 53201-1787
Class Y
19.54% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class R5
12.32% N/A
  COLUMBIA THERMOSTAT FUND
C/O PAULA RYAN
227 W MONROE ST STE 3000
CHICAGO IL 60606-5018
Class I
12.78% N/A
  DCGT AS TTEE AND/OR CUST
FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class R
12.41% N/A
  EDWARD D JONES & CO
FOR THE BENEFIT OF CUSTOMERS
12555 MANCHESTER RD
SAINT LOUIS MO 63131-3729
Class Z
8.66% N/A
  FIIOC
100 MAGELLAN WAY (KW1C)
COVINGTON KY 41015-1987
Class R
5.86% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
6.81% N/A
Class Z 6.18%
  GREAT-WEST TRUST COMPANY LLC TTEE F
EMPLOYEE BENEFITS CLIENTS 401K
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R
12.33% N/A
Class Y 6.28%
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
17.05% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
42.12% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
21.77% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
6.28% N/A
  KEYBANK NA
FBO MEDCENTRAL PEN-COLUMBIA
SELECT
PO BOX 94871
CLEVELAND OH 44101-4871
Class Y
10.79% N/A
Statement of Additional Information – October 3, 2016 207

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class C
22.20% 27.59%
Class Z 45.57%
  MG TRUST CO CUST
717 17TH ST STE 1300
DENVER CO 80202-3304
Class R
8.22% N/A
  MID ATLANTIC TRUST COMPANY
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class R
10.00% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
19.75% N/A
Class Z 12.94%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
54.11% N/A
Class C 21.90%
Class R4 43.99%
Class R5 64.22%
Class Y 25.12%
  NATIONWIDE TRUST COMPANY/FSB
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
Class R5
10.23% N/A
  PARK NATIONAL BANK
ATTN: TRUST (REINV EB)
50 N THIRD STREET
PO BOX 3500
NEWARK OH 43058-3500
Class Y
13.50% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
35.28% N/A
Class R5 9.52%
  RELIANCE TRUST CO CUST
FBO MASSMUTUAL OMNIBUS PLL/SMF
PO BOX 48529
ATLANTA GA 30362-1529
Class R
19.46% N/A
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class Y
5.03% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.93% N/A
Class Z 5.94%
  VANGUARD FDUCIARY TRUST CO
PO BOX 2600
ATTN: OUTSIDE FUNDS
VALLEY FORGE PA 19482-2600
Class R4
11.86% N/A
Class Y 12.56%
Funds with Fiscal Period Ending April 30:
Except as otherwise indicated, the information below is as of July 31, 2016:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
17.86% N/A
Class B 23.21%
Class C 20.90%
Statement of Additional Information – October 3, 2016 208

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  ASCENSUS TRUST COMPANY FBO
PO BOX 10758
FARGO ND 58106-0758
Class A
7.66% N/A
Class C 22.78%
Class R 78.78%
Class R5 32.11%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class B
8.03% N/A
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class I
100.00% N/A (a)
Class R5 10.62%
Class W 100.00%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
27.81% N/A
Class C 9.95%
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
5.40% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class A
26.67% 76.15%
Class B 29.61%
Class C 18.58%
Class T 20.51%
Class Y 99.16%
Class Z 84.31%
  MID ATLANTIC TRUST COMPANY FBO
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class R
21.09% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
5.43% N/A
Class R4 19.25%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
5.17% N/A
Class R4 11.33%
Class R5 16.15%
  TAYNIK & CO
C/O INVESTORS BANK & TRUST CO
1200 CROWN COLONY DR CC10313
QUINCY MA 02169-0938
Class R4
65.12% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
37.65% N/A
Corporate Income Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
32.79% N/A
Class B 27.76%
Class C 28.86%
Class W 99.75%
  BAND & CO C/O US BANK NA
1555 N RIVERCENTER DR STE 302
MILWAUKEE WI 53212-3958
Class Z
23.98% N/A
  CBNA AS CUSTODIAN FBO
6 RHOADS DR STE 7
UTICA NY 13502-6317
Class R5
5.81% N/A
Statement of Additional Information – October 3, 2016 209

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
8.16% N/A
Class R5 44.61%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
N/A
N/A 47.83% (a)
  EDWARD D JONES & CO
FOR THE BENEFIT OF CUSTOMERS
12555 MANCHESTER RD
SAINT LOUIS MO 63131-3729
Class A
6.10% N/A
Class B 7.81%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
28.51% N/A
Class C 7.00%
  JPMCB NA AS CUST FOR THE SC529 PLAN
COLUMBIA MODERATE GROWTH
529 PORTFOLIO
14201 N DALLAS PARKWAY
FL 13
DALLAS TX 75254-2916
Class Z
13.28% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
8.18% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
31.44% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
14.31% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
23.63% N/A
  JPMCB NA CUST FOR
COLUMBIA INCOME BUILDER FUND
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
16.66% N/A
  MATRIX TRUST COMPANY AS TTEE FBO
REGION 10 457B PLAN
PO BOX 52129
PHOENIX AZ 85072-2129
Class Y
74.14% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class A
5.71% N/A
Class B 21.67%
Class C 13.03%
Class Z 41.34%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class C
9.69% N/A
Class R4 7.41%
Class R5 18.12%
Statement of Additional Information – October 3, 2016 210

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
8.59% N/A
Class R4 50.00%
Class R5 25.85%
  TAYNIK & CO
C/O INVESTORS BANK & TRUST CO
1200 CROWN COLONY DR CC10313
QUINCY MA 02169-0938
Class R4
36.57% N/A
  U S BANK FBO
CITY OF HUNTINGTON BEACH SERP
1555 N RIVERCENTER DR STE 302
MILWAUKEE WI 53212-3958
Class Y
24.77% N/A
Multi-Asset Income Fund COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class C
7.74% 97.62% (a)
Class R4 100.00%
Class R5 100.00%
Class W 100.00%
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
38.43% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
14.79% N/A
  JPMCB NA CUST FOR COLUMBIA CAPITAL
ALLOCATION AGGRESSIVE PORTFOLIO
14201 DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
11.20% N/A
  JPMCB NA CUST FOR COLUMBIA CAPITAL
ALLOCATION CONSERVATIVE PORTFOLIO
14201 DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
6.58% N/A
  JPMCB NA CUST FOR COLUMBIA CAPITAL
ALLOCATION MODERATE PORTFOLIO
14201 DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
27.39% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
19.14% N/A
Class C 54.71%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
5.34% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
58.59% N/A
Class C 23.89%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class A
10.71% N/A
Class Z 16.30%
  STATE STREET BK & TR IRA
JEFFREY L KNIGHT
15 SYLVAN LN
WESTON MA 02493-1027
Class Z
78.70% N/A
  U.S. BANCORP INVESTMENTS INC.
60 LIVINGSTON AVE
SAINT PAUL MN 55107-2292
Class C
13.59% N/A
Statement of Additional Information – October 3, 2016 211

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Small Cap Value Fund I AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
8.11% N/A
Class B 28.61%
Class C 5.65%
  CAPITAL BANK & TRUST CO
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R
93.83% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
6.06% N/A
Class Z 5.37%
  FIFTH THIRD BANK TTEE
VARIOUS FASCORE LLC RECORDKEPT PLAN
C/O FASCORE LLC
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R4
7.01% N/A
  FIIOC FBO
100 MAGELLAN WAY
COVINGTON KY 41015-1987
Class R5
6.86% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
12.76% N/A
Class C 9.61%
  JOHN HANCOCK TRUST COMPANY LLC
690 CANTON ST STE 100
WESTWOOD MA 02090-2344
Class Z
11.96% N/A
  JPMCB NA CUST FOR
COLUMBIA INCOME BUILDER FUND
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
100.00% N/A
  LINCOLN RETIREMENT SERVICES CO
PO BOX 7876
FORT WAYNE IN 46801-7876
Class Y
36.73% N/A
Class Z 6.08%
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class C
8.08% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class A
6.71% N/A
Class B 12.41%
Class C 11.98%
Class Z 37.37%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
16.48% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
7.52% N/A
Class B 5.75%
Class C 6.74%
Class R4 35.14%
Class R5 38.20%
Class Y 30.79%
Class Z 9.69%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class B
16.92% N/A
Class C 8.54%
Class R4 54.95%
  PIMS/PRUDENTIAL RETIREMENT
AS NOMINEE
P O BOX 1979
835 N RUSH ST
CHICAGO IL 60611-2030
Class Y
26.65% N/A
Statement of Additional Information – October 3, 2016 212

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
7.75% N/A
  TD AMERITRADE TRUST COMPANY
ATTN HOUSE
PO BOX 17748
DENVER CO 80217-0748
Class R5
6.72% N/A
  TIAA-CREF TRUST CO CUST/TTEE FBO
RETIREMENT PLANS FOR WHICH
TIAA ACTS AS RECORDKEEPER
ATTN TRUST OPERATIONS
211 N BROADWAY STE 1000
SAINT LOUIS MO 63102-2748
Class R5
41.88% N/A
Class Y 5.05%
Class Z 16.63%
  VERROSE LLC
31490 EAST BELLVINE TRL
BEVERLY HILLS MI 48025-3703
Class C
6.62% N/A
U.S. Treasury Index Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
19.53% 25.35%
Class C 33.46%
Class W 99.90%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
5.42% N/A
Class R5 32.74%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
N/A
N/A 37.10% (a)
  COLUMBIA THERMOSTAT FUND
C/O PAULA RYAN
227 W MONROE ST STE 3000
CHICAGO IL 60606-5018
Class I
35.44% N/A
  FIIOC FBO
100 MAGELLAN WAY
COVINGTON KY 41015-1987
Class A
5.45% N/A
Class R5 7.24%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
7.76% N/A
Class B 46.58%
Class C 13.00%
  GREAT-WEST TRUST COMPANY LLC TTEE F
EMPLOYEE BENEFITS CLIENTS 401K – FG
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R5
7.56% N/A
  JPMCB NA AS CUSTODIAN FOR THE SC529
PLAN COLUMBIA AGGRESSIVE GROWTH 529
PORTFOLIO
14201 DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class Z
50.62% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
12.35% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
6.45% N/A
Statement of Additional Information – October 3, 2016 213

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
21.35% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
17.54% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
5.70% N/A
Class C 5.68%
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class A
24.45% N/A
Class B 28.11%
Class R5 21.91%
Class Z 17.73%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R5
23.92% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class B
6.70% N/A
Class C 15.08%
  STATE STREET BANK & TRUST CUST
FBO CHERYL S COX 403B PLAN
647 WINDSOR CIR
CHULA VISTA CA 91910-6233
Class C
5.00% N/A
  STATE STREET BANK & TRUST CUST
IRA R/O STEVEN G DETSCH
4115 THE HILL RD
BONITA CA 91902-2343
Class C
5.47% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.71% N/A
Funds with Fiscal Period Ending May 31:
Except as otherwise indicated, the information below is as of August 31, 2016:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Adaptive Risk Allocation Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
89.98% 91.68%
Class C 78.00%
Class W 100.00%
Class Z 36.51%
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class R4
19.01% N/A
Class R5 29.59%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class K
100.00% N/A (a)
Class Y 100.00%
Statement of Additional Information – October 3, 2016 214

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  DONNA C KNIGHT & JEFFREY L KNIGHT
TTEES DONNA C KNIGHT LIVING TRUST
U/A 07/24/1998
15 SYLVAN LN
WESTON MA 02493-1027
Class Z
5.03% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class Z
10.94% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class Z
6.56% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R
75.88% N/A
Class R4 63.41%
Class R5 20.82%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
16.58% N/A
Class R5 26.96%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class R
11.11% N/A
Class Z 12.27%
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class R
11.90% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
19.12% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class Z
13.94% N/A
Alternative Beta Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
96.39% 91.47%
Class C 92.41%
Class W 100.00%
Class Z 92.59%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class R
100.00% N/A (a)
Class R5 100.00%
Class Y 100.00%
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
19.99% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
19.99% N/A
Statement of Additional Information – October 3, 2016 215

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
19.99% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
19.99% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
19.99% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
98.77% N/A
  STATE STREET BK & TR IRA
JEFFREY L KNIGHT
15 SYLVAN LN
WESTON MA 02493-1027
Class Z
6.68% N/A
Diversified Absolute Return Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
12.83% 31.75%
Class C 51.12%
Class W 99.98%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class C
48.88% 66.32% (a)
Class R4 100.00%
Class R5 100.00%
  DONNA C KNIGHT & JEFFREY L KNIGHT
TTEES DONNA C KNIGHT LIVING TRUST
U/A 07/24/1998
15 SYLVAN LN
WESTON MA 02493-1027
Class Z
98.69% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
8.52% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
5.96% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
30.95% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
12.25% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
25.45% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL OPPORTUNITIES FUND
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
15.13% N/A
Statement of Additional Information – October 3, 2016 216

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
42.75% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
40.20% N/A
Dividend Income Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
39.08% N/A
Class B 32.21%
Class C 15.07%
Class W 97.35%
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class R5
23.45% N/A
Class T 9.02%
Class Y 6.02%
Class Z 7.08%
  COLUMBIA THERMOSTAT FUND
C/O PAULA RYAN
227 W MONROE ST STE 3000
CHICAGO IL 60606-5018
Class I
32.41% N/A
  DCGT AS TTEE AND /OR CUST
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class R
6.15% N/A
  EQUITABLE LIFE FOR SA
ON BEHALF OF VARIOUS 401K
1290 AVENUE OF THE AMERICAS
NEW YORK NY 10104-0101
Class R
53.85% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
23.76% N/A
Class C 9.51%
  GREAT WEST TRUST CO. AS TRUSTEE FBO
11500 OUTLOOK ST
OVERLAND PARK KS 66211-1804
Class Y
7.39% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
26.30% N/A
  JPMCB NA CUST FOR
COLUMBIA INCOME BUILDER FUND
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
41.29% N/A
  MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Class A
6.86% 27.18%
Class B 18.63%
Class C 17.82%
Class R 10.54%
Class R4 9.67%
Class T 17.50%
Class Z 44.20%
  MID ATLANTIC TRUST COMPANY FBO
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class R
5.08% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class B
5.37% N/A
Class C 9.35%
Statement of Additional Information – October 3, 2016 217

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
14.27% N/A
Class B 5.32%
Class C 8.89%
Class R4 29.36%
Class R5 19.43%
Class Y 44.35%
Class Z 15.39%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
6.62% N/A
Class R4 24.86%
  PIMS/PRUDENTIAL RETIREMENT
AS NOMINEE FOR THE TTEE
379 CAMPUS DRIVE
SOMERSET NJ 08873-1161
Class R5
6.84% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
9.75% N/A
Class Z 5.34%
  RELIANCE TRUST CO CUST
PO BOX 48529
ATLANTA GA 30362-1529
Class R4
6.69% N/A
Class R5 13.51%
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
6.80% N/A
  TIAA-CREF TRUST CO CUST/TTEE FBO
RETIREMENT PLANS FOR WHICH
TIAA ACTS AS RECORDKEEPER
ATTN TRUST OPERATIONS
211 N BROADWAY STE 1000
SAINT LOUIS MO 63102-2748
Class Y
17.40% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
6.87% N/A
HY Municipal Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
39.17% N/A
Class C 20.34%
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
5.46% N/A
Class R5 20.28%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
11.94% N/A
Class B 27.09%
Class C 12.93%
  MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Class A
8.29% 49.53%
Class B 62.58%
Class C 9.90%
Class Z 66.80%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class A
7.55% N/A
Class C 16.04%
Statement of Additional Information – October 3, 2016 218

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
7.04% N/A
Class R4 48.71%
Class R5 25.18%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
48.50% N/A
Class R5 32.80%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
17.91% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
21.25% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
6.99% N/A
Class Z 6.87%
Funds with Fiscal Period Ending July 31:
Except as otherwise indicated, the information below is as of October 31, 2015:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
AMT-Free OR Intermediate Muni Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
35.17% N/A
Class C 14.11%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class R5
65.55% N/A
Class Z 15.01%
  CHARLES SCHWAB & CO INC CUST
ATTN MUTUAL FUNDS DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
7.64% N/A
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class B
94.75% N/A (a)
Class R4 6.80%
  EDWARD D JONES & CO
FOR THE BENEFIT OF CUSTOMERS
12555 MANCHESTER RD
SAINT LOUIS MO 63131-3729
Class A
23.11% N/A
Class B 5.25%
Class C 11.28%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
11.79% N/A
Class C 32.04%
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class C
8.46% N/A
Class Z 10.32%
Statement of Additional Information – October 3, 2016 219

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
21.15% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
68.74% N/A
Class R5 12.23%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
24.46% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
21.70% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class A
5.34% N/A
Large Cap Growth Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
22.50% N/A
Class B 15.77%
Class C 15.26%
Class W 100.00%
  ANDREW NEUMANN
ADVANTAGE PLAN TRUST
TRUST END DATE 08/15/2027
C/O CHRISTOPHER M NEUMANN
101 RAMBLE WOOD DR
SKANEATELES NY 13152-2275
Class F
16.34% N/A
  ASCENSUS TRUST COMPANY FBO
CHOPTANK TRANSPORT INC & AFFILIATES
PO BOX 10758
FARGO ND 58106-0758
Class Y
9.34% N/A
  ASCENSUS TRUST COMPANY FBO
NATIONAL KWIKMETAL SERVICE L P 401
PO BOX 10758
FARGO ND 58106-0758
Class R5
10.77% N/A
  BRIDGET NEUMANN
ADVANTAGE PLAN TRUST
END DATE 11/17/2026
C/0 CHRISTOPHER M NEUMANN
101 RAMBLE WOOD DR
SKANEATELES NY 13152-2275
Class F
16.34% N/A
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
64.39% N/A
Class R5 40.54%
Class Z 6.64%
  CLAIRE NEUMANN
ADVANTAGE PLAN TRUST
TRUST END DATE 09/01/2030
ROBERT S NEUMANN
101 RAMBLE WOOD DR
SKANEATELES NY 13152-2275
Class F
16.22% N/A
  DCGT AS TTEE AND/OR CUST
FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class Y
25.87% N/A
Statement of Additional Information – October 3, 2016 220

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  FIIOC FBO
HYUNDAI 401(K) PLAN
100 MAGELLAN WAY #KW1C
COVINGTON KY 41015-1987
Class R5
20.58% N/A
  FIIOC FBO
RAYMOND HANDLING CONCEPTS
CORPORATION 401K PLAN
100 MAGELLAN WAY #KW1C
COVINGTON KY 41015-1987
Class R5
12.69% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
7.55% N/A
Class K 32.93%
  JAMES DUNCAN TTEE
JAMES DUNCAN & ASSOCIATES INC
401K PROFIT SHARING PLAN
17409 RUSH PEA CIR
AUSTIN TX 78738-4045
Class Y
5.02% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
12.23% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
41.58% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
9.25% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
13.90% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
23.03% N/A
  LILY ELIZABETH KRAMER
ADVANTAGE PLAN TRUST
TRUST END DATE 01/18/2028
C/O LEIGH A NEUMANN
5203 SILVER FOX DR
JAMESVILLE NY 13078-8742
Class F
16.25% N/A
  MATTHEW PATRICK NEUMANN
ADVANTAGE PLAN TRUST
TRUST END DATE 03/01/2024
C/O CHRISTOPHER M NEUMANN
101 RAMBLE WOOD DR
SKANEATELES NY 13152-2275
Class F
16.22% N/A
  MERRILL LYNCH PIERCE FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class T
24.75% N/A
Statement of Additional Information – October 3, 2016 221

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
Class C
19.33% N/A
Class R 79.44%
Class R4 11.69%
Class Z 31.18%
  MIRANDA E KRAMER
ADVANTAGE PLAN TRUST
TRUST END DATE 06/09/2025
C/O LEIGH A NEUMANN
5203 SILVER FOX DR
JAMESVILLE NY 13078-8742
Class F
16.28% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
6.10% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
58.93% N/A
Class Z 5.84%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
21.47% N/A
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class Y
55.56% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.85% N/A
Tax-Exempt Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
6.57% N/A
Class B 14.55%
Class C 20.64%
  CATHAY LIFE INSURANCE CO LTD
296 JEN-AI ROAD SEC. 4
TAIPEI, 106 TAIWAN R.O.C
Class Z
25.14% N/A
  EDWARD D JONES & CO
FOR THE BENEFIT OF CUSTOMERS
12555 MANCHESTER RD
SAINT LOUIS MO 63131-3729
Class A
10.34% N/A
Class B 6.06%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
5.04% N/A
Class B 15.21%
Class C 10.36%
  MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Class B
18.31% N/A
Class C 14.22%
Class Z 41.15%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
7.36% N/A
Statement of Additional Information – October 3, 2016 222

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
25.94% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
73.45% N/A
Class R5 25.71%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
6.10% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
69.45% N/A
U.S. Social Bond Fund COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class A
80.10% 99.74% (a)
Class C 100.00%
Class R4 100.00%
Class R5 100.00%
Class Z 99.75%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
19.90% N/A
Ultra Short Term Bond Fund MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Shares
90.21% 90.21%
Funds with Fiscal Period Ending August 31:
Except as otherwise indicated, the information below is as of November 30, 2015:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
AP – Alternatives Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
100.00% 100.00%
AP – Total Return Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
100.00% 100.00%
AP – Small Cap Equity Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
100.00% 100.00%
Balanced Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
35.02% 27.83%
Class B 32.10%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY ACCOUNT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4151
Class R5
6.62% N/A
Class Y 8.27%
Statement of Additional Information – October 3, 2016 223

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  DCGT AS TTEE AND/OR CUST
FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class R
8.81% N/A
  FIIOC FBO
PAREX USA INC 401(K) PLAN
100 MAGELLAN WAY
COVINGTON KY 41015-1987
Class R
6.81% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
5.40% N/A
Class C 11.97%
Class Z 11.41%
  GREAT-WEST TRUST COMPANY LLC TTEE F
EMPLOYEE BENEFITS CLIENTS 401K
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R4
6.97% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class Z
7.37% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class B
7.73% N/A
Class C 8.76%
Class Y 9.75%
Class Z 19.56%
  MID-ATLANTIC TRUST COMPANY CUST
FBO HEARTLAND FINANCIAL RETIREMENT
PLAN
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class Y
20.04% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
8.68% N/A
Class Z 8.88%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
8.38% N/A
Class R4 32.32%
Class R5 55.64%
Class Y 14.86%
Class Z 5.41%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
7.05% N/A
Class R4 26.60%
Class R5 8.63%
  PIMS/PRUDENTIAL RETIREMENT
AS NOMINEE FOR THE TTEE/CUST PL
VICOR CORPORATION
400 FEDERAL ST
ANDOVER MA 01810-1033
Class R4
7.43% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
6.11% N/A
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class Y
10.27% N/A
Statement of Additional Information – October 3, 2016 224

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
5.76% N/A
  WELLS FARGO BANK FBO
1525 W W T HARRIS BLVD
CHARLOTTE NC 28262-8522
Class K
98.28% N/A
Contrarian Core Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
53.84% N/A
Class B 32.97%
Class C 19.76%
Class W 100.00%
  BANKPLUS WEALTH MANAGEMENT GROUP 1
1018 HIGHLAND COLONY PKWY STE 600
RIDGELAND MS 39157-2084
Class Y
6.46% N/A
  BENEFIT TRUST COMPANY AS TRUSTEE
FOR ORANGE USD LT
PO BOX 12765
OVERLAND PARK KS 66282-2765
Class Y
6.75% N/A
  BENEFIT TRUST COMPANY AS TTEE FBO
CONTRA COSTA CC
PO BOX 12765
OVERLAND PARK KS 66282-2765
Class Y
5.69% N/A
  BENEFIT TRUST COMPANY AS TTEE FBO
SOUTH ORANGE COUNTY CC
PO BOX 12765
OVERLAND PARK KS 66282-2765
Class Y
5.55% N/A
  BROWN BROTHERS HARRIMAN & CO AS
CUSTODIAN FOR
140 BROADWAY
NEW YORK NY 10005-1108
Class Y
19.85% N/A
  BROWN BROTHERS HARRIMAN AND COMPANY
AS CUSTODIAN FOR
525 WASHINGTON BLVD
JERSEY CITY NJ 07310-1692
Class Y
6.33% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
97.50% N/A
Class R4 6.35%
Class R5 25.10%
  COLUMBIA THERMOSTAT FUND
C/O PAULA RYAN
227 W MONROE ST STE 3000
CHICAGO IL 60606-5018
Class I
10.84% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
8.51% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
13.62% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
34.37% N/A
Statement of Additional Information – October 3, 2016 225

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
5.49% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
20.22% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
10.13% N/A
  LPL FINANCIAL
FBO CUSTOMER ACCOUNTS
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class C
5.20% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
Class C
16.31% N/A
Class R 31.30%
Class T 29.52%
Class Z 33.05%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
11.17% N/A
Class Z 5.42%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class C
9.67% N/A
Class R4 50.88%
Class R5 40.23%
Class Z 6.18%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
6.73% N/A
Class R4 7.18%
Class R5 8.37%
  PIMS/PRUDENTIAL RETIREMENT
AS NOMINEE FOR THE TTEE/CUST PL
NEXCOM 401(K) PLAN
3280 VIRGINIA BEACH BLVD
VIRGINIA BCH VA 23452-5724
Class R4
9.15% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
6.88% N/A
Class Z 5.64%
  SAMMONS FINANCIAL NETWORK LLC
4546 CORPORATE DR STE 100
WEST DES MOINES IA 50266-5911
Class R
27.86% N/A
  STANDARD INSURANCE COMPANY
1100 SW 6TH AVE
ATTN: SEP ACCT P11D
PORTLAND OR 97204-1093
Class R4
5.06% N/A
  THE NORTHERN TRUST COMPANY AS
TRUSTEE FBO LEAR SALARIED – DV
PO BOX 92994
CHICAGO IL 60675-2994
Class R5
5.21% N/A
Statement of Additional Information – October 3, 2016 226

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Emerging Markets Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
36.63% N/A
Class B 37.33%
Class C 21.28%
Class W 96.00%
  ASCENSUS TRUST COMPANY FBO
CONCUR TECHNOLOGIES, INC. 401(K) PL
PO BOX 10758
FARGO ND 58106-0758
Class Y
40.77% N/A
  ASCENSUS TRUST COMPANY FBO
HERITAGE VALLEY HEALTH SYSTEM 401(K
PO BOX 10758
FARGO ND 58106-0758
Class R5
6.86% N/A
  ASCENSUS TRUST COMPANY FBO
HERITAGE VALLEY HEALTH SYSTEM 403(B
PO BOX 10758
FARGO ND 58106-0758
Class R5
23.19% N/A
  ASCENSUS TRUST COMPANY FBO
LINCOLN PEDIATRICS ASSOCIATES INC
PO BOX 10758
FARGO ND 58106-0758
Class R4
7.32% N/A
  ASCENSUS TRUST COMPANY FBO
LP INNOVATIONS 401(K) PLAN
PO BOX 10758
FARGO ND 58106-0758
Class R4
6.50% N/A
  ASCENSUS TRUST COMPANY FBO
ROSEV DAIRY FOODS INC 401(K) PLAN
PO BOX 10758
FARGO ND 58106-0758
Class R4
5.15% N/A
  ASCENSUS TRUST COMPANY FBO
VIRTUSA CORPORATION 401(K) PLAN
PO BOX 10758
FARGO ND 58106-0758
Class R4
30.22% N/A
  ASCENSUS TRUST COMPANY FBO
WHITE MOUNTAIN LUMBER CO INC RETIRE
PO BOX 10758
FARGO ND 58106-0758
Class R4
8.76% N/A
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
52.14% N/A
Class R5 6.23%
Class Z 6.03%
  FIIOC FBO
HUBSPOT INC 401(K) PROFIT SHARING
PLAN & TRUST
100 MAGELLAN WAY #KW1C
COVINGTON KY 41015-1987
Class Y
5.36% N/A
  FIIOC FBO
RGM ADVISORS, LLC 401K P/S PLAN
100 MAGELLAN WAY (KW1C)
COVINGTON KY 41015-1987
Class Y
5.83% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class K
45.29% N/A
  HEARTLAND BANK AND TRUST COMPANY 0
ASSET MANAGEMENT & TRUST SERVICES
200 W COLLEGE AVE
NORMAL IL 61761-2577
Class Y
12.81% N/A
Statement of Additional Information – October 3, 2016 227

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
21.25% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
42.84% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
9.49% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
26.43% N/A
  MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Class C
11.47% 52.76%
Class R 59.09%
Class Z 88.61%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
20.41% N/A
Class R5 41.39%
Class Y 5.84%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
6.87% N/A
  PIMS/PRUDENTIAL RETIREMENT
AS NOMINEE FOR THE TTEE/CUST PL
THE ROCK SOLID 401(K) PLAN
9 WYNFIELD DR
LITITZ PA 17543-8001
Class Y
15.94% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
7.64% N/A
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class Y
11.33% N/A
  TAYNIK & CO
C/O INVESTORS BANK & TRUST CO
1200 CROWN COLONY DR CC10313
QUINCY MA 02169-0938
Class R
5.61% N/A
  TD AMERITRADE TRUST COMPANY
PO BOX 17748
DENVER CO 80217-0748
Class R
6.79% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.31% N/A
Statement of Additional Information – October 3, 2016 228

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Global Dividend Opportunity Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
9.85% N/A
Class B 16.06%
Class C 14.10%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FOR BENFT CUST
ATTN MUTUAL FUND
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4151
Class A
6.56% N/A
Class B 11.39%
Class C 7.98%
Class Z 6.91%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class W
100.00% N/A (a)
  FIIOC FBO
CORD MOVING & STORAGE 401(K) PLAN
100 MAGELLAN WAY (KW1C)
COVINGTON KY 41015-1987
Class R
10.17% N/A
  FIIOC FBO
JAY INDUSTRIES INC PROFIT SHARING &
401(K) PLAN
100 MAGELLAN WAY (KW1C)
COVINGTON KY 41015-1987
Class R4
84.06% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
5.42% N/A
Class B 11.62%
Class C 5.98%
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
50.71% N/A
  JPMCB NA CUST FOR
COLUMBIA INCOME BUILDER FUND
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
49.28% N/A
  LPL FINANCIAL
FBO CUSTOMER ACCOUNTS
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class C
8.57% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class A
7.31% N/A
Class B 17.89%
Class C 12.82%
  MG TRUST COMPANY CUST FBO
CREATIVE CONCEPTS OF ORLANDO INC 4
717 17TH ST STE 1300
DENVER CO 80202-3304
Class R
6.17% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
6.74% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
7.37% N/A
Class B 9.54%
Class R5 17.39%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
5.88% N/A
Class B 7.63%
Class C 5.60%
Statement of Additional Information – October 3, 2016 229

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
6.92% N/A
  RELIANCE TRUST CO CUST
FBO MASSMUTUAL OMNIBUS PLL/SMF
PO BOX 48529
ATLANTA GA 30362-1529
Class R
72.30% N/A
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class R4
8.22% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
81.52% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
10.80% N/A
  VOYA INSTITUTIONAL TRUST COMPANY
TTEE DAIMLER TRUCKS NORTH AMERICA
LLC DEFERRED COMPENSATION PLAN
30 BRAINTREE HILL OFFICE PARK
BRAINTREE MA 02184-8747
Class Y
99.82% N/A
Global Energy and Natural Resources Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
38.41% N/A
Class B 37.02%
Class C 24.67%
  BAILEY REHABILITATION SERVICES TTEE
BAILEY REHABILITATION SERVICES INC
C/O FASCORE LLC
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R
5.51% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FOR
BENEFIT OF CUSTOMERS
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
63.76% N/A
Class R5 30.73%
Class Z 38.33%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class K
36.24% N/A (a)
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
7.06% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
99.99% N/A
  LPL FINANCIAL
FBO CUSTOMER ACCOUNTS
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class C
6.03% N/A
Statement of Additional Information – October 3, 2016 230

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MASSACHUSETTS MUTUAL LIFE INS CO
1295 STATE ST MIP M200-INVST
SPRINGFIELD MA 01111-0001
Class R
15.98% N/A
  MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Class C
13.57% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R5
60.02% N/A
Class Z 15.98%
Class R4 12.07%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
8.32% N/A
Class R4 85.46%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
11.32% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
9.95% N/A
Global Technology Growth Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
32.33% N/A
Class B 13.33%
Class C 10.61%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class B
11.11% N/A
Class R5 19.73%
Class Z 5.37%
  FIIOC FBO
WHITNEY BRADLEY & BROWN INC
401(K) PLAN & TRUST
100 MAGELLAN WAY # KW1C
COVINGTON KY 41015-1987
Class R4
13.02% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
7.86% N/A
Class B 20.50%
Class C 9.46%
Class Z 6.55%
  GREAT-WEST TRUST COMPANY LLC TTEE F
EMPLOYEE BENEFITS CLIENTS 401K
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R5
5.50% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
99.98% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
6.72% N/A
Class C 5.92%
Class Z 19.43%
  MATRIX TRUST COMPANY, FBO
BSBP & A LLP 401(K) PLAN I
PO BOX 52129
PHOENIX AZ 85072-2129
Class R5
7.10% N/A
Statement of Additional Information – October 3, 2016 231

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class B
5.86% N/A
Class C 32.23%
Class Z 30.43%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class B
9.54% N/A
Class C 11.16%
Class Z 7.56%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
6.01% N/A
Class B 9.20%
Class R4 16.91%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
10.24% N/A
Class B 13.35%
Class C 5.77%
Class R4 60.32%
Class R5 11.84%
  STIFEL NICOLAUS & CO INC
EXCLUSIVE BENEFIT OF CUSTOMERS
501 N BROADWAY
SAINT LOUIS MO 63102-2188
Class B
5.43% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.84% N/A
Class Z 7.04%
  VOYA INSTITUTIONAL TRUST COMPANY
TTEE DAIMLER TRUCKS NORTH AMERICA
LLC DEFERRED COMPENSATION PLAN
30 BRAINTREE HILL OFFICE PARK
BRAINTREE MA 02184-8747
Class R5
14.23% N/A
  WELLS FARGO BANK FBO
STABILUS INC 401K PLAN
1525 WEST WT HARRIS BLVD
CHARLOTTE NC 28288-1076
Class R5
20.01% N/A
Greater China Fund ADVISORS CLEARING NETWORK, INC.
FBO RETIREMENT PLANS OMNIBUS
7 N FAIR OAKS AVE
PASADENA CA 91103-3608
Class R5
8.16% N/A
  AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class C
5.23% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY ACCOUNT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMERS
ATTN MUTUAL FUNDS
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4151
Class B
10.42% N/A
Class Z 5.16%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class I
100.00% N/A (a)
Class W 100.00%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
6.89% N/A
Class B 11.93%
Class C 16.17%
Statement of Additional Information – October 3, 2016 232

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  GREAT-WEST TRUST COMPANY LLC TTEE F
EMPLOYEE BENEFITS CLIENTS 401K
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R5
17.81% N/A
  MARIL & CO FBO JD
C/O M&I TRUST CO NA – ATTN:MF
11270 WEST PARK PLACE – STE 400
MILWAUKEE WI 53224-3638
Class Z
31.35% N/A
  MATRIX TRUST COMPANY CUST FBO
TERWILLIGER DENTAL PC
717 17TH ST STE 1300
DENVER CO 80202-3304
Class R5
15.43% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class A
6.94% N/A
Class B 10.32%
Class C 24.38%
Class Z 29.78%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class B
9.46% N/A
Class C 12.65%
Class Z 8.97%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
9.27% N/A
Class B 15.76%
Class C 11.26%
Class R5 24.93%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
5.07% N/A
Class B 10.13%
Class C 6.58%
Class R4 99.11%
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
21.86% N/A
  TRUST COMPANY OF AMERICA
FBO
PO BOX 6503
ENGLEWOOD CO 80155-6503
Class A
9.24% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
6.72% N/A
Mid Cap Growth Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
19.92% N/A
Class B 20.32%
Class C 10.59%
Class W 98.77%
  CAPITAL BANK & TRUST CO
TTEE F SHOREWEST REALTORS INC
401K
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R
5.38% N/A
  CAPITAL BANK & TRUST COMPANY TTEE F
SMITHGROUP RA 401K
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R5
19.02% N/A
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
32.61% N/A
Class Z 8.46%
Statement of Additional Information – October 3, 2016 233

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class I
100.00% N/A (a)
Class Y 99.96%
  COUNSEL TRUST DBA MATC FBO
ANDERSON & VREELAND INC PSP
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class R
6.39% N/A
  COUNSEL TRUST DBA MATC FBO
EAGLE METALCRAFT INC 401K PSP
& TRUST
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class K
11.01% N/A
  DCGT AS TTEE AND /OR CUST
FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class R
18.64% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
9.72% N/A
Class K 8.82%
  KEITH B ROSE FBO
ROSE LAW FIRM PLLC 401K PSP
& TRUST
501 NEW KARNER RD
ALBANY NY 12205-3882
Class K
8.68% N/A
  KENNETH MECK TRUSTEE
PA ASSOC OF CONSERVATION 401 (K)
PROFIT SHARING PLAN & TRUST
25 NORTH FRONT STREET
HARRISBURG PA 17101-1627
Class K
11.24% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class C
10.38% N/A
Class R 30.86%
Class T 14.28%
Class Z 26.34%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
6.89% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R5
67.84% N/A
Class T 5.88%
Class Z 13.40%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
10.04% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
5.67% N/A
  STATE STREET BANK AND TRUST AS
TRUSTEE AND/OR CUSTODIAN FBO
ADP ACCESS PRODUCT
1 LINCOLN ST
BOSTON MA 02111-2901
Class K
18.65% N/A
Statement of Additional Information – October 3, 2016 234

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  WELLS FARGO BANK FBO
SIX CONTINENTS HOTELS INC 401K
1525 WEST WT HARRIS BLVD # 25881900
CHARLOTTE NC 28288-1076
Class R4
95.36% N/A
Disciplined Small Core Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
23.80% N/A
Class B 28.63%
Class C 16.34%
Class W 99.26%
  ASCENSUS TRUST COMPANY FBO
EVERENCE SERVICES, LLC 401(K) PLAN
PO BOX 10758
FARGO ND 58106-0758
Class R4
14.99% N/A
  ASCENSUS TRUST COMPANY FBO
SPARTAN CHEMICAL COMPANY INC EE P
PO BOX 10758
FARGO ND 58106-0758
Class R5
19.13% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class Y
16.55% N/A
  DCGT AS TTEE AND/OR CUST
FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class A
6.55% N/A
Class R4 10.87%
  FIIOC FBO
AEGIS TECHNOLOGIES GROUP INC
100 MAGELLAN WAY # KW1C
COVINGTON KY 41015-1987
Class R4
31.02% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
12.89% N/A
Class C 15.35%
  GREENLEAF TRUST FBO
EPI PRINTERS, INC 401(K)
211 S ROSE ST
KALAMAZOO MI 49007-4713
Class Y
13.56% N/A
  GREENLEAF TRUST FBO
GREENLEAF TRUST 401(K)
211 S ROSE ST
KALAMAZOO MI 49007-4713
Class Y
8.16% N/A
  GREENLEAF TRUST FBO
HAROLD ZEIGLER AUTO GROUP INC
211 S ROSE ST
KALAMAZOO MI 49007-4713
Class Y
5.19% N/A
  GREENLEAF TRUST FBO
PARAGON HEALTH P C
211 S ROSE ST
KALAMAZOO MI 49007-4713
Class Y
10.97% N/A
  GREENLEAF TRUST FBO
SCHUPAN & SONS, INC.
211 S ROSE ST
KALAMAZOO MI 49007-4713
Class Y
6.44% N/A
  HARTFORD LIFE INSURANCE COMPANY
ATTN UIT OPERATIONS
PO BOX 2999
HARTFORD CT 06104-2999
Class A
8.16% N/A
Statement of Additional Information – October 3, 2016 235

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
18.39% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
20.38% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE CONSERVATIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
18.58% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
39.76% N/A
  LPL FINANCIAL
FBO CUSTOMER ACCOUNTS
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class B
16.06% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
Class A
19.61% 31.83%
Class B 8.86%
Class C 17.79%
Class R4 13.56%
Class T 29.37%
Class Z 57.43%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
8.50% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
9.40% N/A
Class B 5.11%
Class C 12.39%
Class R4 13.61%
Class Y 32.43%
Class Z 14.94%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
8.20% N/A
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
5.05% N/A
  RELIANCE TRUST COMPANY CUSTODIAN
FBO MASS MUTUAL PLL/SMF
PO BOX 48529
ATLANTA GA 30362-1529
Class R5
67.04% N/A
  STATE STREET BANK & TRUST CO
ANDREW P CAPARELLI
SEP IRA
107 STONEWALL CIR
WEST HARRISON NY 10604-1119
Class B
7.21% N/A
Statement of Additional Information – October 3, 2016 236

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class B
13.11% N/A
Small Cap Growth Fund I AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
9.69% N/A
Class B 20.12%
Class C 6.00%
  ASCENSUS TRUST COMPANY FBO
FINANCIAL NETWORK AUDIT, LLC 401(K)
PO BOX 10758
FARGO ND 58106-0758
Class R
5.53% N/A
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
84.10% N/A
Class Z 16.47%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
17.44% N/A
Class C 16.64%
Class K 11.13%
  HEI HOSPITALITY LLC
FBO EXEC EXCESS OF HEI HOSPITALITY
ATTN ERNIE FREEDMAN
101 MERRITT 7 STE 1
NORWALK CT 06851-1060
Class R
7.87% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
6.16% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE AGGRESSIVE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
22.77% N/A
  JPMCB NA CUST FOR
COLUMBIA CAPITAL ALLOCATION
MODERATE PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
11.04% N/A
  JPMCB NA CUST FOR
COLUMBIA GLOBAL STRATEGIC EQUITY
PORTFOLIO
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
60.02% N/A
  MAC & CO
ATTN MUTUAL FUND OPERATIONS
PO BOX 3198
PITTSBURGH PA 15230-3198
Class R5
15.61% N/A
  MERRILL LYNCH, PIERCE, FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
ATTENTION SERVICE TEAM
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246-6484
Class A
14.20% N/A
Class C 16.79%
Class Z 6.99%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
5.73% N/A
Statement of Additional Information – October 3, 2016 237

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
5.80% N/A
Class B 5.56%
Class C 5.25%
Class R4 63.15%
Class Y 35.05%
Class Z 9.61%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class C
5.50% N/A
Class R4 33.82%
  RELIANCE TRUST CO CUST
FBO MASSMUTUAL OMNIBUS PLL/SMF
PO BOX 48529
ATLANTA GA 30362-1529
Class R
68.54% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class B
8.69% N/A
  VANGUARD FDUCIARY TRUST CO
PO BOX 2600
ATTN: OUTSIDE FUNDS
VALLEY FORGE PA 19482-2600
Class Y
64.91% N/A
  WELLS FARGO BANK FBO
YAZAKI EMPLOYEE SAV & RET PLAN
1525 WEST WT HARRIS BLVD # 20318455
CHARLOTTE NC 28288-1076
Class R5
77.49% N/A
Funds with Fiscal Period Ending October 31:
Except as otherwise indicated, the information below is as of January 31, 2016:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
AMT-Free CT Intermediate Muni Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
25.71% N/A
Class C 13.14%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY ACCT FBO
CUSTOMERS
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
8.02% N/A
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class B
6.68% N/A (a)
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
5.47% N/A
Class C 23.78%
  KELLY F SHACKELFORD
PO BOX 672
NEW CANAAN CT 06840-0672
Class T
14.15% N/A
  LPL FINANCIAL
FBO CUSTOMER ACCOUNTS
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class C
10.89% N/A
Statement of Additional Information – October 3, 2016 238

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MERRILL LYNCH PIERCE FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class T
16.72% 81.34%
Class A 18.40%
Class B 22.91%
Class C 22.41%
Class Z 94.65%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
6.56% N/A
Class B 70.41%
Class R4 28.88%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
14.91% N/A
Class R4 70.35%
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class A
9.67% N/A
AMT-Free Intermediate Muni Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
27.04% N/A
Class B 20.34%
Class C 22.81%
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY A/C FBO CUSTOMERS
ATTN MUTUAL FUND DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class R5
27.67% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
35.25% N/A
Class C 11.58%
  JOHN J ALMEIDA TR
JOHN J ALMEIDA REVOCABLE TRUST
U/A DATED MAY 15 1997
27 TOPMAST CT
JAMESTOWN RI 02835-2227
Class T
7.07% N/A
  MERRILL LYNCH PIERCE FENNER
& SMITH INC FOR THE SOLE BENEFIT
OF ITS CUSTOMERS
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class T
11.91% 78.66%
Class A 11.57%
Class B 25.04%
Class C 24.02%
Class Z 89.26%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
9.23% N/A
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
24.68% N/A
Class R5 5.79%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
74.95% N/A
Class R5 29.29%
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
37.05% N/A
Statement of Additional Information – October 3, 2016 239

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.66% N/A
AMT-Free MA Intermediate Muni Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
40.58% N/A
Class C 22.16%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class B
99.90% N/A (a)
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
13.73% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
5.37% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
Class A
9.05% 80.05%
Class C 14.82%
Class T 44.22%
Class Z 94.24%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class A
10.11% N/A
Class C 13.93%
Class R4 99.68%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class A
18.30% N/A
Class C 15.25%
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class A
5.48% N/A
Class C 8.17%
AMT-Free NY Intermediate Muni Bond Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
39.17% N/A
  CHARLES SCHWAB & CO INC
SPECIAL CUSTODY ACCT FBO
CUSTOMERS
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class A
6.79% N/A
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class B
42.24% N/A (a)
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
5.68% N/A
Class C 10.64%
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class A
6.72% N/A
Statement of Additional Information – October 3, 2016 240

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
Class A
5.54% 68.28%
Class C 39.68%
Class T 23.89%
Class Z 80.55%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class A
23.19% N/A
Class C 14.11%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
64.04% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
6.39% N/A
Class B 57.60%
Class C 6.98%
Class R4 34.77%
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
8.36% N/A
CA Tax-Exempt Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
11.34% N/A
Class C 12.75%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class B
7.74% N/A (a)
Class R4 9.93%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
7.39% N/A
Class B 13.15%
Class C 9.26%
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class Z
7.76% N/A
Class C 5.01%
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #970P7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class A
9.34% N/A
Class B 21.94%
Class C 39.61%
Class Z 73.45%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class A
5.48% N/A
Class B 13.44%
Class C 13.11%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
90.07% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class B
27.39% N/A
NY Tax-Exempt Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
19.37% N/A
Class C 8.67%
Statement of Additional Information – October 3, 2016 241

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class R4
25.30% N/A (a)
Class R5 100.00%
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class A
5.43% N/A
Class B 18.57%
Class C 13.58%
Class Z 5.24%
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class Z
10.29% N/A
  MARGARET COOK
6137 WRIGHT ST
WOLCOTT NY 14590-1030
Class B
6.57% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #974A6
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
Class B
57.91% N/A
Class C 27.42%
Class Z 55.93%
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
13.55% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class A
5.93% N/A
Class R4 74.70%
  RBC CAPITAL MARKETS, LLC
MUTUAL FUND OMNIBUS PROCESSING
OMNIBUS
ATTN MUTUAL FUND OPS MANAGER
510 MARQUETTE AVE S
MINNEAPOLIS MN 55402-1110
Class C
5.96% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
7.04% N/A
Class Z 21.80%
Strategic Income Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
56.40% 40.03%
Class B 30.38%
Class C 27.54%
Class Z 9.46%
  ASCENSUS TRUST COMPANY FBO
PO BOX 10758
FARGO ND 58106-0758
Class R
5.71% N/A
  BRICS & CO FBO
340 S CLEVELAND AVE
1ST FL OH1 0481
WESTERVILLE OH 43081-8917
Class Y
11.04% N/A
  CAPITAL BANK & TRUST COMPANY TTEE
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R
17.95% N/A
  CHARLES SCHWAB & CO INC
CUST A/C FOR THE EXCLUSIVE BENEFIT
ATTENTION MUTUAL FUND
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
87.74% N/A
Class R5 18.15%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class K
12.26% N/A (a)
Class W 100.00%
Statement of Additional Information – October 3, 2016 242

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  DCGT AS TTEE AND/OR CUST
FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS
ATTN NPIO TRADE DESK
711 HIGH ST
DES MOINES IA 50392-0001
Class R
23.55% N/A
  FIRST CLEARING LLC
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class B
18.71% N/A
Class C 10.04%
Class Z 8.97%
  GEORGE SHEANSHANG TTEE FBO
GEORGE SHEANSHANG ESQ
C/O FASCORE LLC
8515 E ORCHARD RD # 2T2
GREENWOOD VLG CO 80111-5002
Class R
5.21% N/A
  LPL FINANCIAL
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class Z
5.86% N/A
  MATRIX TRUST COMPANY AS CUST FBO
PO BOX 52129
PHOENIX AZ 85072-2129
Class Y
8.96% N/A
  MERRILL LYNCH PIERCE FENNER & SMITH
FOR THE SOLE BENEFIT OF IT CUSTOMER
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
Class Z
40.10% N/A
Class C 15.38%
Class B 21.86%
Class R 23.45%
  MID ATLANTIC TRUST COMPANY FBO
1251 WATERFRONT PL STE 525
PITTSBURGH PA 15222-4228
Class R
5.43% N/A
  MORGAN STANLEY SMITH BARNEY
HARBORSIDE FINANCIAL CENTER
PLAZA 2, 3RD FLOOR
JERSEY CITY NJ 07311
Class C
10.29% N/A
Class Z 8.35%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class C
5.06% N/A
Class R4 48.96%
Class R5 14.43%
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class R4
46.25% N/A
Class R5 50.55%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class Z
5.24% N/A
  TD AMERITRADE INC FOR THE
EXCLUSIVE BENEFIT OF OUR CLIENTS
PO BOX 2226
OMAHA NE 68103-2226
Class R5
5.47% N/A
  TD AMERITRADE TRUST COMPANY
ATTN HOUSE
PO BOX 17748
DENVER CO 80217-0748
Class Y
39.82% N/A
  UBS WM USA
OMNI ACCOUNT M/F
ATTN: DEPARTMENT MANAGER
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
Class C
5.94% N/A
Class Z 11.84%
  WELLS FARGO BANK NA FBO
PO BOX 1533
MINNEAPOLIS MN 55480-1533
Class Y
26.45% N/A
Statement of Additional Information – October 3, 2016 243

 

Table of Contents
Funds with Fiscal Period Ending December 31:
Except as otherwise indicated, the information below is as of March 31, 2016:
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
Real Estate Equity Fund AMERICAN ENTERPRISE INVESTMENT SVC
707 2ND AVE S
MINNEAPOLIS MN 55402-2405
Class A
46.13% N/A
Class B 40.38%
Class C 18.17%
Class W 87.45%
  APEX CLEARING CORPORATION
350 N SAINT PAUL ST STE 1300
DALLAS TX 75201-4229
Class C
6.30% N/A
  ASCENSUS TRUST COMPANY
PO BOX 10758
FARGO ND 58106-0758
Class R
17.68% N/A
Class R4 10.41%
  CAPITAL BANK & TRUST COMPANY TTEE
8515 E ORCHARD RD 2T2
GREENWOOD VILLAGE CO 80111-5002
Class R
32.60% N/A
  CHARLES SCHWAB & CO INC
ATTENTION MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4151
Class K
59.66% N/A
Class Z 19.83%
  COLUMBIA MGMT INVESTMENT ADVSR LLC
ATTN KATRINA MACBAIN
50807 AMERIPRISE FINANCIAL CTR
MINNEAPOLIS MN 55474-0508
Class K
10.30% N/A (a)
Class W 12.55%
  DAVID BROUSSARD
1016 DEANNA LN
BROUSSARD LA 70518-8007
Class B
6.13% N/A
  FIRST CLEARING LLC
2801 MARKET ST
SAINT LOUIS MO 63103-2523
Class C
10.44% N/A
Class K 30.04%
  JPMCB NA CUST FOR
COLUMBIA ADAPTIVE RISK ALLOCATION
14201 N DALLAS PKWY FL 13
DALLAS TX 75254-2916
Class I
96.44% N/A
  LPL FINANCIAL
FBO CUSTOMER ACCOUNTS
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
Class C
5.73% N/A
  MAC & CO
ATTN MUTUAL FUND OPERATIONS
PO BOX 3198
PITTSBURGH PA 15230-3198
Class R5
65.27% N/A
  MERRILL LYNCH PF&S INC
4800 DEER LAKE DRIVE EAST 3RD FL
JACKSONVILLE FL 32246-6484
Class C
10.31% 26.91%
Class R 30.35%
Class Z 41.71%
  NATIONAL FINANCIAL SERVICES LLC
FEBO CUSTOMERS
MUTUAL FUNDS
200 LIBERTY STREET 1WFC
NEW YORK NY 10281-1003
Class R4
69.75% N/A
  PERSHING LLC
1 PERSHING PLZ
JERSEY CITY NJ 07399-0002
Class B
6.76% N/A
Class R4 11.80%
  RAYMOND JAMES
FBO OMNIBUS FOR MUTUAL FUNDS
ATTN: COURTNEY WALLER
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
Class C
10.82% N/A
Statement of Additional Information – October 3, 2016 244

 

Table of Contents
Fund Shareholder Name and Address Share Class Percentage
of Class
Percentage of Fund
(if greater than 25%)
  VOYA INSTITUTIONAL TRUST COMPANY
TTEE DAIMLER TRUCKS NORTH AMERICA
LLC DEFERRED COMPENSATION PLAN
30 BRAINTREE HILL OFFICE PARK
BRAINTREE MA 02184-8747
Class R5
33.15% N/A
(a) Combination of all share classes of Columbia Management initial capital and/or affiliated funds-of-funds’ investments.
American Enterprise Investment Services Inc., a Minnesota corporation, is a subsidiary of Ameriprise Financial, Inc.
Bank of America, N.A., a national banking association organized under the laws of the United States, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation, are subsidiaries of Bank of America Corporation.
Charles Schwab & Co., Inc., a California corporation, is a subsidiary of The Charles Schwab Corporation.
The Investment Manager, a Minnesota limited liability company, is a subsidiary of Ameriprise Financial, Inc. Other Columbia Funds managed by the Investment Manager may hold more than 25% of a Fund.
Statement of Additional Information – October 3, 2016 245

 

Table of Contents
INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
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 quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the SEC 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS OR IN THIS STATEMENT OF ADDITIONAL INFORMATION, WHICH THE PROSPECTUS INCORPORATES BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST(S). THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFERING BY THE TRUST(S) IN ANY JURISDICTION IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY BE MADE.
Statement of Additional Information – October 3, 2016 246

 

Table of Contents
APPENDIX A — DESCRIPTION OF RATINGS
The ratings of S&P, Moody’s and Fitch represent their opinions as to quality. These ratings are not absolute standards of quality and are not recommendations to purchase, sell or hold a security. Issuers and issues are subject to risks that are not evaluated by the rating agencies. When a security is not rated by one of these agencies, it is designated as Not Rated. Securities designated as Not Rated do not necessarily indicate low credit quality, and for such securities the Investment Manager evaluates the credit quality.
S&P’s Debt Ratings
Long-Term Issue Credit Ratings
An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred, but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
An obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer.
‘NR’ indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
Short-Term Issue Credit Ratings
Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days – including commercial paper.
A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.
Statement of Additional Information – October 3, 2016 A-1

 

Table of Contents
A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.
A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitments.
A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
A short-term obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.
Municipal Short-Term Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Moody’s Long-Term Debt Ratings
Global Long-Term Rating Scale
Aaa – Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa – Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A – Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
Baa – Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba – Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B – Obligations rated B are considered speculative and are subject to high credit risk.
Caa – Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca – Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C – Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Global Short-Term Rating Scale
Issuers (or supporting institutions) rated Prime-1 (P-1) have a superior ability to repay short-term debt obligations.
Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong ability to repay short-term debt obligations.
Issuers (or supporting institutions) rated Prime-3 (P-3) have an acceptable ability to repay short-term obligations.
Issuers (or supporting institutions) rated Not Prime (NP) do not fall within any of the Prime rating categories.
US Municipal Short-Term Debt and Demand Obligation Ratings
While the global short-term ‘prime’ rating scale is applied to U.S. municipal tax-exempt commercial paper, these programs are typically backed by external letters of credit or liquidity facilities and their short-term prime ratings usually map to the long-term rating of the enhancing bank or financial institution and not to the municipality’s rating. Other short-term municipal obligations, which generally have different funding sources for repayment, are rated using two additional short-term rating scales ( i.e. , the MIG and VMIG scales discussed below).
Statement of Additional Information – October 3, 2016 A-2

 

Table of Contents
The Municipal Investment Grade (MIG) scale is used to rate US municipal bond anticipation notes of up to three years maturity. Municipal notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note maturity. MIG ratings expire at the maturity of the obligation, and the issuer’s long-term rating is only one consideration in assigning the MIG rating. MIG ratings are divided into three levels — MIG 1 through MIG 3 — while speculative grade short-term obligations are designated SG.
The MIG 1 designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
The MIG 2 designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
The MIG 3 designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
The SG designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned: a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of risk associated with the ability to receive purchase price upon demand (“demand feature”). The second element uses a rating from a variation of the MIG scale called the Variable Municipal Investment Grade (VMIG) scale. The rating transitions on the VMIG scale, as shown in the diagram below, differ from those on the Prime scale to reflect the risk that external liquidity support generally will terminate if the issuer’s long-term rating drops below investment grade.
The VMIG 1 designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
The VMIG 2 designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
The VMIG 3 designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
The SG designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.
Fitch’s Ratings
Corporate Finance Obligations – Long-Term Rating Scales
AAA: Highest credit quality.
‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Very high credit quality.
‘AA’ ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality.
‘A’ ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality.
‘BBB’ ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB: Speculative.
‘BB’ ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B: Highly speculative.
‘B’ ratings indicate that material credit risk is present.
Statement of Additional Information – October 3, 2016 A-3

 

Table of Contents
CCC: Substantial credit risk.
‘CCC’ ratings indicate that substantial credit risk is present.
CC: Very high levels of credit risk.
‘CC’ ratings indicate very high levels of credit risk.
C: Exceptionally high levels of credit risk.
‘C’ indicates exceptionally high levels of credit risk.
Defaulted obligations typically are not assigned ‘RD’ or ‘D’ ratings, but are instead rated in the ‘B’ to ‘C’ rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Short-Term Ratings Assigned to Issuers or Obligations in Corporate, Public and Structured Finance
F1: Highest short-term credit quality.
Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
F2: Good short-term credit quality.
Good intrinsic capacity for timely payment of financial commitments.
F3: Fair short-term credit quality.
The intrinsic capacity for timely payment of financial commitments is adequate.
B: Speculative short-term credit quality.
Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C: High short-term default risk.
Default is a real possibility.
RD: Restricted default.
Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D: Default.
Indicates a broad-based default event for an entity, or the default of a short-term obligation.
Statement of Additional Information – October 3, 2016 A-4

 

Table of Contents
APPENDIX B — PROXY VOTING GUIDELINES
Effective January 1, 2012
Set forth on the following pages are guidelines adopted and used by the Investment Manager in voting proxies (the Guidelines). The Guidelines are organized by issue and present certain factors that may be considered in making proxy voting determinations. The Investment Manager may, in exercising its fiduciary discretion, determine to vote any proxy in a manner contrary to these Guidelines.
Directors, Boards, Committees
Elect Directors
In a routine election of directors, the Investment Manager generally votes FOR the slate nominated by the nominating committee of independent directors, who are in the best position to know what qualifications are needed for each director to contribute to an effective board. The Investment Manager generally will WITHHOLD support from a nominee who fails to meet one or more of the following criteria:
Independence — A nominee who is deemed an affiliate of the company by virtue of a material business, familial or other relationship with the company but is otherwise not an employee.
Attendance — A nominee who failed to attend at least 75% of the board’s meetings.
Over Boarding — A nominee who serves on more than four other public company boards or an employee director nominee who serves on more than two other public company boards.
Committee Membership — A nominee who has been assigned to the audit, compensation, nominating, or governance committee if that nominee is not independent of management, or if the nominee does not meet the specific independence and experience requirements for audit committees or the independence requirements for compensation committees.
Audit Committee Chair — A nominee who serves as audit committee chair where the committee failed to put forth shareholder proposals for ratification of auditors.
Board Independence — A nominee of a company whose board as proposed to be constituted would have more than one-third of its members from management.
Interlocking Directorship — A nominee who is an executive officer of another company on whose board one of the company’s executive officers sits.
Poor Governance — A nominee involved with options backdating, financial restatements or material weakness in controls, approving egregious compensation, or who has consistently disregarded the interests of shareholders.
The Investment Manager will vote on a CASE-BY-CASE basis on any director nominee who meets the aforementioned criteria but whose candidacy has otherwise been identified by the third party research provider as needing further consideration for any reason not identified above.
In the case of contested elections, the Investment Manager will vote on a CASE-BY-CASE basis, taking into consideration the above criteria and other factors such as the background of the proxy contest, the performance of the company, current board and management, and qualifications of nominees on both slates.
Shareholder Nominations for Director
The Investment Manager will vote on a CASE-BY-CASE basis for shareholder-nominated candidates for director, taking into account various factors including, but not limited to: company performance, the circumstances compelling the nomination by the shareholder, composition of the incumbent board, and the criteria listed above the Investment Manager uses to evaluate nominees.
Shareholder Nominations for Director — Special Criteria
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which are typically based on the view that board nominating committees are responsible for establishing and implementing policies regarding the composition of the board and are therefore in the best position to make determinations with respect to special nominating criteria.
Director Independence and Committees
The Investment Manager generally will vote FOR proposals that require all members of a board’s key committees (audit, compensation, nominating or governance) be independent from management.
Statement of Additional Information – October 3, 2016 B-1

 

Table of Contents
Independent Board Chair/Lead Director
The Investment Manager generally will vote FOR proposals supporting an independent board chair or lead director and FOR the separation of the board chair and CEO roles, as independent board leaders foster the effectiveness of the independent directors and ensure appropriate oversight of management.
Removal of Directors
The Investment Manager generally will vote FOR proposals that amend governing documents to grant or restore shareholder ability to remove directors with cause, and AGAINST proposals that provide directors may be removed only by supermajority vote. The Investment Manager will vote on a CASE-BY-CASE basis on proposals calling for removal of specific directors.
Board Vacancies
The Investment Manager generally votes in accordance with recommendations made by its third party research provider in the case of vacancies filled by continuing directors, taking into account factors including whether the proposal is in connection with a proxy contest or takeover situation.
Cumulative Voting
In the absence of proxy access rights or majority voting, the Investment Manager generally will vote FOR the restoration or provision for cumulative voting and AGAINST its elimination.
Majority Voting
The Investment Manager generally will vote FOR amendments to governing documents that provide that nominees standing for election to the board must receive a majority of votes cast in order to be elected to the board.
Number of Directors
The Investment Manager generally will vote FOR amendments to governing documents that provide directors the authority to adjust the size of the board to adapt to needs that may arise.
Term Limits
The Investment Manager generally will vote AGAINST proposals seeking to establish a limit on director terms or mandatory retirement.
General Corporate Governance
Right to Call a Special Meeting
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which typically recommends votes FOR adoption, considering factors such as proposed ownership threshold, company size, and shareholder ownership, but will not support proposals allowing for investors with less than 10% ownership to call a special meeting.
Eliminate or Restrict Right to Call Special Meeting
The Investment Manager will generally vote AGAINST proposals to eliminate the right of shareholders to call special meetings.
Lead Independent Director Right to Call Special Meeting
The Investment Manager will generally vote FOR governance document amendments or other proposals which give the lead independent director the authority to call special meetings of the independent directors at any time.
Adjourn Meeting
The Investment Manager will vote on a CASE-BY-CASE basis on adjournment proposals and generally in the same direction as the primary proposal ( i.e. , if supporting the primary proposal, favor adjournment; if not supporting the primary proposal, oppose adjournment).
Other Business
The Investment Manager generally will vote AGAINST proposals seeking to give management the authority to conduct or vote on other business at shareholder meetings on the grounds that shareholders not present at the meeting would be unfairly excluded from such deliberations.
Eliminate or Restrict Action by Written Consent
The Investment Manager will generally vote AGAINST proposals to eliminate the right of shareholders to act by written consent since it may be appropriate to take such action in some instances.
Statement of Additional Information – October 3, 2016 B-2

 

Table of Contents
Vote Unmarked Proxies
The Investment Manager generally will vote FOR proposals prohibiting voting of unmarked proxies in favor of management.
Proxy Contest Advance Notice
The Investment Manager generally will vote AGAINST proposals to amend governing documents that require advance notice for shareholder proposals or director nominees beyond notice that allows for sufficient time for company response, SEC review, and analysis by other shareholders.
Minimum Stock Ownership
The Investment Manager will vote on a CASE-BY-CASE basis on proposals regarding minimum stock ownership levels.
Director and Officer Indemnification
The Investment Manager will generally vote FOR the provision of a maximum dollar amount that can be obtained through the course of legal action from a director or officer who acts in good faith and does not benefit from a transaction.
Confidential Voting
The Investment Manager generally will vote FOR actions that ensure all proxies, ballots, and voting tabulations which identify shareholders be kept confidential, except where disclosure is mandated by law. The Investment Manager supports the proposal to minimize pressure on shareholders, particularly employee shareholders.
Miscellaneous Governing Document Amendments
The Investment Manager generally will vote FOR bylaw or charter changes that are of a housekeeping nature ( e.g. , updates or corrections).
Change Company Name
The Investment Manager will generally vote FOR routine business matters such as changing the company’s name.
Approve Minutes
The Investment Manager will generally vote FOR routine procedural matters such as approving the minutes of a prior meeting.
Change Date/Time/Location of Annual Meeting
The Investment Manager will vote in accordance with the recommendation of the third-party research provider on proposals to change the date, time or location of the company’s annual meeting of shareholders.
Approve Annual, Financial and Statutory Reports
The Investment Manager generally will vote FOR proposals to approve the annual reports and accounts, financial and statutory reports, provided companies required to comply with U.S. securities laws have included the certifications required by the Sarbanes Oxley Act of 2002.
Compensation
Approve or Amend Omnibus Equity Compensation Plan
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which typically recommends votes FOR adoption or amendments to omnibus (general) equity compensation plans for employees or non-employee directors if they are reasonable and consistent with industry and country standards, and AGAINST compensation plans that substantially dilute ownership interest in a company, provide participants with excessive awards, or have objectionable structural features.
Approve or Amend Stock Option Plan
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which are typically based on factors including cost, size, and pattern of grants in comparison to peer groups, history of repricing, and grants to senior executives and non-employee directors.
Approve or Amend Employee Stock Purchase Plan
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which are typically based on factors including the plan’s cost to shareholders, whether those costs are in line with the company’s peer’s plans, and whether the plan requires shareholder approval within five years.
Statement of Additional Information – October 3, 2016 B-3

 

Table of Contents
Approve or Amend Performance-Based 162(m) Compensation Plan
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which are typically based on factors that consider the goal of the plan and in particular the linkage between potential payments to senior executives and the attainment of preset performance-based metrics.
Approve or Amend Restricted Stock Plan
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which considers such factors as the balance of all equity grants and awards, the term and other restrictions in place for restricted stock.
Stock Option Repricing or Exchanges
The Investment Manager generally votes in accordance with recommendations made by its third party research provider on matters relating to the repricing of stock options, which are typically based on factors such as whether the amending terms lead to a reduction in shareholder rights, allow the plan to be amended without shareholder approval, or change the terms to the detriment of employee incentives such as excluding a certain class or group of employees. The Investment Manager generally will vote FOR proposals to put stock option repricings to a shareholder vote.
Performance-Based Stock Options
The Investment Manager will vote on a CASE-BY-CASE basis regarding proposals urging that stock options be performance-based rather than tied to the vagaries of the stock market.
Ban Future Stock Option Grants
The Investment Manager generally will vote AGAINST proposals seeking to ban or eliminate stock options in equity compensation plans as such an action would preclude the company from offering a balanced compensation program.
Require Stock Retention Period
The Investment Manager generally will vote FOR proposals requiring senior executives to hold stock obtained by way of a stock option plan for a minimum of three years.
Require Approval of Extraordinary Benefits
The Investment Manager generally will vote FOR proposals specifying that companies disclose any extraordinary benefits paid or payable to current or retired senior executives and generally will vote AGAINST proposals requiring shareholder approval of any such extraordinary benefits.
Pay for Performance
The Investment Manager will vote on a CASE-BY-CASE basis regarding proposals seeking to align executive compensation with shareholders’ interests.
Say on Pay
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, taking into consideration the company’s pay for performance results and certain elements of the Compensation Discussion and Analysis disclosure.
Executive Severance Agreements
The Investment Manager generally votes in accordance with recommendations made by its third party research provider on these proposals regarding approval of specific executive severance arrangements in the event of change in control of a company or due to other circumstances.
Approve or Amend Deferred Compensation Plans for Directors
The Investment Manager generally will vote FOR approval or amendments to deferred compensation plans for non-employee directors, so that they may defer compensation earned until retirement.
Set Director Compensation
The Investment Manager generally will vote AGAINST proposals that seek to limit director compensation or mandate that compensation be paid solely in shares of stock.
Director Retirement Plans
The Investment Manager will generally vote AGAINST the adoption or amendment of director retirement plans on the basis that directors should be appropriately compensated while serving and should not view service on a board as a long-term continuing relationship with a company.
Statement of Additional Information – October 3, 2016 B-4

 

Table of Contents
Business Entity and Capitalization
Common or Preferred Stock — Increase in Authorized Shares or Classes
The Investment Manager will vote on a CASE-BY-CASE basis regarding proposals to increase authorized shares of common stock or to add a class of common stock, taking into consideration the company’s capital goals that may include stock splits, stock dividends, or financing for acquisitions or general operations. With respect to proposals seeking to increase authorized shares of preferred stock, to add a class of preferred stock, to authorize the directors to set the terms of the preferred stock or to amend the number of votes per share of preferred stock, the Investment Manager will vote on a CASE-BY-CASE basis on the grounds that such actions may be connected to a shareholder rights’ plan that the Investment Manager also will consider on a CASE-BY-CASE basis.
Common or Preferred Stock – Decrease in Authorized Shares or Classes
The Investment Manager generally will vote FOR proposals seeking to decrease authorized shares of common or preferred stock or the elimination of a class of common or preferred stock.
Common Stock — Change in Par Value
The Investment Manager generally will vote FOR proposals to change the par value of the common stock, provided that the changes do not cause a diminution in shareholder rights.
Authorize Share Repurchase Program
The Investment Manager generally will vote FOR proposals to institute or renew open market share repurchase plans in which all shareholders may participate on equal terms.
Stock Splits
The Investment Manager generally will vote FOR stock split proposals on the grounds that they intended to encourage stock ownership of a company.
Private Placements, Conversion of Securities, Issuance of Warrants or Convertible Debentures
The Investment Manager will generally vote FOR the issuance of shares for private placements, the conversion of securities from one class to another, and the issuance of warrants or convertible debentures on the grounds that such issuances may be necessary and beneficial for the financial health of the company and may be a low cost source of equity capital. The Investment Manager will generally vote AGAINST any such issuance or related action if the proposal would in any way result in new equity holders having superior voting rights, would result in warrants or debentures, when exercised, holding in excess of 20 percent of the currently outstanding voting rights, or if the proposal would in any way diminish the rights of existing shareholders.
Issuance of Equity or Equity-Linked Securities without Subscription Rights (Preemptive Rights)
The Investment Manager generally will vote FOR proposals that seek shareholder approval of the issuance of equity, convertible bonds or other equity-linked debt instruments, or to issue shares to satisfy the exercise of such securities that are free of subscription (preemptive) rights on the grounds that companies must retain the ability to issue such securities for purposes of raising capital. The Investment Manager generally will vote AGAINST any proposal where dilution exceeds 20 percent of the company’s outstanding capital.
Recapitalization
The Investment Manager generally will vote FOR recapitalization plans that combine two or more classes of stock into one class, or that authorize the company to issue new common or preferred stock for such plans. The Investment Manager generally will vote AGAINST recapitalization plans that would result in the diminution of rights for existing shareholders.
Merger Agreement
The Investment Manager will vote on a CASE-BY-CASE basis on proposals seeking approval of a merger or merger agreement and all proposals related to such primary proposals, taking into consideration the particular facts and circumstances of the proposed merger and its potential benefits to existing shareholders.
Going Private
The Investment Manager will vote on a CASE-BY-CASE basis on proposals that allow listed companies to de-list and terminate registration of their common stock, taking into consideration the cash-out value to shareholders, and weighing the value in continuing as a publicly traded entity.
Statement of Additional Information – October 3, 2016 B-5

 

Table of Contents
Reincorporation
The Investment Manager will vote on a CASE-BY-CASE basis on reincorporation proposals, taking into consideration whether financial benefits ( e.g. , reduced fees or taxes) likely to accrue to the company as a result of a reincorporation or other change of domicile outweigh any accompanying material diminution of shareholder rights. The Investment Manager will generally vote AGAINST the proposal unless the long-term business reasons for doing so are valid. The Investment Manager will generally vote FOR proposals to consider reincorporating in the United States if a company left the country for the purpose of avoiding taxes.
Bundled Proposals
The Investment Manager generally votes in accordance with recommendations made by its third party research provider on “bundled” or otherwise conditioned proposals, which are determined depending on the overall economic effects to shareholders.
Defense Mechanisms
Shareholder Rights’ Plan (Poison Pill)
The Investment Manager will vote on a CASE-BY-CASE basis regarding management proposals seeking ratification of a shareholder rights’ plan, including a net operating loss (NOL) shareholder rights’ plan, or stockholder proposals seeking modification or elimination of any existing shareholder rights’ plan.
Supermajority Voting
The Investment Manager generally will vote FOR the elimination or material diminution of provisions in company governing documents that require the affirmative vote of a supermajority of shareholders for approval of certain actions, and generally will vote AGAINST the adoption of any supermajority voting clause.
Control Share Acquisition Provisions
The Investment Manager generally will vote FOR proposals to opt out of control share acquisition statutes and will generally vote AGAINST proposals seeking approval of control share acquisition provisions in company governing documents on the grounds that such provisions may harm long-term share value by effectively entrenching management. The ability to buy shares should not be constrained by requirements to secure approval of the purchase from other shareholders.
Anti-Greenmail
The Investment Manager generally will vote FOR proposals to adopt anti-greenmail governing document amendments or to otherwise restrict a company’s ability to make greenmail payments.
Classification of Board of Directors
The Investment Manager generally will vote FOR proposals to declassify a board and AGAINST proposals to classify a board, absent special circumstances that would indicate that shareholder interests are better served by voting to the contrary.
Auditors
Ratify or Appoint Auditors
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which typically recommends votes FOR ratification or appointment except in situations where there are questions about the relative qualification of the auditors, conflicts of interest, auditor involvement in significant financial restatements, option backdating, material weaknesses in controls, or situations where independence has been compromised.
Prohibit or Limit Auditor’s Non-Audit Services
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which typically recommends votes AGAINST these proposals since it may be necessary or appropriate for auditors to provide a service related to the business of a company and that service will not compromise the auditors’ independence. In addition, Sarbanes-Oxley legislation spells out the types of services that need pre-approval or would compromise independence.
Indemnification of External Auditor
The Investment Manager will generally vote AGAINST proposals to indemnify external auditors on the grounds that indemnification agreements may limit pursuit of legitimate legal recourse against the audit firm.
Indemnification of Internal Auditor
The Investment Manager will generally vote FOR the indemnification of internal auditors, unless the costs associated with the approval are not disclosed.
Statement of Additional Information – October 3, 2016 B-6

 

Table of Contents
Social and Environmental
Disclose Environmental or Social Agenda
Proposals that seek disclosure, often in the form of a report, on items such as military contracts or sales, environmental or conservation initiatives, business relationships with foreign countries, animal welfare or other environmental and social issues, will be reviewed and, if after considering the proposal the Investment Manager believes the matter may bear on the long-term value creation or sustainability of the company, a vote FOR or AGAINST may be cast, otherwise the Investment Manager generally will ABSTAIN from voting.
Socially Responsible Investing
Proposals that seek to have a company take a position on social or environmental issues will be reviewed and, if after considering the proposal the Investment Manager believes the matter may bear on the long-term value creation or sustainability of the company, a vote FOR or AGAINST may be cast, otherwise the Investment Manager generally will ABSTAIN from voting.
Prohibit or Disclose Contributions and Lobbying Expenses
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which typically considers the proposal in the context of the company’s current disclosures, Federal and state laws, and whether the proposal is in shareholders’ best interests.
Disclose Prior Government Service
Proposals seeking a company to furnish a list of high-ranking employees who served in any governmental capacity over the last five years will be reviewed and, if after considering the proposal the Investment Manager believes the matter may bear on the long-term value creation or sustainability of the company, a vote FOR or AGAINST may be cast, otherwise the Investment Manager generally will ABSTAIN from voting.
Change in Operations or Products Manufactured or Sold
Proposals seeking to change the way a company operates (e.g., protect human rights, sexual orientation, stop selling tobacco products, move manufacturing operations to another country, etc.) will be reviewed and, if after considering the proposal the Investment Manager believes the matter may bear on the long-term value creation or sustainability of the company, a vote FOR or AGAINST may be cast, otherwise the Investment Manager generally will ABSTAIN from voting.
Executive Compensation Report
The Investment Manager generally will vote AGAINST proposals seeking companies to issue a report on linkages between executive compensation and financial, environmental and social performance on the grounds that executive compensation is a business matter for the company’s board to consider.
Pay Equity
The Investment Manager will generally vote AGAINST proposals seeking a cap on the total pay and other compensation of its executive officers to no more than a specified multiple of the pay of the average employee of the company.
Foreign Issues
Foreign Issues — Directors, Boards, Committees
Approve Discharge of Management (Supervisory) Board
The Investment Manager generally votes in accordance with recommendations made by its third party research provider, which typically recommends votes FOR approval of the board, based on factors including whether there is an unresolved investigation or whether the board has participated in wrongdoing. This is a standard request in Germany and discharge is generally granted unless a shareholder states a specific reason for withholding discharge and intends to take legal action.
Announce Vacancies on Management (Supervisory) Board
The Investment Manager generally will vote FOR proposals requesting shareholder approval to announce vacancies on the board, as is required under Dutch law.
Approve Director Fees
The Investment Manager generally votes in accordance with recommendations made by its third party research provider on proposals seeking approval of director fees.
Statement of Additional Information – October 3, 2016 B-7

 

Table of Contents
Foreign Issues — General Corporate Governance
Digitalization of Certificates
The Investment Manager generally will vote FOR proposals seeking shareholder approval to amend a company’s articles of incorporation to eliminate references to share certificates and beneficial owners, and to make other related changes to bring the articles in line with recent regulatory changes for Japanese companies.
Authorize Filing of Required Documents and Other Formalities
The Investment Manager generally will vote FOR proposals requesting shareholders authorize the holder of a copy of the minutes of the general assembly to accomplish any formalities required by law, as is required in France.
Propose Publications Media
The Investment Manager generally will vote FOR proposals requesting shareholders approve the designation of a newspaper as the medium to publish the company’s meeting notice, as is common in Chile and other countries.
Clarify Articles of Association or Incorporation
The Investment Manager generally will vote FOR proposals seeking shareholder approval of routine housekeeping of the company’s articles, including clarifying items and deleting obsolete items.
Update Articles of Association or Incorporation with Proxy Results
The Investment Manager generally will vote FOR proposals requesting shareholders approve changes to the company’s articles of association or incorporation to reflect the results of a proxy vote by shareholders, which is a routine proposal in certain country’s proxies.
Conform Articles of Association or Incorporation to Law or Stock Exchange
The Investment Manager generally will vote FOR proposals requesting shareholder approval to amend the articles of association or incorporation to conform to new requirements in local or national law or rules established by a stock exchange on which its stock is listed.
Authorize Board to Ratify and Execute Approved Resolutions
The Investment Manager generally will vote FOR proposals requesting shareholder approval to authorize the board to ratify and execute any resolutions approved at the meeting.
Prepare and Approve List of Shareholders
The Investment Manager generally votes FOR proposals requesting shareholder approval for the preparation and approval of the list of shareholders entitled to vote at the meeting, which is a routine formality in European countries.
Authorize Company to Engage in Transactions with Related Parties
The Investment Manager generally will vote FOR proposals requesting shareholder approval for the company, its subsidiaries, and target associated companies to enter into certain transactions with persons who are considered “interested parties” as defined in Chapter 9A of the Listing Manual of the Stock Exchange of Singapore (SES), as the SES related-party transaction rules are fairly comprehensive and provide shareholders with substantial protection against insider trading abuses.
Amend Articles to Lower Quorum Requirement for Special Business
The Investment Manager generally will vote on a CASE-BY-CASE basis on proposals seeking to amend the articles to lower the quorum requirement to one-third for special business resolutions at a shareholder meeting, which is common when certain material transactions such as mergers or acquisitions are to be considered by shareholders.
Change Date/Location of Annual Meeting
The Investment Manager will vote in accordance with the recommendation of the third-party research provider on proposals to change the date, time or location of the company’s annual meeting of shareholders.
Elect Chairman of the Meeting
The Investment Manager generally will vote FOR proposals requesting shareholder approval to elect the chairman of the meeting, which is a routine meeting formality in certain European countries.
Authorize New Product Lines
The Investment Manager generally will vote FOR proposals requesting shareholder approval to amend the company’s articles to allow the company to expand into new lines of business.
Statement of Additional Information – October 3, 2016 B-8

 

Table of Contents
Approve Financial Statements, Directors’ Reports and Auditors’ Reports
The Investment Manager generally will vote FOR proposals that request shareholder approval of the financial statements, directors’ reports, and auditors’ reports.
Foreign Issues — Compensation
Approve Retirement Bonuses for Directors/Statutory Auditors
The Investment Manager generally will ABSTAIN from voting on proposals requesting shareholder approval for the payment of retirement bonuses to retiring directors and/or statutory auditors, which is a standard request in Japan, because information to justify the proposal is typically insufficient.
Approve Payment to Deceased Director’s/Statutory Auditor’s Family
The Investment Manager generally will ABSTAIN from voting on proposals requesting shareholder approval for the payment of a retirement bonus to the family of a deceased director or statutory auditor, which is a standard request in Japan, because information to justify the proposal is typically insufficient.
Foreign Issues — Business Entity, Capitalization
Set or Approve the Dividend
The Investment Manager generally will vote FOR proposals requesting shareholders approve the dividend rate set by management.
Approve Allocation of Income and Dividends
The Investment Manager generally will vote FOR proposals requesting shareholders approve a board’s allocation of income for the current fiscal year, as well as the dividend rate.
Approve Scrip (Stock) Dividend Alternative
The Investment Manager generally will vote FOR proposals requesting shareholders authorize dividend payments in the form of either cash or shares at the discretion of each shareholder, provided the options are financially equal. The Investment Manager generally will vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.
Authorize Issuance of Equity or Equity-Linked Securities
The Investment Manager generally will vote FOR proposals requesting shareholder approval to permit the board to authorize the company to issue convertible bonds or other equity-linked debt instruments or to issue shares to satisfy the exercise of such securities.
Authorize Issuance of Bonds
The Investment Manager generally will vote FOR proposals requesting shareholder approval granting the authority to the board to issue bonds or subordinated bonds.
Authorize Capitalization of Reserves for Bonus Issue or Increase in Par Value
The Investment Manager generally will vote FOR proposals requesting shareholder approval to increase authorized stock by capitalizing various reserves or retained earnings, which allows shareholders to receive either new shares or a boost in the par value of their shares at no cost.
Increase Issued Capital for Rights Issue
The Investment Manager generally will vote FOR proposals requesting shareholder approval to increase issued capital in order to offer a rights issue to current registered shareholders, which provides shareholders the option of purchasing additional shares of the company’s stock, often at a discount to market value, and the company will use the proceeds from the issue to provide additional financing.
Board Authority to Repurchase Shares
The Investment Manager generally will vote FOR proposals requesting that a board be given the authority to repurchase shares of the company on the open market, with such authority continuing until the next annual meeting.
Authorize Reissuance of Repurchased Shares
The Investment Manager generally will vote FOR proposals requesting shareholder approval to reissue shares of the company’s stock that had been repurchased by the company at an earlier date.
Statement of Additional Information – October 3, 2016 B-9

 

Table of Contents
Approve Payment of Corporate Income Tax
The Investment Manager generally will vote FOR proposals seeking approval for the use by a company of its reserves in order to pay corporate taxes, which is common practice in Europe.
Cancel Pre-Approved Capital Issuance Authority
The Investment Manager generally will vote FOR proposals requesting shareholders cancel a previously approved authority to issue capital, which may be necessary in Denmark as companies there do not have authorized but unissued capital that they may issue as needed like their counterparts in other countries.
Allotment of Unissued Shares
The Investment Manager generally will vote FOR proposals requesting that shareholders give the board the authority to allot or issue unissued shares.
Authority to Allot Shares for Cash
The Investment Manager generally will vote FOR proposals requesting that shareholders give the board the ability to allot a set number of authorized but unissued shares for the purpose of employee share schemes and to allot equity securities for cash to persons other than existing shareholders up to a limited aggregate nominal amount (a percentage of the issued share capital of the company).
Foreign Issues – Defense Mechanisms
Authorize Board to Use All Outstanding Capital
The Investment Manager will vote on a CASE-BY-CASE basis on proposals requesting shareholders authorize the board, for one year, to use all outstanding capital authorizations in the event that a hostile public tender or exchange offer is made for the company, which is a common anti-takeover measure in France similar to the way U.S. companies use preferred stock.
Foreign Issues — Auditors
Approve Special Auditors’ Report
The Investment Manager generally will vote FOR proposals that present shareholders of French companies, as required by French law, with a special auditor’s report that confirms the presence or absence of any outstanding related party transactions. At a minimum, such transactions (with directors or similar parties) must be previously authorized by the board. This part of the French commercial code provides shareholders with a mechanism to ensure an annual review of any outstanding related party transactions.
Appoint Statutory Auditor
The Investment Manager generally will vote FOR proposals requesting shareholder approval to appoint the internal statutory auditor, designated as independent internal auditor as required by the revised Japanese Commercial Code.
Foreign Issues — Social and Environmental
Authorize Company to Make EU Political Organization Donations
The Investment Manager generally will ABSTAIN from voting on proposals that seek authorization for the company to make EU political organization donations and to incur EU political expenditures.
Statement of Additional Information – October 3, 2016 B-10

 

Table of Contents
APPENDIX C — DESCRIPTION OF STATE RISK FACTORS
The state tax-exempt and state municipal bond Funds invest primarily in municipal securities issued by a single state and political sub-divisions of that state. Each state tax-exempt and state municipal bond Fund will be particularly affected by political and economic conditions and developments in the state in which it invests. This exposure to factors affecting the state’s tax-exempt investments will be significantly greater than that of more geographically diversified funds, and may result in greater losses and volatility. Because of the relatively small number of issuers of tax-exempt securities in a given state, the Fund may invest a higher percentage of assets in a single issuer and, therefore, be more exposed to the risk of loss than a fund that invests more broadly. At times, the Fund and other accounts managed by the Investment Manager may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments. In addition, a Fund may focus on a segment of the tax-exempt debt market, such as revenue bonds for health care facilities, housing or airports. These investments may cause the value of a Fund’s shares to change more than the values of shares of funds that invest more diversely. The yields on the securities in which the Funds invest generally are dependent on a variety of factors, including among others, the financial condition of the issuer or other obligor, the revenue source from which the debt service is payable, general economic and monetary conditions, conditions in the relevant market, the size of a particular issue, the maturity of the obligation, and the rating of the issue. In addition to such factors, geographically concentrated securities will be particularly sensitive to local conditions, including political and economic changes, adverse conditions to an industry significant to the area, and other further developments within a particular locality. Because many tax-exempt bonds may be revenue or general obligations of local governments or authorities, ratings on tax-exempt bonds may be different from the ratings given to the general obligation bonds of a particular state.
Certain events may adversely affect investments within a particular sector in a state. Examples include litigation, legislation or court decisions, concerns about pending or contemplated litigation, legislation or court decisions, or lower demand for the services or products provided by a sector. Investing mostly in state-specific, tax-exempt investments makes the Funds more vulnerable to the relevant state’s economy and to factors affecting tax-exempt issuers in the state than would be true for more geographically diversified funds. These risks include, among others:
the inability or perceived inability of a government authority to collect sufficient tax or other revenues to meet its payment obligations;
natural disasters and ecological or environmental concerns;
the introduction of constitutional or statutory limits on a tax-exempt issuer’s ability to raise revenues or increase taxes;
the inability of an issuer to pay interest on or to repay principal or securities in which the funds invest during recessionary periods; and
economic or demographic factors that may cause a decrease in tax or other revenues for a government authority or for private operators of publicly financed facilities.
State Specific Information
The following discussion regarding certain economic, financial and legal matters pertaining to the states, U.S. territories and possessions referenced below, and their political subdivisions is drawn from the documents indicated below and does not purport to be a complete description or a complete listing of all relevant factors. More information about state specific risks may be available from other official state resources. The information has not been updated nor will it be updated during the year. The Funds have not independently verified any of the information contained in such documents and are not expressing any opinion regarding the completeness or materiality of such information. The information is subject to change at any time. Any such change may adversely affect the financial condition of the applicable state, U.S. territory or possession.
Estimates and projections, if any, contained in the following summaries should not be construed as statements of fact; such estimates and projections are based on assumptions that may be affected by numerous factors and there can be no assurance that such estimates and projections will be realized or achieved. Discussions regarding the financial condition of a particular state or U.S. territory or possession may not be relevant to Municipal Obligations issued by political subdivisions of that state or U.S. territory or possession. Moreover, the general economic conditions discussed may or may not affect issuers of the obligations of these states, U.S. territories or possessions.
Statement of Additional Information – October 3, 2016 C-1

 

Table of Contents
California
Unless otherwise noted, the following information has been obtained from the Official Statement, dated April 21, 2015, for the following bonds: $1,092,355,000 State of California Various Purpose General Obligation Bonds; $105,355,000 Federally Taxable Various Purpose General Obligation Bonds; and $987,000,000 Tax-Exempt Various Purpose General Obligation Refunding Bonds (collectively, the “California 2015 Bonds”).
Current Economic Condition.
The State of California (“California”) has the largest economy among the 50 states and one of the largest and most diverse in the world and has major components in high technology, trade, entertainment, agriculture, manufacturing, government, tourism, construction and services. The relative proportion of the various components of the California economy closely resembles the make-up of the national economy. The California economy continues to benefit from broad-based growth.
California is by far the most populous state in the nation, nearly 50% larger than the second-ranked state according to the 2010 U.S. Census. The 2014 estimate of California’s population is 38.5 million residents, which is 12% of the total United States population. Personal income increased in 16 of the 18 quarters through the third quarter of 2014, with decreases only in the fourth quarter of 2011 and the first quarter of 2013. The decrease in early 2013 was partially due to the expiration of the federal payroll tax holiday.
Employment gains averaged 30,000 jobs per month during the first six months of the 2014-15 fiscal year, and as of December 2014, nonfarm employment increased 2.3% over its June 2014 level. Job increases were spread across a wide array of industries and sectors, and by December 2014, 11 of California’s major metropolitan areas (representing 36% of California’s total labor market) had returned to their pre-recession job peaks. California’s unemployment rate continued to fall during the first six months of the 2014-15 fiscal year; by December 2014, it had receded to 7.0% from 7.4% in June 2014.
California’s began the first quarter of the 2014-15 fiscal year with a solid gain of 3.9% in total personal income compared with the prior quarter. Job gains, personal income increases, and low interest rates spurred a 9% increase in new auto registrations during the first four months of the 2014-15 fiscal year over the same period in prior fiscal years.
As California moved into the remaining months of the 2014-15 fiscal year, it appeared well positioned for further economic gains. Although challenged by an ongoing drought, economic and other instabilities abroad, and continuing budget pressures, California’s economy is clearly making progress on many fronts. The expected further growth in technology, health care, tourism, business and professional services, and construction all promise to deepen and broaden California’s economic expansion.
State Budget.
California’s 2014-15 Budget Act was enacted on June 20, 2014. The Budget Act appropriated $156.3 billion: $108.0 billion from the General Fund, $44.3 billion from special funds, and $4.0 billion from bond funds. The General Fund’s budgeted expenditures increased $7.3 billion (7.2%) over the previous year’s General Fund budget and included a $1.6 billion supplemental payment to pay of the remaining balance of the State’s prior deficit financing bonds, known as Economic Recovery bonds. The General Fund’s available resources were projected to be $105.5 billion, after a projected $1.6 billion transfer to the Budget Stabilization Account (Rainy Day Fund). General Fund revenue comes predominantly from trades, with personal income taxes expected to provide 65.6% of total revenue. California’s major taxes (personal income, sales and use, and corporation taxes) are projected to supply approximately 96.2% of the General Fund’s resources in the 2014-15 fiscal year.
The 2014-15 budget continued the Governor’s multi-year financial plan for the State of California, and for the third consecutive year, it projected a surplus in the General Fund. The 2014-15 fiscal year is projected to end with $2.1 billion in total reserves, $1.6 billion in the Budget Stabilization Account and $449 million reserved for economic uncertainties. The 2014-15 budget made targeted augmentations in a few key areas while paying down several billion dollars of existing liabilities, including California’s Economic Recovery bonds.
Budget-related legislation was enacted to erase the California State Teachers’ Retirement System (CalSTRS) $74 billion unfunded liability in 32 years by increasing contributions from the state, school and community college districts, and teachers. California is responsible for approximately $20 billion of the unfunded liability. The 2014-15 budget provided $1.5 billion in state contributions to CalSTRS, of which $59 million will be used toward reducing the state’s share of the unfunded liability.
Despite the recent significant budgetary improvements as well as the progress in paying down certain liabilities, there remain a number of major risks and pressures that threaten California’s financial condition, including the need to continue to pay remaining obligations which were deferred to balance budgets during the economic downturn, as well as significant unfunded liabilities of the two main retirement systems managed by state entities, CalPERS and CalSTRS.
Statement of Additional Information – October 3, 2016 C-2

 

Table of Contents
Real Estate and Housing.
After hitting a low of close to 200,000 units (seasonally-adjusted and annualized) in the middle of 2007, sales of existing single-family homes have rebounded to over 360,000 units annually. Home prices continued to climb in 2013 and 2014 reaching levels not seen in more than five years. The median price of existing, single-family homes sold in December 2014 was $452,570. However, this remains 24% below the pre-recession peak. California issued 83,000 residential building permits in 2013, 42.6% percent more than were issued in 2012 but still only 39% of the 213,000 permits issued in 2004. There were 86,000 permits issued in 2014, an increase of 4% over 2013. These remain mostly permits for multi-family structures.
Long-Term Debt.
As of January 1, 2015, California had outstanding obligations payable principally from the state’s General Fund or from lease payments paid from the operating budget of the respective lessees, which operating budgets are primarily, but not exclusively, derived from the General Fund, consisting of $76.7 billion principal amount of general obligation bonds and $11.1 billion of lease-revenue bonds. As of January 1, 2015, there was approximately $31.1 billion of authorized and unissued long-term voter-approved general obligation bonds which, when issued, would be payable principally from the General Fund and approximately $3.89 billion of authorized and unissued lease-revenue bonds.
Certain state agencies and authorities issue revenue obligations for which the General Fund has no liability. Revenue bonds represent obligations payable from state revenue-producing enterprises and projects, which are not payable from the General Fund, and conduit obligations payable only from revenues paid by local governments or private users of facilities financed by the revenue bonds. California has always paid when due the principal of and interest on its general obligation bonds, general obligation commercial paper notes, lease-revenue obligations and short-term obligations, including revenue anticipation notes and revenue anticipation warrants.
Bond Ratings.
Three major credit rating agencies, Moody’s Investors Service, Inc. (“Moody’s”), Standard and Poor’s Ratings Services (“S&P”), and Fitch Ratings (“Fitch”), assigned ratings to the California 2015 Bonds, as follows: Moody’s assigned a rating of “Aa3”, S&P assigned a rating of “A+”, and Fitch assigned a rating of “A+”. It is not possible to determine whether, or the extent to which, Moody’s, S&P, or Fitch will change its respective rating in the future. In addition, ratings assigned to individual Municipal Obligations vary.
Connecticut
The following information has been obtained from the Annual Information Statement of the State of Connecticut, dated February 28, 2014, as supplemented on November 21, 2014.
Current Economic Condition.
The State of Connecticut (“Connecticut”) is a highly developed and urbanized state. It is situated directly between the financial centers of Boston and New York.
Connecticut’s economic performance is measured by personal income, which has been among the highest in the nation on a per capital basis, and gross state product (the market value of all final goods and services produced by labor and property located within Connecticut). Connecticut’s nonagricultural employment reached a high in March 2008 with 1,712,700 persons employed, but began declining with the onset of the recession, falling to 1,591,800 jobs by February 2010, and has since risen to 1,650,700 by October 2013.
After enjoying an extraordinary boom during the late 1990s, Connecticut, as well as the rest of the Northeast and the country, experienced an economic slowdown during the recession of the early 2000s. The state’s unemployment rate climbed to 9.3% in 2010, compared to the New England average of 8.5% and the national average of 9.6% for the same period. During the subsequent weak recovery, Connecticut’s average unemployment rate fell to 8.3% for 2012, and for the first ten months of 2013 has averaged 8.0%, compared to the New England average of 7.1% and the national average of 7.5% for the same period.
State Budget.
Connecticut finances most of its operations through its General Fund. Certain state functions, such as Connecticut’s transportation budget, are financed through other state funds. General Fund revenues are derived primarily from the collection of state taxes, including the personal income tax, the sales and use tax and the corporation business tax. Connecticut expected to derive approximately 83.4 percent and 85.8 percent of its General Fund revenues from taxes during fiscal year 2014 and fiscal year 2015, respectively. Connecticut expends money on a variety of programs and services. Significant elements of state expenditures include human services; education, libraries and museums; non-functional (debt service and miscellaneous expenditures including fringe benefits); health and hospitals; corrections; general government and judicial.
Statement of Additional Information – October 3, 2016 C-3

 

Table of Contents
On May 29, 2014, the General Assembly passed legislation necessary to implement certain budget and policy changes reflected in the budget for fiscal year 2015. Based upon the consensus revenue estimate issued on April 30, 2014, revenues are anticipated to be $17,458.1 million, expenditures are anticipated to be $17,457.7 million, and the revised budget is estimated to result in a General Fund surplus of $0.4 million for fiscal year 2015. The revised fiscal year 2015 budget includes policy changes that are projected to result in approximately $55.2 million in additional revenue above the consensus revenue forecast.
State Debt.
Pursuant to various public and special acts Connecticut has authorized a variety of types of debt. These types fall generally into the following categories: direct general obligation debt, which is payable from Connecticut’s General Fund; special tax obligation debt, which is payable from specified taxes and other funds that are maintained outside Connecticut’s General Fund; and special obligation and revenue debt, which is payable from specified revenues or other funds that are maintained outside Connecticut’s General Fund. In addition, Connecticut has a number of programs under which the state provides annual appropriation support for, or is contingently liable on, the debt of certain state quasi-public agencies and political subdivisions.
Statutory Debt Limit. Section 3-21 of the General Statutes provides that no bonds, notes or other evidences of indebtedness for borrowed money payable from General Fund tax receipts of Connecticut may be authorized by the General Assembly or issued unless they do not cause the aggregate amount of (1) the total amount of bonds, notes or other evidences of indebtedness payable from General Fund tax receipts authorized by the General Assembly but which have not been issued and (2) the total amount of such indebtedness that has been issued and remains outstanding, to exceed 1.6 times the total estimated General Fund tax receipts of Connecticut for the fiscal year in which any such authorization will become effective or in which such indebtedness is issued, as estimated for such fiscal year by the joint standing committee of the General Assembly having cognizance of finance, revenue and bonding. In computing the aggregate amount of indebtedness at any time, however, a significant number of exclusions apply.
Transportation Fund and Debt. In 1984, Connecticut adopted legislation establishing a transportation infrastructure program and authorizing special tax obligation (“STO”) bonds to finance the program. The transportation infrastructure program is a continuous program for planning, construction and improvement of Connecticut highways and bridges, projects on the interstate highway system, alternate highway projects in the interstate highway substitution program, waterway facilities, mass transportation and transit facilities, the highway safety program, maintenance garages and administrative facilities of the Department of Transportation, payment of Connecticut’s share of the costs of the local bridge program, and payment of state contributions to the local bridge revolving fund. The transportation infrastructure program is administered by the Department of Transportation.
The cost of the transportation infrastructure program for state fiscal years 1985-2018, which will be met from federal, state and local funds, is estimated at $31.8 billion. Connecticut’s share of such cost, estimated at $14.1 billion, is to be funded from transportation- related taxes, fees and revenues deposited in the Special Transportation Fund and from the proceeds of STO bonds.
Certain Pension and Retirement Systems.
State Employees’ Retirement Fund . Connecticut maintains a State Employees’ Retirement Fund with approximately 49,269 active members, 1,495 inactive (vested) members and 43,659 retired members and beneficiaries as of June 30, 2013. Payments into the fund are made from employee contributions, General and Special Transportation Fund appropriations and grant reimbursements from Federal and other funds.
As of June 30, 2014, the market value of the fund’s investment assets was estimated to be $10,472.6 million. The November 2014 actuarial valuation determined that employer contributions of $1,514.5 million and $1,569.1 million would be required for fiscal year 2016 and fiscal year 2017, respectively. Such amounts will be considered for appropriation in the Fiscal Year 2016-2017 biennium.
Teachers’ Retirement Fund. The Teachers’ Retirement Fund, administered by the Teachers’ Retirement Board, provides benefits for any teacher, principal, supervisor, superintendent or other eligible employee in the public school systems of Connecticut, with certain exceptions. While establishing salary schedules for teachers, municipalities do not provide contributions to the maintenance of the fund. As of June 30, 2013, there were 66,015 active and former employees with accrued and accruing benefits, 33,037 retired members and beneficiaries, and 252 members on disability allowance. Contributions to the fund are made by employees and by General Fund appropriations from Connecticut.
As of June 30, 2014, the market value of the fund’s investment assets was $16,220.9 million. The October 2014 actuarial valuation determined that employer contributions of $975.6 million and $1,012.2 million would be required for fiscal year 2016 and fiscal year 2017. Such amounts will be considered for appropriation in the Fiscal Year 2016-2017 biennium.
Statement of Additional Information – October 3, 2016 C-4

 

Table of Contents
Bond Ratings.
Three major credit rating agencies, Moody’s Investors Service, Inc. (“Moody’s”), Standard and Poor’s Ratings Services (“S&P”) and Fitch Ratings (“Fitch”), assign ratings to the Connecticut’s long-term general obligation bonds. As of November 2014, Connecticut’s general obligation bonds were rated Aa3 by Moody’s, AA by S&P and AA by Fitch. It is not possible to determine whether, or the extent to which, Moody’s, S&P or Fitch will change such ratings in the future. Ratings assigned to individual Municipal Obligations vary.
Massachusetts
The following information has been obtained from The Commonwealth of Massachusetts Information Statement, dated November 7, 2014.
Current Economic Condition and Government Structure.
The ability of the Commonwealth of Massachusetts (“Massachusetts”) to meet its financial obligations is affected by the legislative policies and financial condition of Massachusetts, as well as by general social, environmental and economic conditions, many of which are not within the Commonwealth’s control.
Massachusetts has established a number of independent authorities and agencies, the budgets of which are not included in the Commonwealth’s annual budget. In fiscal 2013, Massachusetts had significant operational or financial relationships with certain of these authorities, such as the Massachusetts Development Finance Agency, the Massachusetts Department of Transportation (MassDOT) and the Massachusetts Water Pollution Abatement Trust. The Commonwealth’s contractual agreements with these authorities constitute general obligations of Massachusetts for which its full faith and credit are pledged. Massachusetts also guarantees certain outstanding bonds of two authorities, the Massachusetts State College Building Authority and the University of Massachusetts Building Authority. The ratings of these independent authorities are based on the guarantee of Massachusetts and generally can be expected to move in tandem with ratings on the Massachusetts general obligation debt.
In addition, a portion of Massachusetts sales tax receipts is dedicated through trust funds to the Massachusetts Bay Transportation Authority (MBTA) and the Massachusetts School Building Authority (MSBA). The amount dedicated to the MBTA is the amount raised by a 1% sales tax (not including meals), with an inflation-adjusted floor (the “base revenue amount”). A comparable amount, though without the floor, is dedicated to the MSBA beginning in fiscal 2010, with lesser amounts dedicated to the MSBA from fiscal 2005 through fiscal 2009. Legislation approved by the Governor of Massachusetts on October 31, 2014 increased the amount of dedicated sales tax receipts and the base revenue amount statutorily required to be credited to the MBTA by $160 million starting in fiscal 2015. The $160 million increase in the dedicated sales tax receipts and the base revenue amount replaces the $160 million annual state appropriation the MBTA received from fiscal 2010 through fiscal 2014 and the $160 million now included in the base revenue amount will increase annually with inflation. Massachusetts also has a net liability of $6.036 billion in debt and grant obligations for the school building assistance program that finances construction of schools for Massachusetts’s cities and towns.
Population and Employment . Massachusetts has a population of about 6.5 million as of the 2010 Census, a little more than 2% of the total United States population. As of November 2014, Massachusetts unemployment stands at 6.0 percent, just slightly higher than the national rate of 5.9 percent.
Commonwealth Budget.
The budgeted operating funds of Massachusetts ended fiscal 2014 with a deficit of revenues and other sources over expenditures and other uses of $423.8 million and aggregate ending fund balances in the budgeted operating funds of Massachusetts of approximately $1.45 billion. The budgeted operating funds of Massachusetts are projected to end fiscal 2015 with a deficiency of revenues and other sources over expenditures and other uses of $167 million and aggregate ending fund balances in the budgeted operating funds of Massachusetts of approximately $1.25 billion.
Growth of tax revenues is limited by law in Massachusetts to the average positive rate of growth in total wages and salaries in Massachusetts, as reported by the federal government, during the three calendar years immediately preceding the end of such fiscal year. The law also requires that allowable state tax revenues be reduced by the aggregate amount received by local governmental units from any newly authorized or increased local option taxes or excises. Any excess in state tax revenue collections for a given fiscal year over the prescribed limit, as determined by the State Auditor, must be applied as a credit against the then current personal income tax liability of all taxpayers in Massachusetts in proportion to the personal income tax liability of all taxpayers in Massachusetts for the immediately preceding tax year.
Legislation enacted in December 1989 imposes a limit on the amount of outstanding “direct” bonds of Massachusetts. The bond cap for fiscal 2015 is expected to be $2.125 billion. The bond cap for fiscal 2016 through fiscal 2019 is projected to be $2.250 billion.
Statement of Additional Information – October 3, 2016 C-5

 

Table of Contents
Massachusetts is also responsible for the payment of pension benefits for Commonwealth employees and for teachers of the cities, towns and regional school districts throughout Massachusetts. Massachusetts employees’ and teachers’ retirement systems are partially funded by employee contributions of regular compensation. In September 2014, Massachusetts issued a valuation, as of January 1, 2014, of its total pension obligation. The unfunded actuarial accrued liability was calculated to be $29.043 billion.
Local Considerations.
Massachusetts makes substantial payments to its cities, towns and regional school districts (local aid) to mitigate the impact of local property tax limits on local programs and services. Local aid payments to cities, towns and regional school districts take the form of both direct and indirect assistance. Direct local aid consists of general revenue sharing funds and specific program funds sent directly to local governments and regional school districts. For fiscal 2015, expenditures for direct local aid are projected to total $5.35 billion.
Transportation.
The Central Artery/Ted Williams Tunnel Project was substantially completed in January 2006 at a cost of nearly $15 billion. In 2007, the Transportation Finance Commission, established by state legislation in 2004, anticipated a funding gap of between $15 billion and $19 billion over the next 20 years, related to maintaining Massachusetts’s transportation system for that time period. On June 30, 2009, Massachusetts entered into a contract for financial assistance which provides for the payment to MassDOT of $100 million per fiscal year, commencing July 1, 2009 until June 30, 2039. Payments under the contract constitute general obligations of Massachusetts for which its full faith and credit are pledged.
On January 14, 2013, MassDOT released a detailed analysis of the infrastructure needs of the Commonwealth’s transportation system, including a 25-year long-term financial plan outlining investments that MassDOT believes necessary to improve economic development and quality of life across Massachusetts. The plan identifies a $1.02 billion average additional investment needed each year to maintain and stabilize the system that currently exists as well as to fund new transportation projects that would create a 21st-century transportation network. MassDOT estimates that the cost associated with the borrowing for this 25-year program will increase to $518 million by fiscal 2023 as more projects enter construction.
Bond Ratings.
Three major credit rating agencies, Moody’s Investors Service, Inc. (“Moody’s”), Standard and Poor’s Ratings Services (“S&P”) and Fitch Ratings (“Fitch”), assign ratings to Massachusetts long-term general obligation bonds. Massachusetts’s general obligation bonds have been assigned long-term ratings of “Aa1” by Moody’s Investors Service, Inc., “AA+” by Standard & Poor’s Ratings Services and “AA+” by Fitch. It is not possible to determine whether, or the extent to which, Moody’s, S&P or Fitch will change such ratings in the future. Ratings assigned to individual Municipal Obligations vary.
New York
The following information has been obtained from the Annual Information Statement of the State of New York, dated June 11, 2014, as supplemented on November 24, 2014.
Current Economic Condition.
The State of New York (“New York”) boasts the third-largest economy among the 50 states. The most recent economic data indicate that the pace of New York employment growth remains healthy, and New York’s Division of the Budget forecasts personal income growth to be at 5.0 percent for 2014 and 4.9 percent for 2015. However, New York is subject to many of the same downside risks that apply to the national economy, including slowing global growth and the European sovereign debt crisis. As the nation’s financial capital, New York is also especially sensitive to credit and equity market volatility, which poses additional uncertainty for New York’s fiscal condition.
In its report from June 2014 (updated through November 2014), New York’s Division of the Budget noted that tax receipts through September 2014 were 0.6 percent below levels in the prior fiscal year, which largely reflects lower personal income tax collections due to a reduction in extension payments. After controlling for the impact of tax law changes, base tax revenue is expected to grow by 3.2 percent for fiscal year 2015 and 5.1 percent for fiscal year 2016.
However, weak and unsettled economic conditions around the world, together with a push for broader regulation of the financial environment, have the potential to negatively affect the profitability of New York’s financial services industry, which is a major source of New York tax revenue. In particular, market volatility and increased regulation may result in lower bonuses on Wall Street in the future, which in turn may reduce a major segment of income subject to taxation and depress the level of economic activity generated by the spending of those earnings. Similarly, both financial sector income and taxable capital gains realization may be negatively affected if equity markets fail to grow as anticipated.
Population and Employment. New York ranks third among the 50 states in terms of population. According to the 2010 U.S. Census, New York’s 2010 population was 19.4 million, an increase from 19 million in 2000.
Statement of Additional Information – October 3, 2016 C-6

 

Table of Contents
As of March 2014, New York’s Division of the Budget anticipated a state unemployment rate of 6.9 percent for 2014, compared with a national unemployment rate of 6.5 percent. Total state nonagricultural employment grew by 1.6 percent in 2014 and was projected to grow by 1.4 percent in 2015. Private sector employment grew by 2.0 percent in 2014 and was projected to grow by 1.7 percent in 2015.
State Budget.
New York’s budget process is governed by the New York constitution, with additional details and actions prescribed by New York law and practices established over time. The New York constitution requires the Governor to submit a budget that is balanced on a cash basis in the General Fund, which receives the majority of New York taxes and all income not earmarked for a particular program or activity.
New York receives revenues from taxes, fees, charges for state-provided services, Federal grants, and other miscellaneous sources. General Fund receipts, including transfers from other funds, are estimated to total $67.8 billion in fiscal year 2015, an increase of $4.8 billion from the enacted budget financial plan. While modest economic growth is projected for fiscal year 2015, total tax receipts are estimated to decrease by 0.2 percent after taking into account the acceleration of certain income tax refunds into fiscal year 2014.
New York expends money on a variety of programs and services. Major categories of operating disbursements include healthcare and Medicaid, higher education (including subsidization of the State University of New York and City University of New York systems), criminal justice and public safety, school aid, transportation, and mental hygiene programs. General Fund spending is expected to total $63.2 billion in fiscal year 2015, an increase of 3.1 percent over the prior year and an increase of $29 million from the enacted budget financial plan. Spending in State Operating Funds is expected to grow by 1.8 percent for fiscal year 2015, which adheres to the 2 percent spending benchmark adopted in fiscal year 2012.
New York is also responsible for the payment of pension benefits for public employees. As a result of investment gains that positively affected the assets held by New York’s retirement systems, employer contribution rates decreased for fiscal years 2015 and 2016.
Based on the current economic outlook, New York’s Division of the Budget estimates that New York will end fiscal year 2015 with a General Fund closing balance of $6.8 billion, an increase of $4.8 billion from the enacted budget financial plan.
Implementation of New York’s current financial plan is dependent on the state’s ability to market its bonds successfully. New York finances much of its capital spending from the General Fund, which it reimburses with proceeds from the sale of general obligation or other state-supported bonds. New York’s inability to sell bonds at the levels or on the timetable expected may adversely affect the state’s overall cash position and capital funding plan. The success of projected public sales will be dependent on prevailing market conditions.
Local Considerations.
New York’s fiscal demands may be affected by the fiscal condition of New York City, which relies in part on state aid to balance its budget and meet its cash requirements. In addition, certain localities outside New York City have experienced financial problems and have received state assistance during the last several state fiscal years. While a relatively infrequent practice, deficit financing has become more common in recent years.
Local assistance grants include payments to local governments, school districts, health care providers, and other local entities, as well as financial assistance to, or on behalf of, individuals, families, and nonprofit organizations. Expenditures in the form of aid to local governments for their general purposes (and to school districts and municipalities for specific purposes such as education and social services) are made from New York’s General Fund. These payments are limited under the New York constitution to appropriations in force. Local assistance spending is estimated to comprise 66 percent of total operating funds spending for fiscal year 2015.
Debt Service.
New York pays debt service on all outstanding state-supported bonds. These include general obligation bonds, for which New York is constitutionally obligated to pay debt service, as well as bonds issued by New York public authorities. Public authorities refer to certain of New York’s public benefit corporations — such as the Empire State Development Corporation and the New York State Thruway Authority — which are not subject to the constitutional restrictions on the incurrence of debt that apply to New York itself and may issue bonds and notes within the amounts and restrictions set forth in legislative authorization. New York’s access to the public credit markets could be impaired and the market price of its outstanding debt may be materially and adversely affected if its public authorities were to default on their respective obligations.
Total debt service is projected to be $5.65 billion for fiscal year 2015, of which $1.08 billion is expected to be paid from the General Fund for general obligations and service contract bonds, and $4.57 billion of which is expected to service other state-supported bonds.
Statement of Additional Information – October 3, 2016 C-7

 

Table of Contents
The Debt Reform Act of 2000 restricts the issuance of state-supported debt to capital purposes only and limits such debt to a maximum term of 30 years. Under the Debt Reform Act, new state-supported debt issued since April 1, 2000 is limited to 4 percent of state personal income, while new debt service costs are limited to 5 percent of all Funds receipts.
Impact of Hurricane Sandy.
In October 2012, a powerful storm known as “Hurricane Sandy” struck portions of the Northeast, causing severe and widespread damage along the Atlantic seaboard. $60 billion in Federal disaster aid has been approved by the Federal Government. New York, which was particularly hard hit by Hurricane Sandy, expects to receive about half of this amount in total, but it cannot be guaranteed that New York will receive the full amount or that the Federal government will provide the disaster aid to New York on the expected schedule. Federal aid to New York was estimated at $1.2 billion in fiscal year 2014 and $1.5 billion in fiscal year 2015.
Bond Ratings.
As of July 2014, New York’s general obligation bonds were rated “Aa1” by Moody’s Investors Service, Inc. (“Moody’s”), “AA+” by Standard & Poor’s Ratings Services (“S&P”), and “AA+” by Fitch Ratings (“Fitch”). It is not possible to determine whether, or the extent to which, Moody’s, S&P or Fitch will change such ratings in the future. Ratings assigned to individual Municipal Obligations may vary.
Statement of Additional Information – October 3, 2016 C-8

 

Table of Contents
APPENDIX D — SERIES OF CFST, CFST I AND CFST II
Below are the series of CFST, CFST I and CFST II. In prospectuses dated prior to June 25, 2014, series of CFST and CFST I are referred to as “Legacy Columbia Funds” and series of CFST II are referred to as “Legacy RiverSource Funds”.
Columbia Funds Series Trust
Columbia AMT-Free California Intermediate Muni Bond Fund
Columbia AMT-Free Georgia Intermediate Muni Bond Fund
Columbia AMT-Free Maryland Intermediate Muni Bond Fund
Columbia AMT-Free North Carolina Intermediate Muni Bond Fund
Columbia AMT-Free South Carolina Intermediate Muni Bond Fund
Columbia AMT-Free Virginia Intermediate Muni Bond Fund
Columbia Capital Allocation Moderate Aggressive Portfolio
Columbia Capital Allocation Moderate Conservative Portfolio
Columbia Convertible Securities Fund
Columbia Global Strategic Equity Fund
Columbia Large Cap Enhanced Core Fund
Columbia Large Cap Growth Fund II
Columbia Large Cap Growth Fund III
Columbia Large Cap Growth Fund V
Columbia Large Cap Index Fund
Columbia Mid Cap Index Fund
Columbia Mid Cap Value Fund
Columbia Overseas Value Fund
Columbia Select Global Growth Fund
Columbia Select International Equity Fund
Columbia Select Large Cap Equity Fund
Columbia Short Term Bond Fund
Columbia Short Term Municipal Bond Fund
Columbia Small Cap Index Fund
Columbia Small Cap Value Fund II
Columbia Funds Series Trust I
Active Portfolios ® Multi-Manager Alternatives Fund
Active Portfolios ® Multi-Manager Directional Alternatives Fund
Active Portfolios ® Multi-Manager Growth Fund
Active Portfolios ® Multi-Manager Small Cap Equity Fund
Active Portfolios ® Multi-Manager Total Return Bond Fund
CMG Ultra Short Term Bond Fund
Columbia Adaptive Risk Allocation Fund
Columbia Alternative Beta Fund
Columbia AMT-Free Connecticut Intermediate Muni Bond Fund
Columbia AMT-Free Intermediate Muni Bond Fund
Columbia AMT-Free Massachusetts Intermediate Muni Bond Fund
Columbia AMT-Free New York Intermediate Muni Bond Fund
Columbia AMT-Free Oregon Intermediate Muni Bond Fund
Columbia Balanced Fund
Columbia Bond Fund
Columbia California Tax-Exempt Fund
Columbia Contrarian Core Fund
Columbia Corporate Income Fund
Columbia Disciplined Small Core Fund
Columbia Diversified Absolute Return Fund
Columbia Diversified Real Return Fund
Columbia Dividend Income Fund
Columbia Emerging Markets Fund
Columbia Global Dividend Opportunity Fund
Columbia Global Energy and Natural Resources Fund
Columbia Global Technology Growth Fund
Columbia Greater China Fund
Columbia High Yield Municipal Fund
Columbia Large Cap Growth Fund
Columbia Mid Cap Growth Fund
Columbia Multi-Asset Income Fund
Columbia New York Tax-Exempt Fund
Columbia Pacific/Asia Fund
Columbia Real Estate Equity Fund
Columbia Select Large Cap Growth Fund
Columbia Small Cap Growth Fund I
Columbia Small Cap Value Fund I
Columbia Strategic Income Fund
Columbia Tax-Exempt Fund
Columbia Total Return Bond Fund
Columbia U.S. Social Bond Fund
Columbia U.S. Treasury Index Fund

Columbia Funds Series Trust II
Active Portfolios ® Multi-Manager Value Fund
Columbia Absolute Return Currency and Income Fund
Columbia Asia Pacific ex-Japan Fund
Columbia Capital Allocation Aggressive Portfolio
Columbia Capital Allocation Conservative Portfolio
Columbia Capital Allocation Moderate Portfolio
Columbia Commodity Strategy Fund
Columbia Disciplined Core Fund
Columbia Disciplined Growth Fund
Columbia Disciplined Value Fund
Columbia Diversified Equity Income Fund
Columbia Dividend Opportunity Fund
Columbia Emerging Markets Bond Fund
Columbia European Equity Fund
Columbia Flexible Capital Income Fund
Columbia Floating Rate Fund
Columbia Global Bond Fund
Columbia Global Equity Value Fund
Columbia Global Infrastructure Fund
Columbia Global Opportunities Fund
Columbia Government Money Market Fund
Columbia High Yield Bond Fund
Columbia Income Builder Fund
Columbia Income Opportunities Fund
Columbia Inflation Protected Securities Fund
Columbia Limited Duration Credit Fund
 
 
Statement of Additional Information – October 3, 2016 D-1

 

Table of Contents
Columbia Minnesota Tax-Exempt Fund
Columbia Mortgage Opportunities Fund
Columbia Select Global Equity Fund
Columbia Select Large-Cap Value Fund
Columbia Select Smaller-Cap Value Fund
Columbia Seligman Communications and Information Fund
Columbia Seligman Global Technology Fund
Columbia Short-Term Cash Fund
Columbia Small/Mid Cap Value Fund
Columbia Strategic Municipal Income Fund
Columbia U.S. Government Mortgage Fund
Statement of Additional Information – October 3, 2016 D-2

 

Table of Contents
APPENDIX S — MORE INFORMATION ABOUT CHOOSING A SHARE CLASS
Class Y — Changes to Share Class Eligibility
Effective June 25, 2014, Class Y shares of the Funds are available to any retirement plan that maintains a plan-level or omnibus account with the Fund (through the Transfer Agent).
Prior to June 25, 2014, Class Y shares of a Fund were available only to (i) omnibus retirement plans with plan assets of at least $10 million as of the date of funding the Fund account (without a minimum initial investment amount) and (ii) omnibus retirement plans with plan assets of less than $10 million as of the date of funding the Fund account, provided that such plans invest $500,000 or more in Class Y shares of the Fund. Effective June 25, 2014, these size and minimum initial investment requirements have been removed.
Prior to November 8, 2012, Class Y shares were offered only to certain former shareholders of series of the former Columbia Funds Institutional Trust (together, Former CFIT Shareholders). Former CFIT Shareholders who opened and funded a Class Y account with a Fund as of the close of business on November 7, 2012 may continue to make additional purchases of Class Y shares even if they do not satisfy the current eligibility requirements but may not establish new Class Y shares accounts and will not be eligible to exchange Class Y shares of a Fund into Class Y shares of other Funds. Former CFIT Shareholders may exchange Class Y shares of a Fund for Class Z shares of the same Fund or Class Z shares of another Fund, subject to applicable minimum investments.
Changes to Share Class Names
Effective October 25, 2012, Class R4 shares were renamed Class K shares. Effective October 31, 2012, Class R3 shares were renamed Class R4 shares. Prior to September 3, 2010, any Class R shares of a series of CFST II were known as Class R2 shares.
Front-End Sales Charge Reductions — Accounts Eligible for Aggregation
The following accounts are eligible for account value aggregation for purposes of the right of accumulation (ROA) and letters of intent (LOI) as described in the prospectuses offering share classes subject to a front-end sales charge:
Individual or joint accounts;
Roth and traditional Individual Retirement Accounts (IRAs), Simplified Employee Pension accounts (SEPs), Savings Investment Match Plans for Employees of Small Employers accounts (SIMPLEs) and Tax Sheltered Custodial Accounts (TSCAs);
Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors (UTMA) accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child;
Revocable trust accounts for which you or an immediate family member, individually, is the beneficial owner/grantor;
Accounts held in the name of your, your spouse’s, or your domestic partner’s sole proprietorship or single owner limited liability company or S corporation;
Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan; and
Investments in wrap accounts;
provided that each of the accounts identified above is invested in Class A, Class B, Class C, Class E, Class F, Class T, Class W, Class Z shares of the Funds and/or Class R4 or Class R5 shares of the Funds invested in non-retirement plan accounts. The term “retirement plan” refers to retirement plans created under sections 401(a), 401(k), 457 and 403(b) of the Internal Revenue Code of 1986, as amended (the Code), non-qualified deferred compensation plans governed by section 409A of the Code and similar plans, but does not refer to individual retirement plans.
The following accounts are not eligible for account value aggregation:
Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts);
Accounts invested in Class I, Class K, Class R and/or Class Y shares of the Funds;
Retirement plan accounts invested in Class R4 and/or Class R5 shares;
Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, or managed separate accounts;
Statement of Additional Information – October 3, 2016 S-1

 

Table of Contents
Charitable and irrevocable trust accounts;
Accounts holding shares of money market Funds that used the Columbia brand before May 1, 2010; and
Direct purchases of Columbia Government Money Market Fund shares. (Shares of Columbia Government Money Market Fund acquired by exchange from other Funds may be combined for letter of intent purposes.)
Your “Immediate Family” and Account Value Aggregation
For purposes of obtaining a breakpoint discount for Class A shares or Class T shares the value of your account will be deemed to include the value of all applicable shares in eligible Fund accounts that are held by you and your “immediate family,” which includes your spouse, domestic partner, parent, step-parent, legal guardian, child under 21, step-child under 21, father-in-law and mother-in-law, provided that you and your immediate family members share the same mailing address. Any Fund accounts linked together for account value aggregation purposes as of the close of business on September 3, 2010 will be permitted to remain linked together. Group plan accounts are valued at the plan level.
You must request the reduced sales charge (whether through ROA or an LOI) when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. To obtain a breakpoint discount, you must notify your Selling Agent in writing at the time you buy your shares of each eligible account maintained by you and members of your immediate family, including accounts maintained through different Selling Agents. You and your Selling Agent are responsible for ensuring that you receive discounts for which you are eligible. The Fund is not responsible for a Selling Agent's failure to apply the eligible discount to your account. You may be asked by your Selling Agent (or by the Fund if you hold your account directly with the Fund) for account statements or other records to verify your discount eligibility for new and subsequent purchases, including, when applicable, records for accounts opened with a different Selling Agent and records of accounts established by members of your immediate family.
Sales Charge Waivers
Front-End Sales Charge Waivers
The following categories of investors may buy Class A, Class E and Class T shares at net asset value, without payment of any front-end sales charge that would otherwise apply:
Current or retired fund Board members, officers or employees of the funds or Columbia Management or its affiliates (a) ;
Current or retired Ameriprise Financial Services, Inc. (Ameriprise Financial Services) financial advisors and employees of such financial advisors (a) ;
Registered representatives and other employees of affiliated or unaffiliated Selling Agents (and their immediate family members and related trusts or other entities owned by the foregoing) having a selling agreement with the Distributor (a) ;
Registered broker-dealer firms that have entered into a dealer agreement with the Distributor may buy Class A shares without paying a front-end sales charge for their investment account only;
Portfolio managers employed by subadvisers of the funds (a) ;
Partners and employees of outside legal counsel to the funds or the funds’ directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees;
Direct rollovers ( i.e. , rollovers of fund shares and not reinvestments of redemption proceeds) from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund;
Employees of Bank of America, its affiliates and subsidiaries;
Employees or partners of Columbia Wanger Asset Management, LLC and Marsico Capital Management, LLC (or their successors);
(For Class T shares only) Shareholders who (i) bought Galaxy fund Retail A shares at net asset value and received Class T shares in exchange for those shares during the Galaxy/Liberty fund reorganization; and (ii) continue to maintain the account in which the Retail A shares were originally bought; and Boston 1784 fund shareholders on the date that those funds were reorganized into Galaxy funds;
Separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11);
At a fund’s discretion, front-end sales charges may be waived for shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the fund is a party;
Statement of Additional Information – October 3, 2016 S-2

 

Table of Contents
In the Distributor’s discretion, on (i) purchases (including exchanges) of Class A shares in accounts of Selling Agents that have entered into agreements with the Distributor to offer fund shares to self-directed investment brokerage accounts that may or may not charge a transaction fee to customers and (ii) exchanges of Class Z shares of a fund for Class A shares of the fund; and
Purchases by registered representatives and employees (and their immediate family members and related trusts or other entities owned by the foregoing (referred to as “Related Persons”)) of Ameriprise Financial Services and its affiliates; provided that with respect to employees (and their Related Persons) of an affiliate of Ameriprise, such persons must make purchases through an account held at Ameriprise or its affiliates.
The following categories of investors may buy Class A shares of any eligible series of CFST II at net asset value, without payment of any front-end sales charge that would otherwise apply:
Participants of “eligible employee benefit plans” including 403(b) plans for which Ameriprise Financial Services serves as broker-dealer, and the school district or group received a written proposal from Ameriprise Financial Services between November 1, 2007 and December 31, 2008 (each a Qualifying 403(b) Plan). In order for participants in one of these 403(b) plans to receive this waiver, at least one participant account of the 403(b) plan must have been funded at Ameriprise Financial Services prior to December 31, 2009. This waiver may be discontinued for any Qualifying 403(b) Plan, in the sole discretion of the Distributor.
Purchases of Class A, Class E and Class T shares may be made at net asset value if they are made as follows:
With dividend or capital gain distributions from a fund or from the same class of another fund (b) ;
Through or under a wrap fee product or other investment product sponsored by a Selling Agent that charges an account management fee or other managed agency/asset allocation accounts or programs involving fee-based compensation arrangements that have or that clear trades through a Selling Agent that has a selling agreement with the Distributor;
Through state sponsored college savings plans established under Section 529 of the Internal Revenue Code;
Through banks, trust companies and thrift institutions, acting as fiduciaries; and
Through “employee benefit plans” created under section 401(a), 401(k), 457 and 403(b), and qualified deferred compensation plans, that have a plan level or omnibus account maintained with the fund or the Transfer Agent and transacts directly with the fund or the Transfer Agent through a third party administrator or third party recordkeeper.

(a) Including their spouses or domestic partners, children or step-children, parents, step-parents or legal guardians, and their spouse’s or domestic partner’s parents, step-parents, or legal guardians.
(b) The ability to invest dividend and capital gain distributions from one Fund to another Fund may not be available to accounts held at all Selling Agents.
Investors can also buy Class A shares without paying a sales charge if the purchase is made from the proceeds of a sale from any Columbia Fund Class A, B, C or T shares of another fund in the Columbia Funds Complex (other than Columbia Government Money Market Fund) within 90 days, up to the amount of the sales proceeds. In addition, shareholders of the money market fund series of BofA Funds Series Trust, which were formerly referred to as the Columbia Money Market Funds (the Former Columbia Money Market Funds), can also buy Class A shares of the Columbia Funds without paying a sales charge if the purchase is made from the proceeds of a sale of shares from a Former Columbia Money Market Fund within 90 days, up to the amount of the sales proceeds, provided that the proceeds are from the sale of shares of a Former Columbia Money Market Fund purchased on or before April 30, 2010. To be eligible for these reinstatement privileges the purchase must be made into an account for the same owner, but does not need to be into the same fund from which the shares were sold. The Transfer Agent, Distributor or their agents must receive a written reinstatement request within 90 days after the shares are sold and the purchase of Class A shares through this reinstatement privilege will be made at the NAV of such shares next calculated after the request is received in good order.
Restrictions may apply to certain accounts and certain transactions. The funds may change or cancel these terms at any time. Any change or cancellation applies only to future purchases. Unless you provide your financial advisor with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial advisor provide this information to the funds when placing your purchase order. For more information about the sales charge reductions and waivers described here, as well as additional categories of eligible investors, please see the applicable prospectus.
Contingent Deferred Sales Charge Waivers (Class A, Class B, Class C, Class E, Class F and Class T Shares)
For purposes of calculating a CDSC, the start of the holding period is generally the first day of the month in which your purchase was made. However, for purposes of calculating the CDSC on Class B shares of series of CFST II purchased on or before the close of business on September 3, 2010, the start of the holding period is the date your purchase was made.
Statement of Additional Information – October 3, 2016 S-3

 

Table of Contents
Shareholders won’t pay a CDSC on redemption of Class A, Class C and Class T shares:
In the event of the shareholder’s death;
For which no sales commission or transaction fee was paid to an authorized Selling Agent at the time of purchase;
Purchased through reinvestment of dividend and capital gain distributions;
In an account that has been closed because it falls below the minimum account balance;
That result from required minimum distributions taken from retirement accounts upon the shareholder’s attainment of age 70½;
That result from returns of excess contributions made to retirement plans or individual retirement accounts, so long as the Selling Agent returns the applicable portion of any commission paid by the Distributor;
Of Class A shares of a fund initially purchased by an employee benefit plan;
Other than Class A shares of a fund initially purchased by an employee benefit plan that are not connected with a plan level termination;
In connection with the fund’s Small Account Policy (as described in the applicable prospectus); and
At a fund’s discretion, issued in connection with plans of reorganization, including but not limited to mergers, asset acquisitions and exchange offers, to which the fund is a party.
Shareholders won’t pay a CDSC on redemption of Class B or Class F shares:
In the event of the shareholder’s death; and
That result from required minimum distributions taken from retirement accounts upon the shareholder’s attainment of age 70½.
Shareholders won’t pay a CDSC on the following categories of redemptions of Class B or Class F shares purchased prior to September 7, 2010:
By health savings accounts sponsored by third party platforms, including those sponsored by Bank of America affiliates.*
For medical payments that exceed 7.5% of income.*
To pay for insurance by an individual who has separated from employment and who has received unemployment compensation under a federal or state program for at least twelve weeks.*
Occurring pursuant to a Systematic Withdrawal Plan (SWP) established with the Transfer Agent, to the extent that the sales do not exceed, on an annual basis, 12% of the account’s value as long as distributions are reinvested. Otherwise, a CDSC will be charged on SWP sales until this requirement is met.
For shares purchased prior to September 7, 2010, CDSCs may be waived on sales after the sole shareholder on an individual account or a joint tenant on a joint tenant account becomes disabled (as defined by Section 72(m)(7) of the Code). To be eligible for such a waiver: (i) the disability must arise after the account is opened and (ii) a letter from a physician must be signed under penalty of perjury stating the nature of the disability. If the account is transferred to a new registration and then shares are sold, the applicable CDSC will be charged.*
Shares redeemed in connection with loans from qualified retirement plans to shareholders.*
CDSCs may be waived on shares (except for Class B shares) sold by certain group retirement plans held in omnibus accounts. However, CDSCs may not be waived for Class C shares if the waiver would occur as a result of a plan-level termination.
Below are additional categories of CDSC waivers for Class B or Class F shares of a series of CFST or CFST I purchased prior to September 7, 2010:
Shares redeemed in connection with distributions from qualified retirement plans, government (Section 457) plans, individual retirement accounts or custodial accounts under Section 403(b)(7) of the Code following normal retirement or the attainment of 59½.**

* Fund investors and Selling Agents must inform the Fund or the Transfer Agent in writing that the Fund investor qualifies for the particular sales charge waiver and provide proof thereof.
** For direct trades on non-prototype retirement accounts where the date of birth of the shareholder is not maintained, the shareholder or Selling Agent must inform the Fund or the Transfer Agent in writing that the Fund investor qualifies for the particular sales charge waiver and provide proof thereof.
Statement of Additional Information – October 3, 2016 S-4

 

Table of Contents
Shareholders won’t pay a CDSC on the following categories of redemptions of Class B shares of a series of CFST II:
Redemptions of Class B shares of a series of CFST II held in investment-only accounts ( i.e. , accounts for which Ameriprise Trust Company does not act as the custodian) at Ameriprise Financial Services on behalf of a trust for an employee benefit plan.
Redemptions of Class B shares of a series of CFST II held in individual retirement accounts or certain qualified plans, on or prior to June 12, 2009, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans where Ameriprise Trust Company is acting as custodian, provided that the shareholder is (i) at least 59½ years old and taking a retirement distribution (if the sale is part of a transfer to an individual retirement account or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived* or (ii) selling under an approved substantially equal periodic payment arrangement.
Class B shares of a series of CFST II held in individual retirement accounts and certain qualified plans where an Ameriprise Financial affiliate acts as Selling Agent that were purchased prior to September 7, 2010 and sold under an approved substantially equal periodic payment arrangement (applies to retirement accounts when a shareholder sets up an arrangement with the IRS). The Distributor, in its discretion, may grant a waiver to accounts held directly with the Transfer Agent or held at other Selling Agents under similar circumstances.**

* You must notify the Fund or the Transfer Agent prior to redeeming shares of the applicability of the CDSC waiver, but final decision of the applicability of the CDSC waiver is contingent on approval of the Fund or the Transfer Agent.
** Fund investors and Selling Agents and/or Servicing Agents must inform the Fund or the Transfer Agent in writing that the Fund investor qualifies for the particular sales charge waiver and provide proof thereof.
Restrictions may apply to certain accounts and certain transactions. The Distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. The fund may change or cancel these terms at any time. Any change or cancellation applies only to future purchases. For more information about the sales charge reductions and waivers described here, as well as additional categories of eligible redemptions, please see the prospectuses.
Minimum Initial Investment in Class Z Shares
Class Z shares are available only to certain eligible investors, which are subject to different minimum initial investment requirements described in the prospectuses. In addition to the categories of Class Z investors described in the prospectuses, the minimum initial investments in Class Z shares are as follows:
There is no minimum initial investment in Class Z shares for any health savings account sponsored by a third party platform.
The minimum initial investment in Class Z shares for the following eligible investors is $1,000:
Any persons employed as of April 30, 2010 by the Previous Adviser, Previous Distributor or Previous Transfer Agent and immediate family members of any of the foregoing who share the same address and any employee of the Investment Manager, Distributor or Transfer Agent and immediate family members of any of the foregoing who share the same address and are eligible to make new and subsequent purchases in Class Z shares through an individual retirement account. If you maintain your account with a financial intermediary, you must contact that financial intermediary each time you seek to purchase shares to notify them that you qualify for Class Z shares.
The minimum initial investment in Class Z shares for the following categories of eligible investors is $2,000:
Any client of Bank of America or one of its subsidiaries buying shares through an asset management company, trust, fiduciary, retirement plan administration or similar arrangement with Bank of America or the subsidiary.
Any employee (or family member of an employee) of Bank of America or one of its subsidiaries.
Any investor buying shares through a Columbia Management state tuition plan organized under Section 529 of the Internal Revenue Code.
Any trustee or director (or family member of a trustee or director) of a fund distributed by the Distributor.
Any persons employed as of April 30, 2010 by the Previous Adviser, Previous Distributor or Previous Transfer Agent and immediate family members of any of the foregoing who share the same address and any employee of the Investment Manager, Distributor or Transfer Agent and immediate family members of any of the foregoing who share the same address and are eligible to make new and subsequent purchases in Class Z shares through a non-retirement account. If you maintain your account with a financial intermediary, you must contact that financial intermediary each time you seek to purchase shares to notify them that you qualify for Class Z shares.
Statement of Additional Information – October 3, 2016 S-5

 

Table of Contents
As described in the prospectuses, any shareholder (as well as any family member of a shareholder or person listed on an account registration for any account of the shareholder) of another fund distributed by the Distributor who holds Class Z shares is eligible to purchase Class Z shares subject to a minimum initial investment of $2,000. If the account in which the shareholder holds Class Z shares is not eligible to purchase additional Class Z shares, the shareholder may purchase Class Z shares in an account maintained directly with the Transfer Agent, subject to the $2,000 minimum for such direct account.
Class B Shares — Conversion to Class A Shares
Class B shares purchased in a series of CFST, CFST I or CFST II (other than Class B shares purchased in a former Seligman Fund on or prior to June 12, 2009) automatically convert to Class A shares after you’ve owned the shares for eight years, except for Class B shares of Columbia Short Term Municipal Bond Fund, which do not convert to Class A shares. Class B shares originally purchased in a former Seligman Fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. The conversion feature allows you to benefit from the lower operating costs of Class A shares, which can help increase your total returns from an investment in the fund.
The following rules apply to the conversion of Class B shares to Class A shares:
Class B shares are converted on or about the 15th day of the month that they become eligible for conversion. For purposes of determining the month when your Class B shares are eligible for conversion, the start of the holding period is the first day of the month in which your purchase was made.
Any shares you received from reinvested distributions on these shares generally will convert to Class A shares at the same time.
You’ll receive the same dollar value of Class A shares as the Class B shares that were converted. Class B shares that you received from an exchange of Class B shares of another fund will convert based on the day you bought the original shares.
No sales charge or other charges apply, and conversions are free from U.S. federal income tax.
Class F Shares — Conversion to Class E Shares*
The following rules apply to the conversion of Class F shares to Class E shares:
Class F shares are converted on or about the 15th day of the month that they become eligible for conversion. For purposes of determining the month when your Class F shares are eligible for conversion, the start of the holding period is the first day of the month in which your purchase was made.
Any shares you received from reinvested distributions on these shares generally will convert to Class E shares at the same time.
You’ll receive the same dollar value of Class E shares as the Class F shares that were converted. Class F shares that you received from an exchange of Class F shares of another Fund will convert based on the day you bought the original shares.
No sales charge or other charges apply, and conversions are free from U.S. federal income tax.

* The Funds no longer accept investments from new or existing investors in Class E or Class F shares, except by existing Class E and/ or Class F shareholders who opened and funded their account prior to September 22, 2006 that may continue to invest in Class E and/or Class F shares. See the prospectus offering Class E and Class F shares of Large Cap Growth Fund for details.
Class A Shares of Active Portfolio Funds
The Active Portfolio Funds offer only Class A shares that are available only to certain eligible investors through certain wrap fee programs sponsored and/or managed by Ameriprise Financial or its affiliates. Class A shares of Active Portfolio Funds are not subject to any front-end sales charge or CDSC.
Additional Eligible Investors
The Distributor, in its sole discretion, may accept investments in any share class of a Fund from investors other than those listed above and in the Fund’s prospectus(es).
Additional Information about Minimum Initial Investments
The Distributor, in its sole discretion, may also waive minimum initial investment requirements, including, without limitation, the requirement for omnibus retirement plans with plan assets of less than $10 million to invest $500,000 or more in Class Y shares of a Fund. Minimum investment and related requirements may be modified at any time, with or without prior notice.
Additional Information about Systematic Withdrawal Plans
Systematic Withdrawal Plans allow you to schedule regular redemptions from your account any day of the month on a monthly, quarterly or semi-annual basis. Currently, Systematic Withdrawal Plans are generally available for Class A, B, C, R4, R5, T, W, Y and Z share accounts. Contact the Transfer Agent or your financial advisor to set up the plan.
Statement of Additional Information – October 3, 2016 S-6

 

Table of Contents
To set up the plan, your account balance must meet the class minimum initial investment amount. A Systematic Withdrawal Plan cannot be set up on an account that already has a Systematic Investment Plan established. If you set up the plan after you’ve opened your account, we may require your signature to be Medallion Signature Guaranteed, as described below.
You can choose to receive your withdrawals via check or direct deposit into your bank account. The Fund will deduct any applicable CDSC from the withdrawals before sending the balance to you. You can cancel the plan by giving the Fund 30 days notice in writing or by calling the Transfer Agent at 800.422.3737. It’s important to remember that if you withdraw more than your investment in the Fund is earning, you’ll eventually withdraw your entire investment.
Fund Reorganizations
Class A shares may be issued without any initial sales charge in connection with the acquisition of cash and securities owned by other investment companies. Any CDSC will be waived in connection with the redemption of shares of the fund if the fund is combined with another fund or in connection with a similar reorganization transaction.
Rejection of Purchases
Each fund and the distributor of the funds reserve the right to reject any offer to purchase shares, in their sole discretion.
Medallion Signature Guarantees
The Transfer Agent may require a Medallion Signature Guarantee for your signature in order to process certain transactions. A Medallion Signature Guarantee helps assure that a signature is genuine and not a forgery. A Medallion Signature Guarantee must be provided by an eligible guarantor institution including, but not limited to, the following: bank, credit union, savings association, broker or dealer, that participates in the Securities Transfer Association Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) or the New York Stock Exchange Medallion Signature Program (MSP). Notarization by a notary public is not an acceptable signature guarantee. The Transfer Agent reserves the right to reject a signature guarantee and to request additional documentation for any transaction.
A Medallion Signature Guarantee is required if: (i) the transaction amount is over $100,000; (ii) you want your check made payable to someone other than yourself; (iii) your address has changed within the last 30 days; (iv) you want the check mailed to an address other than the address of record; (v) you want proceeds to be sent according to existing bank account instructions not coded for outgoing ACH or wire, or to a bank account not on file; (vi) you are the beneficiary of the account and the account owner is deceased (other documentation may be required); or (vii) you are changing legal ownership of your account.
Dividend Diversification
Generally, you may automatically invest distributions made by another Fund into the same class of shares (and in some cases certain other classes of shares) of a Fund at no additional sales charge. A sales charge may apply when you invest distributions made with respect to shares that were not subject to a sales charge at the time of your initial purchase. Call the Transfer Agent at 800.345.6611 for details. The ability to invest distributions from one Fund to another Fund may not be available to accounts held at all Selling Agents.
SAI910_00_033_(10/16)
Statement of Additional Information – October 3, 2016 S-7


Table of Contents

PART C. OTHER INFORMATION

 

Item 28. Exhibits

 

(a)(1) Second Amended and Restated Agreement and Declaration of Trust, dated August 10, 2005, is incorporated by reference to Post-Effective Amendment No. 40 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (a)(1)), filed on September 16, 2005.

 

(a)(2) Amendment No. 1 to Second Amended and Restated Agreement and Declaration of Trust, effective September 19, 2005, is incorporated by reference to Post-Effective Amendment No. 40 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (a)(2)), filed on September 16, 2005.

 

(b) Amended and Restated By-laws of the Registrant, effective October 20, 2015, are incorporated by reference to Post-Effective Amendment No. 248 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (b)), filed on December 22, 2015.

 

(c) Not Applicable.

 

(d)(1) Amended and Restated Management Agreement, as of April 25, 2016, between Columbia Management Investment Advisers, LLC, Columbia Funds Variable Insurance Trust and the Registrant, is incorporated by reference to Post-Effective Amendment No. 257 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(1)), filed on April 27, 2016.

 

(d)(1)(i) Schedule A and Schedule B, as of October 1, 2016, to the Management Agreement between Columbia Management Investment Advisers, LLC, Columbia Funds Variable Insurance Trust and the Registrant, as of April 25, 2016, are filed herewith as Exhibit (d)(1)(i) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(d)(2) Management Agreement between Columbia Management Investment Advisers, LLC and Registrant, effective June 16, 2015, is incorporated by reference to Post-Effective Amendment No. 231 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(4)), filed on June 29, 2015.

 

(d)(2)(i) Schedule A and Schedule B, as of August 17, 2016, to the Management Agreement between Columbia Management Investment Advisers, LLC and the Registrant, as of June 16, 2015, are filed herewith as Exhibit (d)(2)(i) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(d)(3) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and AQR Capital Management, LLC dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(3)), filed on May 30, 2014.

 

(d)(3)(i) Addendum dated March 7, 2012 to the Subadvisory Agreement dated March 7, 2012 between Columbia Management Investment Advisers, LLC and AQR Capital Management, LLC on behalf of Active Portfolios ® Multi-Manager Alternatives Strategies Fund, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(3)(1)), filed on May 30, 2014.

 

(d)(3)(ii) Amendment No. 1, dated August 18, 2016 to the Subadvisory Agreement dated March 7, 2012 between Columbia Management Investment Advisers, LLC and AQR Capital Management, LLC on behalf of Active Portfolios ® Multi-Manager Directional Alternatives Fund is filed herewith as Exhibit (d)(3)(ii) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.


Table of Contents
(d)(4) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Dalton, Greiner, Hartman, Maher & Co., LLC dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(4)), filed on May 30, 2014.

 

(d)(4)(i) Amendment No. 1, dated June 10, 2015, to the Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Dalton, Greiner, Hartman, Maher & Co., LLC dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 231 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(6)(i)), filed on June 29, 2015.

 

(d)(5) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and EAM Investors, LLC dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 99356 of the Registrant on Form N-1A (Exhibit (d)(5)), filed on May 30, 2014.

 

(d)(6) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and PGIM Inc., the asset management arm of Prudential Financial, dated March 9, 2016, is incorporated by reference to Post-Effective Amendment No. 259 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(6)), filed on May 16, 2016.

 

(d)(7) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and TCW Investment Management Company LLC dated February 6, 2013, last amended January 24, 2014, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(7)), filed on May 30, 2014.

 

(d)(7)(i) Addendum – Authorization to Enter Into Over-The-Counter And/Or Exchange Traded Derivatives between Columbia Management Investment Advisers, LLC and TCW Investment Management Company LLC dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(7)(1)), filed on May 30, 2014.

 

(d)(8) Subadvisory Agreement among Columbia Management Investment Advisers, LLC and Threadneedle International Limited dated March 5, 2014, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)), filed on August 26, 2015.

 

(d)(8)(i) Amendment No. 1, dated December 19, 2014, to the Subadvisory Agreement, between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(i)), filed on August 26, 2015.

 

(d)(8)(ii) Amendment No. 2, dated March 4, 2015, to the Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(ii)), filed on August 26, 2015.

 

(d)(8)(iii) Amendment No. 3, dated June 10, 2015, to the Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(iii)), filed on August 26, 2015.


Table of Contents
(d)(8)(iv) Addendum, dated December 19, 2014, to the Subadvisory Agreement, dated March 5, 2014, between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, pertaining to CDARF1 Offshore Fund Ltd., a subsidiary of Columbia Diversified Absolute Return Fund, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(iv)), filed on August 26, 2015.

 

(d)(8)(v) Addendum, dated December 19, 2014, to the Subadvisory Agreement, dated March 5, 2014, between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, pertaining to CDARF2 Offshore Fund Ltd., a subsidiary of Columbia Diversified Absolute Return Fund, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(v)), filed on August 26, 2015.

 

(d)(8)(vi) Addendum, dated December 19, 2014, to the Subadvisory Agreement, dated March 5, 2014, between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, pertaining to CDARF3 Offshore Fund Ltd., a subsidiary of Columbia Diversified Absolute Return Fund, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(vi)), filed on August 26, 2015.

 

(d)(8)(vii) Addendum, dated December 19, 2014, to the Subadvisory Agreement, dated March 5, 2014, between Columbia Management Investment Advisers, LLC and Threadneedle International Limited, pertaining to CAAF Offshore Fund Ltd., a subsidiary of Columbia Adaptive Alternatives Fund, is incorporated by reference to Post-Effective Amendment No. 236 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)(vii)), filed on August 26, 2015.

 

(d)(9) Subadvisory Agreement among Columbia Management Investment Advisers, LLC and Wasatch Advisors Inc, dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(8)), filed on May 30, 2014.

 

(d)(10) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Water Island Capital, LLC dated March 7, 2012, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(9)), filed on May 30, 2014.

 

(d)(11) Delegation Agreement dated March 7, 2012 between Dalton, Greiner, Hartman, Maher & Co. LLC, and Real Estate Management Services Group, LLC, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(10)), filed on May 30, 2014.

 

(d)(12) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Conestoga Capital Advisors, LLC dated June 11, 2014, is incorporated by reference to Post-Effective Amendment No. 205 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(11)), filed on August 28, 2014.

 

(d)(13) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Loomis, Sayles and Company, L.P. dated December 4, 2013, is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(12)), filed on May 30, 2014.

 

(d)(13)(i) Amendment No. 1, dated March 9, 2016, to the Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Loomis, Sayles and Company, L.P., dated December 4, 2013, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(14)(i)), filed on April 11, 2016.


Table of Contents
(d)(14) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and BMO Asset Management Corp. dated October 20, 2015, is incorporated by reference to Post-Effective Amendment No. 243 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(16)), filed on October 26, 2015.

 

(d)(15) Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Boston Partners Global Investors Inc., on behalf of Active Portfolios ® Multi-Manager Directional Alternatives Fund is filed herewith as Exhibit (d)(15) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(d)(16) Management Agreement between Columbia Management Investment Advisers, LLC and CAAF Offshore Fund, Ltd., a subsidiary of Columbia Adaptive Alternatives Fund, effective October 1, 2015, is incorporated by reference to Post-Effective Amendment No. 239 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(18)), filed on September 28, 2015.

 

(d)(17) Management Agreement between Columbia Management Investment Advisers, LLC and CDARF1 Offshore Fund, Ltd., a subsidiary of Columbia Diversified Absolute Return Fund, effective October 1, 2015, is incorporated by reference to Post-Effective Amendment No. 239 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(19)), filed on September 28, 2015.

 

(d)(18) Management Agreement between Columbia Management Investment Advisers, LLC and CDARF2 Offshore Fund, Ltd., a subsidiary of Columbia Diversified Absolute Return Fund, effective October 1, 2015, is incorporated by reference to Post-Effective Amendment No. 239 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(20)), filed on September 28, 2015.

 

(d)(19) Management Agreement between Columbia Management Investment Advisers, LLC and CDARF3 Offshore Fund, Ltd., a subsidiary of Columbia Diversified Absolute Return Fund, effective October 1, 2015, is incorporated by reference to Post-Effective Amendment No. 239 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(21)), filed on September 28, 2015.

 

(d)(20) Management Agreement between Columbia Management Investment Advisers, LLC and ASGM Offshore Fund, Ltd., a subsidiary of Active Portfolios ® Multi-Manager Alternative Strategies Fund, effective January 1, 2016, is incorporated by reference to Post-Effective Amendment No. 248 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(22)), filed on December 22, 2015.

 

(d)(21) Management Agreement between Columbia Management Investment Advisers, LLC and ASMF Offshore Fund, Ltd., a subsidiary of Active Portfolios ® Multi-Manager Alternative Strategies Fund, effective January 1, 2016, is incorporated by reference to Post-Effective Amendment No. 248 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (d)(23)), filed on December 22, 2015.

 

(e)(1) Amended and Restated Distribution Agreement by and between Registrant and Columbia Management Investment Distributors, Inc., dated March 1, 2016, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (e)(1)), filed on April 11, 2016.

 

(e)(1)(i) Restated Schedule I, dated August 17, 2016 and Schedule II, to Amended and Restated Distribution Agreement by and between the Registrant and Columbia Management Investment Distributors, Inc., dated March 1, 2016, is filed herewith as Exhibit (e)(1)(i) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(e)(2) Form of Mutual Fund Sales Agreement is incorporated by reference to Post-Effective Amendment No. 63 to Registration Statement No. 2-72174 of RiverSource Bond Series, Inc. on Form N-1A (Exhibit (e)(2)), filed on July 9, 2010.


Table of Contents
(f) Form of Deferred Compensation Agreement is incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (f)), filed on May 30, 2014.

 

(g)(1) Second Amended and Restated Master Global Custody Agreement between certain Funds and JP Morgan Chase Bank, N.A., dated March 7, 2011, is incorporated by reference to Post-Effective Amendment No. 124 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (g)(2)), filed on April 29, 2011.

 

(g)(2) Addendum to Master Global Custody Agreement (related to Active Portfolios ® Multi-Manager Alternative Strategies Fund, Active Portfolios ® Multi-Manager Core Plus Bond Fund, now known as Active Portfolios ® Multi-Manager Total Return Bond Fund, Active Portfolios ® -Multi-Manager Small Cap Equity Fund and Columbia Active Portfolios ® – Select Large Cap Growth Fund, now known as Active Portfolios ® -Multi-Manager Growth Fund), dated March 9, 2012, Addendum to Master Global Custody Agreement (related to Columbia Adaptive Risk Allocation Fund), dated June 11, 2012, and Addendum to Master Global Custody Agreement (related to Columbia Diversified Real Return Fund), dated February 25, 2014, are incorporated by reference to Post-Effective Amendment No. 196 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (g)(2)), filed on May 30, 2014.

 

(g)(3) Addendum to Master Global Custody Agreement (related to Columbia Adaptive Alternatives Fund and Columbia Diversified Absolute Return Fund), dated January 15, 2015, is incorporated by reference to Post-Effective Amendment No. 221 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (g)(3)), filed on February 27, 2015.

 

(g)(4) Addendum to Master Global Custody Agreement (related to Columbia Multi-Asset Income Fund and Columbia U.S. Social Bond Fund), dated March 18, 2015, is incorporated by reference to Post-Effective Amendment No. 223 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (g)(4)), filed on March 24, 2015.

 

(g)(5) Side letter (related to the China Connect Service on behalf of Columbia Emerging Markets Fund, Columbia Greater China Fund and Columbia Pacific/Asia Fund), dated December 19, 2014, to the Second Amended and Restated Master Global Custody Agreement with JP Morgan Chase Bank, N.A., dated March 7, 2011, is incorporated by reference to Post-Effective Amendment No. 221 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (g)(4)), filed on February 27, 2015.

 

(g)(6) Addendum to Master Global Custody Agreement (related to Active Portfolios ® Multi-Manager Directional Alternatives Fund), is filed herewith as Exhibit (g)(6) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(h)(1) Amended and Restated Transfer and Dividend Disbursing Agent Agreement by and between the Registrant and Columbia Management Investment Services Corp., dated March 1, 2016, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(2)), filed on April 11, 2016.

 

(h)(1)(i) Schedule A, effective August 17, 2016 and Schedule B, effective October 1, 2015, to the Amended and Restated Transfer and Dividend Disbursing Agent Agreement by and between the Registrant and Columbia Management Investment Services Corp., dated March 1, 2016, are filed herewith as Exhibit (h)(1)(i) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(h)(2) Form of Indemnification Agreement is incorporated by reference to Post-Effective Amendment No. 46 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(6)), filed on March 24, 2006.


Table of Contents
(h)(3) Amended and Restated Plan Administration Services Agreement, dated as of September 7, 2010, amended and restated November 1, 2012, by and among the Registrant, Columbia Funds Series Trust and Columbia Management Investment Services Corp, is incorporated by reference to Post-Effective Amendment No. 165 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(13)), filed on November 7, 2012.

 

(h)(3)(i) Exhibit A, Exhibit B and Exhibit C, effective May 1, 2016, to the Amended and Restated Plan Administration Services Agreement among Columbia Management Investment Services Corp., the Registrant and Columbia Funds Series Trust, dated as of September 7, 2010, are incorporated by reference to Post-Effective Amendment No. 257 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(3)(i)), filed on April 27, 2016.

 

(h)(4) Amended and Restated Fee Waiver and Expense Cap Agreement, effective July 1, 2016, by and among Columbia Management Investment Advisers, LLC, Columbia Management Investment Distributors, Inc., Columbia Management Investment Services Corp., the Registrant and Columbia Funds Variable Insurance Trust is incorporated by reference to Post-Effective Amendment No. 264 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(4)), filed on June 29, 2016.

 

(h)(4)(i) Restated Schedule A, effective October 1, 2016, to the Amended and Restated Fee Waiver and Expense Cap Agreement, effective July 1, 2016, by and among Columbia Management Investment Advisers, LLC, Columbia Management Investment Distributors, Inc., Columbia Management Investment Services Corp., the Registrant and Columbia Funds Variable Insurance Trust is filed herewith as Exhibit (h)(4)(i) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(h)(5) Agreement and Plan of Reorganization, dated October 9, 2012, is incorporated by reference to Post-Effective Amendment No. 175 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(8)), filed on May 30, 2013.

 

(h)(6) Agreement and Plan of Reorganization, dated December 20, 2010, is incorporated by reference to Post-Effective Amendment No. 15 to Registration Statement No. 333-146374 of Columbia Funds Variable Series Trust II on Form N-1A (Exhibit (h)(9)), filed on April 29, 2011.

 

(h)(7) Agreement and Plan of Reorganization, dated December 17, 2015, is incorporated by reference to Registration Statement No. 333-208706 of Columbia Funds Series Trust on Form N-14 (Exhibit (4)), filed on December 22, 2015.

 

(h)(8) Amended and Restated Credit Agreement, as of December 9, 2014, is incorporated by reference to Post-Effective Amendment No. 225 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(14)), filed on April 16, 2015.

 

(h)(8)(i) Restated Credit Agreement, as of December 8, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (h)(9)(i)), filed on April 11, 2016.

 

(i)(1) Opinion of Counsel of Ropes & Gray LLP is incorporated by reference to Post-Effective Amendment No. 40 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)), filed on September 16, 2005.

 

(i)(2) Opinion of Counsel of Ropes & Gray LLP is incorporated by reference to Post-Effective Amendment No. 68 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)(2)), filed on January 16, 2008.


Table of Contents
(i)(3) Opinion of Counsel of Ropes & Gray LLP is incorporated by reference to Post-Effective Amendment No. 81 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)(3)), filed on November 25, 2008.

 

(i)(4) Opinion of Counsel of Ropes & Gray LLP is incorporated by reference to Post-Effective Amendment No. 95 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)(4)), filed on November 20, 2009.

 

(i)(5) Opinion of Counsel of Ropes & Gray LLP is incorporated by reference to Post-Effective Amendment No. 143 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)(5)), filed on March 14, 2012.

 

(i)(6) Opinion of Counsel of Ropes & Gray LLP, with respect to Columbia Adaptive Risk Allocation Fund, is incorporated by reference to Post-Effective Amendment No. 153 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (I)(6)), filed on June 15, 2012.

 

(i)(7) Opinion of Counsel of Ropes & Gray LLP, with respect to Columbia Diversified Real Return Fund, is incorporated by reference to Post-Effective Amendment No. 190 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)(7)), filed on March 10, 2014.

 

(i)(8) Opinion of Counsel of Ropes & Gray LLP, with respect to Columbia Adaptive Alternatives Fund and Columbia Diversified Absolute Return Fund, is incorporated by reference to Post-Effective Amendment No. 219 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (j)(8)), filed on January 27, 2015.

 

(i)(9) Opinion of Counsel of Ropes & Gray LLP, with respect to Columbia Multi-Asset Income Fund and Columbia U.S. Social Bond Fund is incorporated by reference to Post-Effective Amendment No. 223 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (i)(9)), filed on March 24, 2015.

 

(i)(10) Opinion of Counsel of Ropes & Gray LLP, with respect to Active Portfolios ® Multi-Manager Directional Alternatives Fund, is filed herewith as Exhibit (i)(10) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(j)(1) Consent of Morningstar, Inc., is incorporated by reference to Post-Effective Amendment No. 21 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (11)(b)), filed on August 30, 1996.

 

(j)(2) Consent of PricewaterhouseCoopers LLP: Not applicable

 

(k) Omitted Financial Statements: Not Applicable.

 

(l) Initial Capital Agreement: Not Applicable.

 

(m)(1) Amended and Restated Distribution Plan, as of August 17, 2016, is filed herewith as Exhibit (m)(1) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(m)(2) Amended and Restated Shareholder Servicing Plan, as of March 4, 2015, for certain Fund share classes of the Registrant, is incorporated by reference to Post-Effective Amendment No. 223 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (m)(2)), filed on March 24, 2015.

 

(m)(2)(i) Exhibit I and Exhibit II, effective June 10, 2015, to Amended and Restated Shareholder Servicing Plan, as of March 4, 2015, for certain Fund share classes of the Registrant, are incorporated by reference to Post-Effective Amendment No. 231 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (m)(2)(i)), filed on June 29, 2015.


Table of Contents
(m)(3) Amended and Restated Shareholder Services Plan for Registrant’s Class T shares is incorporated by reference to Post-Effective Amendment No. 113 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (m)(3)), filed on November 24, 2010.

 

(m)(4) Restated Schedule I, effective October 1, 2014, to Shareholder Servicing Plan Implementation Agreement for Registrant’s Class T shares between the Registrant and Columbia Management Investment Distributors, Inc., is incorporated by reference to Post-Effective Amendment No. 207 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (m)(5)), filed on September 26, 2014.

 

(m)(5) Shareholder Servicing Plan Implementation Agreement for certain Fund share classes of the Registrant between the Registrant, Columbia Funds Series Trust, Columbia Funds Series Trust II and Columbia Management Investment Distributors, Inc., is incorporated by reference to Post-Effective Amendment No. 113 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (m)(4)), filed on November 24, 2010.

 

(m)(6) Restated Schedule I, effective May 1, 2016, to Shareholder Servicing Plan Implementation Agreement is incorporated by reference to Post-Effective Amendment No. 257 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (m)(6)), filed on April 27, 2016.

 

(n) Rule 18f – 3 Multi-Class Plan, amended and restated as of August 8, 2016, is incorporated by reference to Post-Effective Amendment No. 270 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (n)), filed on August 23, 2016.

 

(o) Reserved.

 

(p)(1) Code of Ethics of Columbia Atlantic Board Funds, effective February 2016, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(1)), filed on April 11, 2016.

 

(p)(2) Ameriprise Global Asset Management Personal Trading Account Dealing and Code of Ethics Policy, effective December 1, 2015, is incorporated by reference to Post-Effective Amendment No. 48 to Registration Statement No. 333-146374 of Columbia Funds Variable Series Trust II on Form N-1A (Exhibit) (p)(2)), filed on February 19, 2016.

 

(p)(3) Code of Ethics of AQR Capital Management, LLC (a subadviser of Active Portfolios ® Multi-Manager Alternative Strategies Fund and Active Portfolios ® Multi-Manager Directional Alternatives Fund ), effective February 2016, is filed herewith as Exhibit (p)(3) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(p)(4) Code of Ethics of Dalton, Greiner, Hartman, Maher & Co., LLC (a subadviser of Active Portfolios ® Multi-Manager Small Cap Equity Fund), dated November 24, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(4)), filed on April 11, 2016.

 

(p)(5) Code of Ethics and Standards of Business Conduct of EAM Investors, LLC (a subadviser of Active Portfolios ® Multi-Manager Small Cap Equity Fund), effective June 25, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(5)), filed on April 11, 2016.


Table of Contents
(p)(6) Code of Ethics of Prudential Financial (for PGIM, Inc., a subadviser of Active Portfolios ® Multi-Manager Total Return Bond Fund), dated January 11, 2016, is incorporated by reference to Post-Effective Amendment No. 259 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(6)), filed on May 16, 2016.

 

(p)(7) Code of Ethics of TCW Investment Management Company LLC (a subadviser of Active Portfolios ® Multi-Manager Total Return Bond Fund (formerly known as Active Portfolios ® Multi-Manager Core Plus Bond Fund)), dated October 1, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(7)), filed on April 11, 2016.

 

(p)(8) Code of Ethics of Wasatch Advisors Inc (a subadviser of Active Portfolios ® Multi-Manager Alternative Strategies Fund), effective August 22, 2012, is incorporated by reference to Post-Effective Amendment No. 187 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(9)), filed on December 23, 2013.

 

(p)(9) Code of Ethics of Water Island Capital, LLC (a subadviser of Active Portfolios ® Multi-Manager Alternative Strategies Fund), effective September 1, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(9)), filed on April 11, 2016.

 

(p)(10) Code of Ethics of Real Estate Management Services Group, LLC. (provides advisory services as delegated by Dalton, Greiner, Hartman, Maher & Co., LLC, a subadviser of Active Portfolios ® Multi-Manager Small Cap Equity Fund), dated July 1, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(10)), filed on April 11, 2016.

 

(p)(11) Code of Ethics of Conestoga Capital Advisors, LLC (a subadviser of Active Portfolios ® Multi-Manager Small Cap Equity Fund), dated January 1, 2016, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(11)), filed on April 11, 2016.

 

(p)(12) Code of Ethics of Loomis, Sayles and Company, L.P. (subadviser of Active Portfolios ® Multi-Manager Growth Fund and Active Portfolios ® Multi-Manager Total Return Bond Fund (formerly known as Active Portfolios ® Multi-Manager Core Plus Bond Fund)), effective January 14, 2000, as amended September 30, 2015, is incorporated by reference to Post-Effective Amendment No. 256 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(12)), filed on April 11, 2016.

 

(p)(13) Code of Ethics of BMO Asset Management Corp. (a subadviser of Active Portfolios ® Multi-Manager Small Cap Equity Fund), effective June 4, 2015, is incorporated by reference to Post-Effective Amendment No. 243 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (p)(13)), filed on October 26, 2015.

 

(p)(14) Code of Ethics of Boston Partners (a subadviser of Active Portfolios ® Multi-Manager Directional Alternatives Fund ), effective March 1, 2016, is filed herewith as Exhibit (p)(14) to Post-Effective Amendment No. 276 to Registration Statement No. 2-99356 of the Registrant on Form N-1A.

 

(q)(1) Trustees Power of Attorney, dated January 26, 2016, is incorporated by reference to Post-Effective Amendment No. 251 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(1)), filed on February 12, 2016.


Table of Contents
(q)(2) Power of Attorney for Christopher O. Petersen, dated February 16, 2015, is incorporated by reference to Post-Effective Amendment No. 221 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(7)), filed on February 27, 2015.

 

(q)(3) Power of Attorney for Michael G. Clarke, dated May 23, 2016, is incorporated by reference to Post-Effective Amendment No. 261 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(3)), filed on May 27, 2016.

 

(q)(4) Power of Attorney for Amy K. Johnson, dated May 11, 2016, is incorporated by reference to Post-Effective Amendment No. 261 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(4)), filed on May 27, 2016.

 

(q)(5) Power of Attorney for Anthony P. Haugen, dated May 11, 2016, is incorporated by reference to Post-Effective Amendment No. 261 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(5)), filed on May 27, 2016.

 

Item 29. Persons Controlled by or under Common Control with the Registrant

Columbia Management Investment Advisers, LLC (the investment manager or Columbia Management), as sponsor of the Columbia funds, may make initial capital investments in Columbia funds (seed accounts). Columbia Management also serves as investment manager of certain Columbia funds-of-funds that invest primarily in shares of affiliated funds (the underlying funds). Columbia Management does not make initial capital investments or invest in underlying funds for the purpose of exercising control. However, since these ownership interests may be significant, in excess of 25%, such that Columbia Management may be deemed to control certain Columbia funds, procedures have been put in place to assure that public shareholders determine the outcome of all actions taken at shareholder meetings. Specifically, Columbia Management (which votes proxies for the seed accounts) and the Boards of Trustees of the affiliated funds-of-funds (which votes proxies for the affiliated funds-of-funds) vote on each proposal in the same proportion as the vote of the direct public shareholders vote; provided, however, that if there are no direct public shareholders of an underlying fund or if direct public shareholders represent only a minority interest in an underlying fund, the Fund may cast votes in accordance with instructions from the independent members of the Board.

 

Item 30. Indemnification

Article Five of the Bylaws of Registrant provides that Registrant shall indemnify each of its trustees and officers (including persons who serve at Registrant’s request as directors, officers or trustees of another organization in which Registrant has any interest as a shareholder, creditor or otherwise) who are not employees or officers of any investment adviser to Registrant or any affiliated person thereof and its chief compliance officer, regardless of whether such person is an employee or officer of any investment adviser to Registrant or any affiliated person thereof, and may indemnify each of its trustees and officers (including persons who serve at Registrant’s request as directors, officers or trustees of another organization in which Registrant has any interest as a shareholder, creditor or otherwise) (i.e., those who are employees or officers of any investment adviser to Registrant or any affiliated person thereof) (Covered Persons) under specified circumstances, all as more fully set forth in the Registrant’s Bylaws, which have been filed as an exhibit to this registration statement.

Section 17(h) of the Investment Company Act of 1940 (1940 Act) provides that no instrument pursuant to which Registrant is organized or administered shall contain any provision which protects or purports to protect any trustee or officer of Registrant against any liability to Registrant or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. In accordance with Section 17(h) of the 1940 Act, no Covered Person is indemnified under the Bylaws against any liability to Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of the Covered Person’s office.

Pursuant to the Distribution Agreement, Columbia Management Investment Distributors, Inc. agrees to indemnify the Registrant, its officers and trustees against claims, demands, liabilities and expenses under specified circumstances, all as more fully set forth in the Registrant’s Distribution Agreement, which has been filed as an exhibit to the registration statement. The Registrant may be party to other contracts that include indemnification provisions for the benefit of the Registrant’s trustees and officers.


Table of Contents

The trustees and officers of the Registrant and the personnel of the Registrant’s investment adviser and principal underwriter are insured under an errors and omissions liability insurance policy. Registrant’s investment adviser, Columbia Management Investment Advisers, LLC, maintains investment advisory professional liability insurance to insure it, for the benefit of Registrant and its non-interested trustees, against loss arising out of any effort, omission, or breach of any duty owed to Registrant or any series of Registrant by Columbia Management Investment Advisers, LLC.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant by the Registrant pursuant to the Registrant’s organizational instruments or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and, therefore, is unenforceable.

 

Item 31. Business and Other Connections of the Investment Adviser

To the knowledge of the Registrant, none of the directors or officers of Columbia Management Investment Advisers, LLC (the Investment Manager), the Registrant’s investment adviser, or the subadviser to a series of the Registrant, except as set forth below, are or have been, at any time during the Registrant’s past two fiscal years, engaged in any other business, profession, vocation or employment of a substantial nature.

 

  (a) The Investment Manager, a wholly-owned subsidiary of Ameriprise Financial, Inc. performs investment advisory services for the Registrant and certain other clients. Information regarding the business of the Investment Manager and certain of its officers is set forth in the Prospectuses and Statements of Additional Information of the Registrant’s portfolios and is incorporated herein by reference. Information about the business of the Investment Manager and the directors and principal executive officers of the Investment Manager is also included in the Form ADV filed by the Investment Manager (formerly, RiverSource Investments, LLC) with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-25943), which is incorporated herein by reference. In addition to their position with the Investment Manager, certain directors and officers of the Investment Manager also hold various positions with, and engage in business for, Ameriprise Financial, Inc. or its other subsidiaries.

 

  (b) AQR Capital Management, LLC performs investment management services for the Registrant and certain other clients. Information regarding the business of AQR Capital Management, LLC and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by AQR Capital Management, LLC and is incorporated herein by reference. Information about the business of AQR Capital Management, LLC and the directors and principal executive officers of AQR Capital Management, LLC is also included in the Form ADV filed by AQR Capital Management, LLC with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-55543), which is incorporated herein by reference.

 

  (c) Boston Partners Global Investors, Inc. performs investment management services for the Registrant and certain other clients. Information regarding the business of Boston Partners Global Investors, Inc. and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Boston Partners Global Investors, Inc. and is incorporated herein by reference. Information about the business of Boston Partners Global Investors, Inc. and the directors and principal executive officers of Boston Partners Global Investors, Inc. is also included in the Form ADV filed by Boston Partners Global Investors, Inc. with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-61786), which is incorporated herein by reference.

 

  (d)

BMO Asset Management Corp. performs investment management services for the Registrant and certain other clients. Information regarding the business of BMO Asset Management Corp. and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by BMO Asset Management Corp. and is incorporated herein by


Table of Contents
 

reference. Information about the business of BMO Asset Management Corp. and the directors and principal executive officers of BMO Asset Management Corp. is also included in the Form ADV filed by BMO Asset Management Corp. with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-35533), which is incorporated herein by reference.

 

  (d) Conestoga Capital Advisors, LLC performs investment management services for the Registrant and certain other clients. Information regarding the business of Conestoga Capital Advisors, LLC and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Conestoga Capital Advisors, LLC and is incorporated herein by reference. Information about the business of Conestoga Capital Advisors, LLC and the directors and principal executive officers of Conestoga Capital Advisors, LLC is also included in the Form ADV filed by Conestoga Capital Advisors, LLC with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-60133), which is incorporated herein by reference.

 

  (e) Dalton, Greiner, Hartman, Maher & Co., LLC performs investment management services for the Registrant and certain other clients. Information regarding the business of Dalton, Greiner, Hartman, Maher & Co., LLC and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Dalton, Greiner, Hartman, Maher & Co., LLC and is incorporated herein by reference. Information about the business of Dalton, Greiner, Hartman, Maher & Co., LLC and the directors and principal executive officers of Dalton, Greiner, Hartman, Maher & Co., LLC is also included in the Form ADV filed by Dalton, Greiner, Hartman, Maher & Co., LLC with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-62895), which is incorporated herein by reference.

 

  (f) EAM Investors, LLC performs investment management services for the Registrant and certain other clients. Information regarding the business of EAM Investors, LLC and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by EAM Investors, LLC and is incorporated herein by reference. Information about the business of EAM Investors, LLC and the directors and principal executive officers of EAM Investors, LLC is also included in the Form ADV filed by EAM Investors, LLC with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-70305), which is incorporated herein by reference.

 

  (g) Loomis, Sayles and Company, L.P. performs investment management services for the Registrant and certain other clients. Information regarding the business of Loomis, Sayles and Company, L.P. and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Loomis, Sayles and Company, L.P. and is incorporated herein by reference. Information about the business of Loomis, Sayles and Company, L.P. and the directors and principal executive officers of Loomis, Sayles and Company, L.P. is also included in the Form ADV filed by Loomis, Sayles and Company, L.P. with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-170), which is incorporated herein by reference.

 

  (h) PGIM, Inc. performs investment management services for the Registrant and certain other clients. Information regarding the business of PGIM, Inc. and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by PGIM, Inc. and is incorporated herein by reference. Information about the business of PGIM, Inc. and the directors and principal executive officers of PGIM, Inc. is also included in the Form ADV filed by PGIM, Inc. with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-22808), which is incorporated herein by reference.

 

  (i) TCW Investment Management Company LLC performs investment management services for the Registrant and certain other clients. Information regarding the business of TCW Investment Management Company LLC and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by TCW Investment Management Company LLC and is incorporated herein by reference. Information about the business of TCW Investment Management Company LLC and the directors and principal executive officers of TCW Investment Management Company LLC is also included in the Form ADV filed by TCW Investment Management Company LLC with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-29075), which is incorporated herein by reference.


Table of Contents
  (j) Threadneedle International Limited performs investment management services for the Registrant and certain other clients. Information regarding the business of Threadneedle International Limited and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Threadneedle International Limited and is incorporated herein by reference. Information about the business of Threadneedle International Limited and the directors and principal executive officers of Threadneedle International Limited is also included in the Form ADV filed by Threadneedle International Limited with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-63196), which is incorporated herein by reference.

 

  (k) Wasatch Advisors Inc performs investment management services for the Registrant and certain other clients. Information regarding the business of Wasatch Advisors Inc and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Wasatch Advisors Inc and is incorporated herein by reference. Information about the business of Wasatch Advisors Inc and the directors and principal executive officers of Wasatch Advisors Inc is also included in the Form ADV filed by Wasatch Advisors Inc with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-11095), which is incorporated herein by reference.

 

  (l) Water Island Capital, LLC performs investment management services for the Registrant and certain other clients. Information regarding the business of Water Island Capital, LLC and certain of its officers is set forth in the Prospectuses and Statement of Additional Information of the Registrant’s portfolio(s) subadvised by Water Island Capital, LLC and is incorporated herein by reference. Information about the business of Water Island Capital, LLC and the directors and principal executive officers of Water Island Capital, LLC is also included in the Form ADV filed by Water Island Capital, LLC with the SEC pursuant to the Investment Advisers Act of 1940 (File No. 801-57341), which is incorporated herein by reference.

 

Item 32. Principal Underwriter

 

  (a) Columbia Management Investment Distributors, Inc. acts as principal underwriter for the following investment companies, including the Registrant:

Columbia Acorn Trust; Columbia Funds Series Trust; Columbia Funds Series Trust I; Columbia Funds Series Trust II; Columbia Funds Variable Series Trust II; Columbia Funds Variable Insurance Trust and Wanger Advisors Trust.

 

  (b) As to each director, principal officer or partner of Columbia Management Investment Distributors, Inc.

 

Name and Principal Business

Address*

  

Position and Offices

with Principal Underwriter

  

Positions and Offices

with Registrant

William F. Truscott    Chief Executive Officer    Board Member, Senior Vice President
Joseph Kringdon    President and Head of Intermediary Distribution    None
Jeffrey F. Peters    Managing Director and Head of Global Institutional Distribution    None
Dave K. Stewart    Chief Financial Officer    None


Table of Contents
Scott R. Plummer    Senior Vice President, Head of Global Asset Management Legal and Assistant Secretary    None
Michael E. DeFao    Vice President, Chief Legal Officer and Assistant Secretary    Vice President and Assistant Secretary
Stephen O. Buff    Vice President, Chief Compliance Officer    None
Paulo Botelho    Vice President – Investor and Intermediary Services    None
Joe Feloney    Vice President – National Sales Manager – U.S. Trust/Private Wealth Management    None
Thomas A. Jones    Vice President and Head of Strategic Relations    None
Gary Rawdon    Vice President – Sales Governance and Administration    None
Leslie A. Walstrom    Vice President and U.S. Head of Marketing    None
Thomas R. Moore    Secretary    None
Paul B. Goucher    Vice President and Assistant Secretary   

Senior Vice President,

Chief Legal Officer and Assistant Secretary

Tara W. Tilbury    Vice President and Assistant Secretary    Assistant Secretary
Nancy W. LeDonne    Vice President and Assistant Secretary    None
Ryan C. Larrenaga    Vice President and Assistant Secretary    Vice President and Secretary
Joseph L. D’Alessandro    Vice President and Assistant Secretary    Assistant Secretary
Christopher O. Petersen    Vice President and Assistant Secretary    President and Principal Executive Officer
Eric T. Brandt    Vice President and Assistant Secretary    None
Shweta J. Jhanji    Treasurer    None
Michael Tempesta    Anti-Money Laundering Officer and Identity Theft Prevention Officer    None
Kevin Wasp    Ombudsman    None
Kristin Weisser    Conflicts Officer    None

 

* The principal business address of Columbia Management Investment Distributors, Inc. is 225 Franklin Street, Boston, MA 02110.

 

  (c) Not Applicable.


Table of Contents
Item 33. Location of Accounts and Records

Person maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules thereunder include:

 

  Registrant, 225 Franklin Street, Boston, MA 02110;

 

  Registrant’s investment adviser and administrator, Columbia Management Investment Advisers, LLC, 225 Franklin Street, Boston, MA 02110;

 

  Registrant’s subadviser, AQR Capital Management, LLC, Two Greenwich Plaza, 3rd Floor, Greenwich, CT 06830;

 

  Registrant’s subadviser, Boston Partners Global Investors, Inc., 909 Third Avenue, New York, NY 10022;

 

  Registrant’s subadviser, BMO Asset Management, Corp., 115 South LaSalle Street, 11 th Floor, Chicago, IL, 60603;

 

  Registrant’s subadviser, Conestoga Capital Advisors, LLC, 550 East Swedesford Road, Suite 120, Wayne, PA 19087;

 

  Registrant’s subadviser, Dalton, Greiner, Hartman, Maher & Co., 565 Fifth Avenue, Suite 2101, New York, NY 10017;

 

  Registrant’s subadviser, EAM Investors, LLC, 2533 South Coast Highway 101, Suite 240, Cardiff-by-the-Sea, CA 92007;

 

  Registrant’s subadviser, Loomis, Sayles and Company, L.P., One Financial Center, Boston, MA 02111;

 

  Registrant’s subadviser, PGIM, Inc./Prudential Financial, Inc., 655 Broad Street, Newark, NJ 07102;

 

  Registrant’s subadviser, TCW Investment Management Company LLC, 865 South Figueroa Street, Suite 1800, Los Angeles, CA 90017;

 

  Registrant’s subadviser, Threadneedle International Limited, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom;

 

  Registrant’s subadviser, Wasatch Advisors Inc, 505 Wakara Way, 3 rd Floor, Salt Lake City, UT 84108;

 

  Registrant’s subadviser, Water Island Capital, LLC, 41 Madison Avenue, 42nd floor, New York, NY 10010;

 

  Registrant’s provider of advisory service as delegated by DGHM, Real Estate Management Services Group, LLC, 1100 Fifth Avenue South, Suite 305, Naples, FL 34102;

 

  Registrant’s former subadviser, Eaton Vance Management, Two International Place, Boston, MA 02110;

 

  Registrant’s former subadviser, Federated Investment Management Company, Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779;

 

  Registrant’s former subadviser, Nordea Investment Management North America, Inc., 437 Madison Avenue, New York, NY 10022;

 

  Registrant’s former subadviser, RS Investment Management Co. LLC, 388 Market Street, Suite 1700, San Francisco, CA 94111;

 

  Registrant’s principal underwriter, Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA, 02110;

 

  Registrant’s transfer agent, Columbia Management Investment Services Corp., 225 Franklin Street, Boston, MA, 02110;

 

  Registrant’s custodian, JP Morgan Chase Bank, N.A., 1 Chase Manhattan Plaza 19 th Floor, New York, NY 10005; and

 

  Registrant’s former custodian, State Street Bank and Trust Company, State Street Financial Center, One Lincoln Street, Boston, MA 02111.


Table of Contents

In addition, Iron Mountain Records Management is an off-site storage facility housing historical records that are no longer required to be maintained on-site. Records stored at this facility include various trading and accounting records, as well as other miscellaneous records. The address for Iron Mountain Records Management is 920 & 950 Apollo Road, Eagan, MN 55121.

 

Item 34. Management Services

Not Applicable.

 

Item 35. Undertakings

Not Applicable.


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, COLUMBIA FUNDS SERIES TRUST I, certifies that it meets all the requirements for effectiveness of this Amendment to its Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and The Commonwealth of Massachusetts on the 30th day of September, 2016.

 

COLUMBIA FUNDS SERIES TRUST I
By:  

/s/ Christopher O. Petersen

 

Christopher O. Petersen

President

Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 30th day of September, 2016.

 

Signature         Capacity    Signature         Capacity

/s/ Christopher O. Petersen

      President   

/s/ David M. Moffett*

      Trustee
Christopher O. Petersen       (Principal Executive Officer)        David M. Moffett      

/s/ Michael G. Clarke*

      Chief Financial Officer   

/s/ Charles R. Nelson*

      Trustee
    Michael G. Clarke       (Principal Financial Officer)        Charles R. Nelson      
      Chief Accounting Officer         
      (Principal Accounting Officer)         

/s/ Douglas A. Hacker*

      Chair of the Board   

/s/ John J. Neuhauser*

      Trustee
    Douglas A. Hacker              John J. Neuhauser      

/s/ Janet L. Carrig*

      Trustee   

/s/ Patrick J. Simpson*

      Trustee
    Janet L. Carrig              Patrick J. Simpson      

/s/ Nancy T. Lukitsh*

      Trustee   

/s/ William F. Truscott*

      Trustee
    Nancy T. Lukitsh              William F. Truscott      

/s/ William E. Mayer*

      Trustee   

/s/ Anne-Lee Verville*

      Trustee
    William E. Mayer              Anne-Lee Verville      

 

*  

By:

 

/s/ Joseph L. D’ Alessandro

 

Name:

  Joseph L. D’ Alessandro**
    Attorney-in-fact

 

** Executed by Joseph L. D’ Alessandro on behalf of Michael G. Clarke pursuant to a Power of Attorney, dated May 23, 2016 and incorporated by reference to Post-Effective Amendment No. 261 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(3)), filed with the Commission on May 27, 2016, and on behalf of each of the Trustees pursuant to a Trustees Power of Attorney, dated January 26, 2016, and incorporated by reference to Post-Effective Amendment No. 251 to Registration Statement No. 2-99356 of the Registrant on Form N-1A (Exhibit (q)(1)), filed with the Commission on February 12, 2016.


Table of Contents

Exhibit Index

 

(d)(1)(i)

   Schedule A and Schedule B, as of October 1, 2016, to the Management Agreement between Columbia Management Investment Advisers, LLC, Columbia Funds Variable Insurance Trust and the Registrant, as of April 25, 2016

(d)(2)(i)

   Schedule A and Schedule B, as of August 17, 2016, to the Management Agreement between Columbia Management Investment Advisers, LLC and the Registrant, as of April 25, 2016, for Active Portfolios ® Multi-Manager Directional Alternatives Fund

(d)(3)(ii)

   Amendment No. 1, dated August 18, 2016 to the Subadvisory Agreement dated March 7, 2012 between Columbia Management Investment Advisers, LLC and AQR Capital Management, LLC on behalf of Active Portfolios ® Multi-Manager Directional Alternatives Fund

(d)(15)

   Subadvisory Agreement between Columbia Management Investment Advisers, LLC and Boston Partners Global Investors Inc., on behalf of Active Portfolios ® Multi-Manager Directional Alternatives Fund

(e)(1)(i)

   Restated Schedule I, dated August 17, 2016 and Schedule II, to Amended and Restated Distribution Agreement by and between the Registrant and Columbia Management Investment Distributors, Inc., dated March 1, 2016

(g)(6)

   Addendum to Master Global Custody Agreement (related to Active Portfolios ® Multi-Manager Directional Alternatives Fund)

(h)(1)(i)

   Schedule A, effective August 17, 2016 and Schedule B, effective October 1, 2015, to the Amended and Restated Transfer and Dividend Disbursing Agent Agreement by and between the Registrant and Columbia Management Investment Services Corp., dated March 1, 2016

(h)(4)(i)

   Restated Schedule A, effective October 1, 2016, to the Amended and Restated Fee Waiver and Expense Cap Agreement, effective July 1, 2016, by and among Columbia Management Investment Advisers, LLC, Columbia Management Investment Distributors, Inc., Columbia Management Investment Services Corp., the Registrant and Columbia Funds Variable Insurance Trust

(i)(10)

   Opinion of Counsel of Ropes & Gray LLP, with respect to Active Portfolios ® Multi-Manager Directional Alternatives Fund

(m)(1)

   Amended and Restated Distribution Plan, as of August 17, 2016

(p)(3)

   Code of Ethics of AQR Capital Management, LLC (a subadviser of Active Portfolios ® Multi-Manager Alternative Strategies Fund and Active Portfolios ® Multi-Manager Directional Alternatives Fund ), effective February 2016

(p)(14)

   Code of Ethics of Boston Partners (a subadviser of Active Portfolios ® Multi-Manager Directional Alternatives Fund), effective March 1, 2016

Schedules A and B – Management Agreement – CFST I and CFVIT

 

SCHEDULE A

As of October 1, 2016

 

Series

  

Effective Date

Columbia Funds Series Trust I   
Active Portfolios ® Multi-Manager Alternative Strategies Fund    January 1, 2016
Active Portfolios ® Multi-Manager Growth Fund    August 1, 2015
Active Portfolios ® Multi-Manager Small Cap Equity Fund    January 1, 2016
Active Portfolios ® Multi-Manager Total Return Bond Fund    January 1, 2016
CMG Ultra Short Term Bond Fund    December 1, 2015
Columbia Adaptive Risk Allocation Fund    October 1, 2015
Columbia Alternative Beta Fund    October 1, 2016
Columbia AMT-Free Connecticut Intermediate Muni-Bond Fund    March 1, 2016
Columbia AMT-Free Intermediate Muni-Bond Fund    March 1, 2016
Columbia AMT-Free Massachusetts Intermediate Muni-Bond Fund    March 1, 2016
Columbia AMT-Free New York Intermediate Muni-Bond Fund    March 1, 2016
Columbia AMT-Free Oregon Intermediate Muni Bond Fund    December 1, 2015
Columbia Balanced Fund    January 1, 2016
Columbia Bond Fund    September 1, 2015
Columbia California Tax-Exempt Fund    March 1, 2016
Columbia Contrarian Core Fund    January 1, 2016
Columbia Corporate Income Fund    September 1, 2015
Columbia Disciplined Small Core Fund    January 1, 2016
Columbia Diversified Absolute Return Fund    October 1, 2015
Columbia Diversified Real Return Fund    June 1, 2016
Columbia Dividend Income Fund    October 1, 2015
Columbia Emerging Markets Fund    January 1, 2016
Columbia Global Dividend Opportunities Fund    January 1, 2016
Columbia Global Energy and Natural Resources Fund    January 1, 2016
Columbia Global Technology Growth Fund    January 1, 2016
Columbia Greater China Fund    January 1, 2016
Columbia High Yield Municipal Fund    October 1, 2015
Columbia Large Cap Growth Fund    December 1, 2015
Columbia Mid Cap Growth Fund    January 1, 2016
Columbia Multi-Asset Income Fund    September 1, 2015
Columbia New York Tax-Exempt Fund    March 1, 2016
Columbia Pacific/Asia Fund    August 1, 2015
Columbia Real Estate Equity Fund    May 1, 2016
Columbia Select Large Cap Growth Fund    August 1, 2015
Columbia Small Cap Growth Fund I    January 1, 2016
Columbia Small Cap Value Fund I    September 1, 2015
Columbia Strategic Income Fund    March 1, 2016
Columbia Tax-Exempt Fund    December 1, 2015
Columbia Total Return Bond Fund    September 1, 2015
Columbia U.S. Social Bond Fund    December 1, 2015
Columbia U.S. Treasury Index Fund    September 1, 2015
Columbia Value and Restructuring Fund    July 1, 2015


Schedules A and B – Management Agreement – CFST I and CFVIT

 

    

Effective Date

Columbia Funds Variable Insurance Trust

  
Columbia Variable Portfolio – Asset Allocation Fund    May 1, 2016
Columbia Variable Portfolio – Contrarian Core Fund    May 1, 2016
Columbia Variable Portfolio – Diversified Absolute Return Fund    May 1, 2016
Columbia Variable Portfolio – Long Government/Credit Bond Fund    May 1, 2016
Columbia Variable Portfolio – Managed Volatility Conservative Fund    May 1, 2016
Columbia Variable Portfolio – Managed Volatility Conservative Growth Fund    May 1, 2016
Columbia Variable Portfolio – Managed Volatility Growth Fund    May 1, 2016
Columbia Variable Portfolio – Select Large Cap Growth Fund    May 1, 2016
Columbia Variable Portfolio – Small Cap Value Fund    May 1, 2016
Columbia Variable Portfolio – Small Company Growth Fund    May 1, 2016
Columbia Variable Portfolio – Strategic Income Fund    May 1, 2016
Variable Portfolio – AQR Managed Futures Strategy Fund    May 1, 2016
Variable Portfolio – Lazard International Equity Advantage Fund    May 1, 2016
Variable Portfolio – Multi-Manager Diversified Income Fund    May 1, 2016
Variable Portfolio – Multi-Manager Interest Rate Adaptive Fund    May 1, 2016


Schedules A and B – Management Agreement – CFST I and CFVIT

 

SCHEDULE B

Fee Schedule

As of October 1, 2016

For the following funds, the asset charge for each calendar day of each year shall be equal to the total of 1/365 th (1/366 th in each leap year) of the amount computed in accordance with the fee schedule in the table below:

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

Active Portfolios ® Multi-Manager Alternative Strategies Fund*

 

Variable Portfolio (VP) – AQR Managed Futures Strategy Fund*

  

January 1, 2016

 

 

May 1, 2016

  

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

1.100%

1.050%

1.020%

0.990%

0.960%

0.950%

Active Portfolios ® Multi-Manager Total Return Bond Fund

   January 1, 2016   

$0 - $500

>$500 - $1,000

>$1,000 - $2,000

>$2,000 - $3,000

>$3,000 - $6,000

>$6,000 - $7,500

>$7,500 - $9,000

>$9,000 - $12,000

>$12,000 - $20,000

>$20,000 - $24,000

>$24,000 - $50,000

>$50,000

  

0.500%

0.495%

0.480%

0.460%

0.450%

0.430%

0.415%

0.410%

0.390%

0.380%

0.360%

0.340%

Columbia VP – Long Government/Credit Bond Fund

   May 1, 2016      

Active Portfolios ® Multi-Manager Growth Fund

Columbia Select Large Cap Growth Fund

 

   August 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

0.770%

0.720%

0.670%

0.620%

0.600%

0.580%

0.570%

Columbia Large Cap Growth Fund

 

   December 1, 2015      

Columbia Contrarian Core Fund

Columbia Global Dividend Opportunity Fund

 

   January 1, 2016      

Columbia VP – Contrarian Core Fund

Columbia VP – Select Large Cap Growth Fund

   May 1, 2016      

 

B-1


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

Active Portfolios ® Multi Manager Small Cap Equity Fund

   January 1, 2016   

$0 - $250

>$250 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $12,000

>$12,000

  

0.980%

0.930%

0.875%

0.870%

0.860%

0.850%

CMG Ultra Short Term Bond Fund

   December 1, 2015    All    0.250% (1)

Columbia Alternative Beta Fund*

   October 1, 2016   

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $12,000

>$12,000

  

0.960%

0.955%

0.950%

0.940%

0.930%

Columbia Adaptive Risk Allocation Fund

   October 1, 2015   

Category 1

Assets invested in affiliated mutual funds, exchange-traded funds and closed-end funds that pay a management fee (or advisory fee, as applicable) to the Investment Manager.

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $12,000

>$12,000

  

0.060%

0.055%

0.050%

0.040%

0.030%

     

 

Category 2

Assets invested in exchange-traded funds and mutual funds that are not managed by the Investment Manager or its affiliates.

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $12,000

>$12,000

  

0.160%

0.155%

0.150%

0.140%

0.130%

     

Category 3

Securities, instruments and other assets not described above, including without limitation affiliated mutual funds, exchange-traded funds and closed-end funds that do not pay a management fee to the Investment Manager, third party closed-end funds, derivatives and individual securities.

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

0.760%

0.745%

0.730%

0.720%

0.690%

0.665%

0.630%

 

B-2


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

Columbia AMT-Free Oregon Intermediate Muni Bond Fund

 

  

December 1, 2015

 

  

$0 - $250

>$250 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $6,000

>$6,000 - $7,500

>$7,500 - $12,000

>$12,000

  

0.470%

0.465%

0.415%

0.380%

0.340%

0.330%

0.320%

0.310%

Columbia AMT-Free Connecticut Intermediate Muni-Bond Fund

Columbia AMT-Free Massachusetts Intermediate Muni-Bond Fund

Columbia AMT-Free New York Intermediate Muni-Bond Fund

Columbia California Tax-Exempt Fund

Columbia New York Tax-Exempt Fund

   March 1, 2016      

Columbia Tax-Exempt Fund

 

Columbia AMT-Free Intermediate Muni-Bond Fund

  

December 1, 2015

 

March 1, 2016

  

$0 - $500

>$500 - $1,000

>$1,000 - $2,000

>$2,000 - $3,000

>$3,000 - $6,000

>$6,000 - $9,000

>$9,000 - $10,000

>$10,000 - $12,000

>$12,000 - $15,000

>$15,000 - $24,000

>$24,000 - $50,000

>$50,000

  

0.480%

0.475%

0.445%

0.420%

0.385%

0.360%

0.350%

0.340%

0.330%

0.320%

0.300%

0.290%

        

Columbia Balanced Fund

 

 

Columbia Dividend Income Fund

  

January 1, 2016

 

 

October 1, 2015

  

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

0.720%

0.670%

0.620%

0.570%

0.550%

0.530%

0.520%

Columbia Diversified Real Return Fund

   June 1, 2016   

Category 1

Assets invested in affiliated funds (including ETFs and closed-end funds) that pay a management fee (or advisory fee, as applicable) to the Investment Manager

  

 

0.02%

     

 

Category 2

Assets invested in ETFs and mutual funds that are not managed by the Investment Manager or its affiliates. Securities, instruments and other assets not described above, including without limitation affiliated mutual funds, ETFs and closed-end mutual funds that do not pay a management fee to the Investment Manager, third party closed-end funds, derivatives and individual securities.

  

 

0.76%

 

B-3


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

Columbia Bond Fund

 

Columbia Corporate Income Fund

Columbia Total Return Bond Fund

   September 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $2,000

>$2,000 - $3,000

>$3,000 - $6,000

>$6,000 - $7,500

>$7,500 - $9,000

>$9,000 - $12,000

>$12,000 - $20,000

>$20,000 - $24,000

>$24,000 - $50,000

>$50,000

  

0.500%

0.495%

0.480%

0.460%

0.450%

0.430%

0.415%

0.410%

0.390%

0.380%

0.360%

0.340%

Columbia Diversified Absolute Return Fund*

   October 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

1.180%

1.130%

1.100%

1.070%

1.040%

1.030%

Columbia Emerging Markets Fund

   January 1, 2016   

$0 - $250

>$250 - $500

>$500 - $750

>$750 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000

  

1.180%

1.160%

1.140%

1.115%

0.870%

0.820%

0.770%

0.720%

Columbia Global Energy and Natural Resources Fund

   January 1, 2016   

$0 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000

  

0.750%

0.670%

0.620%

0.600%

0.580%

 

B-4


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

Columbia Global Technology Growth Fund

   January 1, 2016   

$0 - $500

$500 - $1,000

>$1,000

  

0.870%

0.820%

0.770%

Columbia Greater China Fund

   January 1, 2016   

$0 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000

  

0.950%

0.870%

0.820%

0.770%

0.720%

Columbia High Yield Municipal Fund

   October 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $2,000

>$2,000 - $3,000

>$3,000 - $6,000

>$6,000 - $7,500

>$7,500 - $10,000

>$10,000 - $12,000

>$12,000 - $15,000

>$15,000 - $24,000

>$24,000 - $50,000

>$50,000

  

0.540%

0.535%

0.505%

0.480%

0.445%

0.420%

0.410%

0.400%

0.390%

0.380%

0.360%

0.340%

Columbia Mid Cap Growth Fund

   January 1, 2016   

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $12,000

>$12,000

  

0.820%

0.770%

0.720%

0.670%

0.660%

0.650%

Columbia Multi-Asset Income Fund

   September 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

0.660%

0.625%

0.610%

0.600%

0.570%

0.545%

0.510%

Columbia Pacific/Asia Fund

   August 1, 2015   

$0 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000

  

0.950%

0.870%

0.820%

0.770%

0.720%

Columbia Real Estate Equity Fund

   May 1, 2016   

$0 - $500

$500 - $1,000

$1,000 - $1,500

$1,500 - $3,000

>$3,000

  

0.750%

0.745%

0.720%

0.670%

0.660%

 

B-5


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

Columbia Small Cap Value Fund I

 

Columbia Disciplined Small Core Fund

Columbia Small Cap Growth Fund I

 

Columbia VP – Small Cap Value Fund

Columbia VP – Small Company Growth Fund

  

September 1, 2015

 

January 1, 2016

 

May 1, 2016

  

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $12,000

>$12,000

  

0.870%

0.820%

0.770%

0.760%

0.750%

Columbia Strategic Income Fund

 

Columbia VP – Strategic Income Fund

  

March 1, 2016

 

May 1, 2016

  

$0 - $500

>$500 - $1,000

>$1,000 - $2,000

>$2,000 - $3,000

>$3,000 - $6,000

>$6,000 - $7,500

>$7,500 - $9,000

>$9,000 - $10,000

>$10,000 - $12,000

>$12,000 - $15,000

>$15,000 - $20,000

>$20,000 - $24,000

>$24,000 - $50,000

>$50,000

  

0.600%

0.590%

0.575%

0.555%

0.530%

0.505%

0.490%

0.481%

0.469%

0.459%

0.449%

0.433%

0.414%

0.393%

Columbia U.S. Social Bond Fund

   December 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $3,000

>$3,000 - $12,000

>$12,000

  

0.570%

0.565%

0.560%

0.550%

0.540%

Columbia U.S. Treasury Index Fund (2)

   September 1, 2015    All    0.400%

Columbia Value and Restructuring Fund

   July 1, 2015   

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

0.750%

0.740%

0.670%

0.620%

0.600%

0.580%

0.570%

Columbia VP – Asset Allocation Fund

   May 1, 2016   

Category 1

Assets invested in securities, (other than third-party advised mutual funds and funds that pay a management fee (or advisory fee, as applicable) to the Investment Manager) including other funds advised by the Investment Manager that do not pay a management fee, exchange-traded funds, derivatives and individual securities.

  

 

0.570%

 

B-6


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

     

Category 2

Assets invested in non-exchange traded third-party advised mutual funds

  

 

0.120%

     

Category 3

Assets invested in underlying funds that pay a management fee to the Investment Manager.

  

 

0.020%

Columbia VP – Diversified Absolute Return Fund*

   May 1, 2016   

$0 - $500

$500 - $1,000

$1,000 - $3,000

$3,000 - $6,000

$6,000 - $12,000

> $12,000

  

1.100%

1.050%

1.020%

0.990%

0.960%

0.950%

Columbia VP – Managed Volatility Conservative Fund

Columbia VP – Managed Volatility Conservative Growth Fund

Columbia VP – Managed Volatility Growth Fund

 

 

 

 

VP – Multi-Manager Diversified Income Fund

VP – Multi-Manager Interest Rate Adaptive Fund

   May 1, 2016   

Category 1

Assets invested in affiliated underlying funds (including ETFs and closed-end funds) that pay a management fee (or advisory fee, as applicable) to the Investment Manager

 

Category 2

Assets invested in securities (other than affiliated underlying funds (including ETFs and closed end funds) that pay a management fee to the Investment Manager), including other funds advised by the Investment Manager that do not pay a management fee, third party funds, derivatives and individual securities

  

 

0.02%

     

$0 - $500

>$500 - $1,000

>$1,000 - $1,500

>$1,500 - $3,000

>$3,000 - $6,000

>$6,000 - $12,000

>$12,000

  

0.720%

0.670%

0.620%

0.570%

0.550%

0.530%

0.520%

 

B-7


Schedules A and B – Management Agreement – CFST I and CFVIT

 

Fund

  

Schedule B Effective Date

  

Net Assets (millions)

  

Annual rate at each asset

level

“Asset Charge”

VP – Lazard International Equity Advantage Fund

   May 1, 2016   

$0 - $500

$500 - $1,000

$1,000 - $1,500

$1,500 - $3,000

$3,000 - $6,000

$6,000 - $12,000

>$12,000

  

0.870%

0.820%

0.770%

0.720%

0.700%

0.680%

0.670%

 

* When calculating asset levels for purposes of determining fee breakpoints, asset levels are based on net assets of the Fund, including assets invested in any wholly-owned subsidiary advised by the Investment Manager (“Subsidiaries”). Fees payable by the Fund under this agreement shall be reduced by any management fees paid to the Investment Manager by any Subsidiaries under separate management agreements with the Subsidiaries.
(1)   Fee is a “unitary fee,” as contemplated by Section 3(b) of this Agreement, pursuant to which the Investment Manager pays all operating costs and expenses of CMG Ultra Short Term Bond Fund (other than independent trustees’ fees and expenses, including their legal counsel, auditing expenses, interest incurred on borrowing by the Fund, if any, portfolio transaction expenses, taxes and extraordinary expenses), including accounting expenses (other than audit fees), legal fees for the Fund, transfer agent fees, custodian fees, governmental fees, cost of stock certificates and any other expenses (including clerical expenses) of issue, sale, repurchase, or redemption of shares, expenses of registering or qualifying shares for sale, transfer taxes, and all expenses of preparing the Fund’s registration statement and prospectus, and the cost of printing and delivering to shareholders prospectuses and reports, all executive salaries and executive expenses, office rent of the Fund, ordinary office expenses (other than the expense of clerical services relating to the administration of the Fund) and for any other expenses that, if otherwise borne by the Fund, would cause the Fund to “be deemed to be acting as a distributor of securities of which it is the issuer, other than through an underwriter” pursuant to Rule 12b-1 under the Act.
(2) The Investment Manager has agreed to pay all operating expenses of the Fund with the exception of brokerage fees and commissions, taxes, interest, fees and expenses of Trustees who are not officers, directors or employees of the Investment Manager or its affiliates, distribution (12b-1) and/or shareholder servicing fees, and any extraordinary non-recurring expenses that may arise, including but not limited to, litigation expenses.

The computation shall be made for each calendar day on the basis of net assets as of the close of the preceding day. In the case of the suspension of the computation of net asset value, the fee for each calendar day during such suspension shall be computed as of the close of business on the last full day on which the net assets were computed. Net assets as of the close of a full day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day.

 

B-8


Schedules A and B – Management Agreement – CFST I and CFVIT

 

IN WITNESS THEREOF, the parties hereto have executed the foregoing Schedule A and Schedule B as of August 17, 2016.

 

COLUMBIA FUNDS SERIES TRUST I
COLUMBIA FUNDS VARIABLE INSURANCE TRUST
By:  

/s/ Christopher O. Petersen

  Name:   Christopher O. Petersen
  Title:   President
COLUMBIA MANAGEMENT INVESTMENT ADVISERS, LLC
By:  

/s/ Amy K. Johnson

  Name:   Amy K. Johnson
  Title:   Head of Operations

 

B-9

SCHEDULE A

As of August 17, 2016

 

Series

   Effective Date

Active Portfolios ® Multi-Manager Directional Alternatives Fund

   August 17, 2016

 

A-1


SCHEDULE B

Fee Schedule

As of August 17, 2016

For the following funds, the asset charge for each calendar day of each year shall be equal to the total of 1/365 th (1/366 th in each leap year) of the amount computed in accordance with the fee schedule in the table below:

 

Fund

   Schedule B Effective Date    Net Assets (millions)    Annual rate at each
asset level

“Asset Charge”

Active Portfolios ® Multi-Manager Directional Alternatives Fund

   August 17, 2016    All    1.60%

The computation shall be made for each calendar day on the basis of net assets as of the close of the preceding day. In the case of the suspension of the computation of net asset value, the fee for each calendar day during such suspension shall be computed as of the close of business on the last full day on which the net assets were computed. Net assets as of the close of a full day shall include all transactions in shares of the Fund recorded on the books of the Fund for that day.


IN WITNESS THEREOF, the parties hereto have executed the foregoing Schedule A and Schedule B as of August 17, 2016.

 

COLUMBIA FUNDS SERIES TRUST I
By:  

/s/ Christopher O. Petersen

  Name:   Christopher O. Petersen
  Title:   President
COLUMBIA MANAGEMENT INVESTMENT ADVISERS, LLC
By:  

/s/ Amy K. Johnson

  Name:   Amy K. Johnson
  Title:   Head of Operations

AMENDMENT NO. 1

TO THE SUBADVISORY AGREEMENT

This Amendment No. 1 (the “Amendment”), made and entered into as of August 18, 2016, is made a part of the Subadvisory Agreement between Columbia Management Investment Advisers, LLC, a Minnesota limited liability company (“Investment Manager”) and AQR Capital Management, LLC, a Delaware limited liability company (“Subadviser”), dated March 7, 2012 (the “Agreement”).

WHEREAS, Investment Manager desires to retain Subadviser to provide investment advisory services to an additional mutual fund, Active Portfolios ® Multi-Manager Directional Alternatives Fund, and Subadviser is willing to render such investment advisory services; and

WHEREAS, Investment Manager and Subadviser desire to amend the Agreement, including Schedule A thereto, to add, effective October 3, 2016, Active Portfolios ® Multi-Manager Directional Alternatives Fund as a “Fund” covered by the Agreement.

NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:

 

  1. Inclusion of additional Fund . All references to the “Fund” in the Agreement shall be, and hereby are, changed to the “Fund(s),” and shall mean those “Fund(s)” identified on the amended Schedule A attached to this Amendment.

Schedule A . Schedule A to the Agreement shall be, and hereby is, deleted and replaced with the Schedule A attached hereto.

 

  2. Portfolio Management . Section 1(a)(iii)(D) of the Agreement shall be, and hereby is, deleted and replaced with the following:

Derivatives Authority . Subadviser is authorized on behalf of the Fund, consistent with the investment discretion delegated to Subadviser herein, and is hereby appointed as the Fund’s agent and attorney in fact with authority to: (i) enter into agreements and execute any documents on behalf of the Fund (e.g. any futures or derivatives documentation such as exchange traded and over-the-counter transaction documentation, as applicable, it being understood that legal counsel for the Investment Manager will review ISDA Master Agreements, Futures Commission Merchant (“FCM”) agreements, FCM agreements for cleared swaps and equity prime brokerage agreements (if applicable) and any similar


agreements prior to Subadviser’s execution thereof) required with respect to any investments made for the Fund (such documentation includes but is not limited to any market and/or industry standard documentation and the standard representations contained therein); (ii) acknowledge the receipt of brokers’ risk disclosure statements, electronic trading disclosure statements and similar disclosures; and (iii) open, continue and terminate brokerage accounts and other brokerage arrangements with respect to the portfolio transactions entered into by Subadviser on behalf of the Fund. Subadviser further shall have the authority to instruct the custodian to: (i) pay cash for securities and other property delivered for the Fund; (ii) deliver or accept delivery of, upon receipt of payment or payment upon receipt of, securities, commodities or other property underlying any futures or options contracts, and other property purchased or sold for the Fund; and (iii) deposit margin or collateral which shall include the transfer of money, securities or other property to the extent permitted by the 1940 Act and the rules and regulations thereunder and necessary to meet the obligations of the Fund with respect to any investments made in accordance with the Prospectus and SAI. Subadviser shall not have the authority to cause the Investment Manager to deliver securities or other property, or pay cash to Subadviser other than payment of the management fee provided for in this Agreement.

 

  3. Portfolio Management . Section 1(a) of the Agreement shall be, and hereby is, amended by adding the following as paragraph (vi):

 

  (vi) Management of Funds with Multiple Subadvisers . Subadviser’s responsibilities for providing services to a Fund shall be limited to the portion of the Fund’s assets allocated to Subadviser (“Subadviser Account”). Subadviser shall not, without the prior approval of Investment Manager, effect any transactions that would cause the Subadviser Account, treated as a separate fund, to be out of compliance with the Fund’s investment objectives, policies and restrictions. Subadviser shall not consult with any other subadviser of a Fund concerning transactions for the Fund in securities or other assets.


  4. Duration . Section 9(a) shall be, and hereby is, deleted and replaced with the following:

“Unless sooner terminated as provided herein, this Agreement, with respect to each Fund identified on Schedule A (as amended from time to time), shall continue from the date identified on such Schedule A only so long as such continuance is specifically approved at least annually in conformity with the requirements of the 1940 Act. Thereafter, if not terminated with respect to a Fund, this Agreement shall continue automatically for successive periods of 12 months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Board members who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party, and (ii) by the Board or by a vote of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund.

 

  5. The following shall be, and is hereby added as Section 23 to the Agreement:

No Third-Party Beneficiaries . The Fund is intended to be a third party beneficiary of this Agreement. For the avoidance of doubt, and without in any way implying that there are any other third-party beneficiaries to the Agreement or any other agreement with respect to the Trust or any of its series, no person other than the Investment Manager and the Subadviser is a party to this Agreement or shall be entitled to any right or benefit arising under or in respect of this Agreement (with the exception of the Fund), and there are no other third-party beneficiaries of this Agreement. Without limiting the generality of the foregoing, nothing in this Agreement is intended to, or shall be read to, (i) create in any other person (including without limitation any shareholder of any Fund) any direct, indirect, derivative, or other rights against the Investment Manager or Subadviser, or (ii) create or give rise to any duty or obligation on the part of the Investment Manager or Subadviser (including without limitation any fiduciary duty) to any person other than the Fund, all of which rights, benefits, duties, and obligations are hereby expressly excluded.


  6. Notices . Section 12 to the Agreement shall be, and hereby is, amended by deleting the addresses for Subadviser and Investment Manager and replacing them with the following:

Subadviser:

AQR Capital Management, LLC

Two Greenwich Plaza, 3rd Floor

Greenwich, CT 06830

Attn: Brendan Kalb, General Counsel

Tel: (203) 742-3618

Fax: (203) 742-3118

with a copy to:

Nicole DonVito, Senior Counsel & Head of Registered Products

AQR Capital Management, LLC

Two Greenwich Plaza, 3 rd Floor

Greenwich, CT 06830

Ph. (203) 742-3815

Fax (203) 742-3315

Investment Manager:

Paul Mikelson

Vice President, Subadvised Strategies

Columbia Threadneedle Investments

707 2 nd Ave. S, Routing: H17 435

Minneapolis, MN 55402

Tel: (612) 671-4452

Fax: (612) 671-0618

with a copy to:

Christopher O. Petersen

Vice President and Lead Chief Counsel

Ameriprise Financial, Inc.

5228 Ameriprise Financial Center, Routing: 27/5228

Minneapolis, MN 55474

Tel: (612) 671-4321

Fax: (612) 671-2680

 

  7. Schedule A . Schedule A to the Agreement shall be, and hereby is, deleted and replaced with the Schedule A attached hereto.


  8. Miscellaneous . Capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. This Amendment may be executed in counterparts, each of which will be deemed an original and all of which together will be deemed to be one and the same agreement. As modified herein, the Agreement is confirmed and remains in full force and effect.

 

  9. Duration and Termination . Section 9(c) to the Agreement shall be, and hereby is, deleted and replaced with the following:

In the event of termination of the Agreement, those paragraphs of the Agreement which govern conduct of the parties’ future interactions with respect to Subadviser having provided investment management services to the Fund(s) for the duration of the Agreement, including, but not limited to, paragraphs 1(a)(iv)(a), 1(c), 1(d), 1(e), 1(f), 8(a), 8(b), 8(c), 15, 17, 18, 20 and 23 shall survive such termination of the Agreement.

 

  10. The following shall be, and hereby is, added as Section 24 to the Agreement:

Other Regulatory Matters .

 

  (1) Investment Manager acknowledges that Subadviser intends to treat each Fund as an “exempt account” under Commodity Futures Trading Commission (“CFTC”) Regulation 4.7(c) under the Commodity Exchange Act (“CEA”) and needs to verify certain information in order for Subadviser to claim relief from the disclosure and certain recordkeeping provisions of the CEA. Accordingly, Investment Manager hereby represents that each Fund is a “qualified eligible person” under CFTC Regulation 4.7 (“Qualified Eligible Person”). Investment Manager agrees to furnish Subadviser with such financial information as it may request to confirm each Fund’s status (or continuing status) as a qualified eligible person and to inform Subadviser promptly if a Fund loses its status as a Qualified Eligible Person.

 

  (2) Investment Manager hereby consents to each Fund being treated as an “exempt account” within the meaning of CFTC Regulation 4.7(c).

 

  (3) Investment Manager and Subadviser each hereby represents that it is:

(a) registered as required with the CFTC as a commodity pool operator, commodity trading advisor, futures commission merchant, introducing broker, retail foreign exchange dealer, swap dealer and/or major swap participant (and is a member of NFA),


(b) is excluded or exempt from such registration requirements and has made all required filings relating thereto, or

(c) is not required to be registered in any capacity with the CFTC or to be a member of NFA because it does not engage in any activity that comes within the definition of any of the registration categories in clause (a) of this Section 24.

(4) Investment Manager hereby represents that it will provide Subadviser reasonable advance notification (in no event less than 30 days) of any decision to

(a) alter its operation of any Fund for which the Investment Manager has claimed an exclusion or exemption from registration as a commodity pool operator on behalf of a Fund, to then register and operate as a commodity pool operator on behalf of the Fund, or

(b) if the Investment Manager is registered as a commodity pool operator on behalf of the Fund, operate such Fund under an exclusion or exemption from registration with the CFTC.

[REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]


PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS ACCOUNT DOCUMENT.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.

 

Columbia Management Investment Advisers, LLC     AQR Capital Management, LLC
By:  

/s/ Jeffrey L. Knight

    By:  

/s/ Nicole DonVito

  Signature       Signature
Name:  

Jeffrey L. Knight

    Name:  

Nicole DonVito

  Printed       Printed
Title:  

Managing Director, Global Head of Investment Solutions and Head of Global Asset Allocation

    Title:  

Senior Counsel & Head of Registered Products

AQR Capital Management, LLC


AMENDMENT NO. 1

TO THE SUBADVISORY AGREEMENT

SCHEDULE A

[REDACTED DATA]

SUBADVISORY AGREEMENT

Agreement made as of the 18th day of August, 2016 by and between Columbia Management Investment Advisers, LLC, a Minnesota limited liability company (“Investment Manager”), and Boston Partners Global Investors, Inc., a Delaware corporation, dba Boston Partners (“Subadviser”).

WHEREAS, the Fund listed in Schedule A is a series of an investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”).

WHEREAS, Investment Manager entered into a Management Agreement (the “Advisory Agreement”) with the Fund pursuant to which Investment Manager provides investment advisory services to the Fund.

WHEREAS, Investment Manager and the Fund each desire to retain Subadviser to provide investment advisory services to the Fund, and Subadviser is willing to render such investment advisory services.

WHEREAS, the effective date of this Agreement is October 3, 2016.

NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:

 

1. Subadviser’s Duties .

 

  (a) Portfolio Management . Subject to supervision by Investment Manager and the Fund’s Board of Directors/Trustees (the “Board”), Subadviser shall manage the investment operations and the composition of that portion of the assets of the Fund which is allocated to Subadviser from time to time by Investment Manager (which portion may include any or all of the Fund’s assets), including the purchase, retention, and disposition thereof, in accordance with the Fund’s investment objectives, policies, and restrictions, and subject to the following understandings:

 

  (i) Investment Decisions . Subadviser shall determine from time to time what investments and securities will be purchased, retained, or sold with respect to that portion of the Fund allocated to it by Investment Manager, and what portion of such assets will be invested or held uninvested as cash. Subadviser is prohibited from consulting with any other subadviser of the Fund concerning transactions of the Fund in securities or other assets, other than for purposes of complying with the conditions of Rule 12d3-1(a) or (b) of the 1940 Act. Subadviser will not be responsible for voting proxies issued by companies held in the Fund although Investment Manager may consult with Subadviser from time to time regarding the voting of proxies of securities owned by the Fund. Subadviser will not be responsible for filing claims in class action settlements related to securities currently or previously held by that portion of the Fund allocated to it by Investment Manager.

 

 

1 | Page


  (ii) Investment Limits . In the performance of its duties and obligations under this Agreement, Subadviser shall act in conformity with applicable limits and requirements, as amended from time to time, as set forth in the (a) Fund’s prospectus (“Prospectus”) and the Fund’s Statement of Additional Information (“SAI”); (b) instructions and directions of Investment Manager and of the Board; and (c) requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended (the “Code”), as applicable to the Fund, and all other applicable federal and state laws and regulations. Investment Manager agrees to give Subadviser prompt written notice if Investment Manager believes any recommendations, advice or investments to be in violation of (a), (b) or (c) above.

 

  (iii) Portfolio Transactions .

 

  (A) Trading . With respect to the securities and other investments to be purchased or sold for the Fund, Subadviser shall place orders with or through such persons, brokers, dealers, or futures commission merchants (including, but not limited to, broker-dealers that are affiliated with Investment Manager or Subadviser) selected by Subadviser; provided, however, that such orders shall be consistent with Subadviser’s brokerage policy; conform with federal securities laws; and be consistent with seeking best execution. The Subadviser may consider the research, investment information, and other services provided by, and the financial responsibility of, brokers, dealers, or futures commission merchants who may effect, or be a party to, any such transaction or other transactions to which Subadviser’s other clients may be a party in accordance with Section 28(e) of the Securities Exchange Act of 1934, as amended. To the extent permitted by law, and consistent with its obligation to seek best execution, Subadviser may execute transactions or pay a broker-dealer a commission, spread or markup in excess of that which another broker-dealer might have charged for executing a transaction provided that Subadviser determines, in good faith, that the execution is appropriate or the commission, spread or markup is reasonable in relation to the value of the brokerage and/or research services provided, viewed in terms of either that particular transaction or Subadviser’s overall responsibilities with respect to the Fund and other clients for which it acts as subadviser. Notwithstanding anything herein to the contrary, to the extent Subadviser is directed by Investment Manager to use a particular broker or brokers to borrow securities to cover securities sold short, Subadviser shall have no responsibility for setting the rate charged to borrow a security or otherwise ensuring that the rate charged by such broker to borrow a security is favorable.

 

 

2 | Page


  (B) Aggregation of Trades . Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or other investments to be sold or purchased for the Fund as well as other clients of Subadviser in order to seek best execution. In such event, allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, will be made by Subadviser in the manner Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients.

 

  (C) Subadviser will not arrange purchases or sales of securities or other investments between the Fund and other accounts advised by Subadviser or its affiliates unless (a) such purchases or sales are in accordance with applicable law (including Rule 17a-7 of the 1940 Act) and the Fund’s policies and procedures as provided in writing to Subadviser along with any amendments, and (b) Subadviser determines the purchase or sale is in the best interests of the Fund.

 

  (D)

Derivatives Authority . Subadviser is authorized on behalf of the Fund, consistent with the investment discretion delegated to Subadviser herein, and is hereby appointed as the Fund’s agent and attorney in fact with authority to: (i) enter into, subject to the review of legal counsel for the Investment Manager prior to Subadviser’s execution thereof, agreements and execute any documents on behalf of the Fund (e.g. any futures or derivatives documentation such as exchange traded and over-the-counter transaction documentation, as applicable) required with respect to any investments made for the Fund (such documentation includes but is not limited to any market and/or industry standard documentation and the standard representations contained therein); (ii) acknowledge the receipt of brokers’ risk disclosure statements, electronic trading disclosure statements and similar disclosures; and (iii) open, continue and terminate brokerage accounts and other brokerage arrangements with respect to the portfolio transactions entered into by Subadviser on behalf of the Fund. Subadviser further shall have the authority to instruct the custodian to: (i) pay cash for securities and other property delivered for the Fund; (ii) deliver or accept delivery of, upon receipt of payment or payment upon receipt of, securities, commodities or other property underlying any futures or options contracts, and other property purchased or sold for the Fund; and (iii) deposit margin or collateral which shall include the transfer of money, securities or other property to the extent permitted by the

 

 

3 | Page


 

1940 Act and the rules and regulations thereunder and necessary to meet the obligations of the Fund with respect to any investments made in accordance with the Prospectus and SAI. Subadviser shall not have the authority to cause the Investment Manager to deliver securities or other property, or pay cash to Subadviser other than payment of the management fee provided for in this Agreement.

 

  (iv) Records and Reports . Subadviser (a) shall maintain such books and records for such time periods as are required of an SEC-registered investment adviser to an investment company registered under the 1940 Act, (b) shall render to the Board such periodic and special reports as the Board (or a Committee thereof) or Investment Manager may reasonably request in writing, and (c) shall meet with any persons at the request of Investment Manager or the Board for the purpose of reviewing Subadviser’s performance under this Agreement at reasonable times and upon reasonable advance notice.

 

  (v) Transaction Reports. Subadviser shall provide Investment Manager a daily trade file with information relating to all transactions concerning the allocated portion of the Fund’s assets for which Subadviser is responsible and shall provide Investment Manager with such other information regarding the Fund upon Investment Manager’s reasonable request. Subadviser shall affirm or send a trade file of these transactions as instruction to the custodian of the Fund.

 

  (b)

Compliance Program and Ongoing Certification(s). As requested, Subadviser shall timely provide to Investment Manager (i) information and commentary for the Fund’s annual and semi-annual reports, in a format approved by Investment Manager, and shall (a) certify that such information and commentary does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information and commentary not misleading, in a format reasonably requested by Investment Manager, as it may be amended from time to time, and (b) provide (i) additional certifications related to Subadviser’s management of the Fund in order to support the Fund’s filings on Form N-CSR and Form N-Q, and the Fund’s Principal Executive Officer’s and Principal Financial Officer’s certifications under Rule 30a-2 of the 1940 Act, thereon; in a format reasonably requested by Investment Manager, as it may be amended from time to time, (ii) a quarterly sub-certification with respect to compliance matters related to Subadviser and Subadviser’s management of the Fund, in a format reasonably requested by Investment Manager, as it may be amended from time to time; (iii) an annual certification from Subadviser’s Chief Compliance Officer, appointed under Rule 206(4)-7 of the Investment Advisers Act of 1940 (the “Advisers Act”), or his or her designee with respect to the design and operation of Subadviser’s compliance program, in a format reasonably requested by Investment Manager, as it may be amended from time to time; and (iv) from time to time Subadviser shall provide such certifications to assist Investment Manager

 

 

4 | Page


 

in fulfilling Investment Manager’s obligations under Rule 38a-1 of the 1940 Act, as are reasonably requested by the Fund or Investment Manager. In addition, Subadviser will, from time to time, provide a written assessment of its compliance program in conformity with current industry standards that is reasonably acceptable to Investment Manager to enable the Fund to fulfill its obligations under Rule 38a-1 of the 1940 Act.

 

  (c) Maintenance of Records . Subadviser shall timely furnish to Investment Manager all information relating to Subadviser’s services hereunder which Subadviser is required by law or regulation to keep and which are needed by Investment Manager to maintain the books and records of the Fund required under the 1940 Act. Subadviser agrees that all records which it maintains for the Fund are the property of the Fund and Subadviser will surrender promptly to the Fund any of such records upon the Fund’s request; provided, however, that Subadviser may retain a copy of such records. Subadviser further agrees to preserve for the periods prescribed under the 1940 Act any such records as are required to be maintained by it pursuant to paragraph 1(a) hereof.

 

  (d) Insurance and Code of Ethics . Subadviser will provide the Fund with reasonable evidence that, with respect to its activities on behalf of the Fund, Subadviser is maintaining (i) adequate errors and omissions insurance and (ii) an appropriate Code of Ethics and related reporting procedures.

 

  (e)

Confidentiality . Each of the parties hereto agrees that it shall exercise the same standard of care that it uses to protect its own confidential and proprietary information (“Confidential Information”), but no less than reasonable care, to protect the Confidential Information of the other party. As used herein, Confidential Information, includes, but is not limited, to “Fund Portfolio Information,” which refers to confidential and proprietary information with regard to (i) the portfolio holdings and characteristics of the portion of the Fund allocated to Subadviser that Subadviser manages under the terms of this Agreement, and (ii) any copies of any agreements between the Investment Manager and its various counterparties and all the terms and provisions contained therein, which the Investment Manager (which term shall include the Investment Manager’s directors, officers, employees, agents, advisors, proposed financing sources, attorneys and accountants) may furnish, disclose or reveal to Subadviser (which term shall include Subadviser’s directors, officers, employees, agents, advisors, proposed financing sources, attorneys and accountants). Each party hereby agrees to restrict access to the other party’s Confidential Information to its employees who will use it only for the purpose of providing services under this Agreement. The foregoing shall not prevent a party from disclosing Confidential Information (1) that is publicly known or becomes publicly known through no unauthorized act; (2) that is rightfully received from a third party without obligation of confidentiality; (3)(a) that, in the case of Investment Manager’s Confidential Information, is approved in writing by Investment Manager for disclosure, (3)(b) that, in the case of Subadviser’s Confidential Information, is approved in writing

 

 

5 | Page


 

by Subadviser for disclosure; (4) that is disclosed in the course of a regulatory examination or that is required to be disclosed pursuant to a requirement of a governmental or regulatory agency or law, so long as the non-disclosing party provides (to the extent permitted under applicable law) the disclosing party (i.e., the party whose Confidential Information would be disclosed) with prompt written notice of such requirement prior to any such disclosure; however, Subadviser is not required to provide such notice if information is provided on an aggregate basis without specific attribution to the Fund; (5) to affiliates that have a reason to know such information; (6) to the custodian of the Fund; (7) to brokers and dealers that are counterparties for trades for the Fund; (8) to futures commission merchants executing or clearing transactions in connection with the Fund, if applicable; and (9) to third party service providers to Subadviser subject to confidentiality agreements or duties. Notwithstanding the foregoing, to the extent Fund Portfolio Information is similar to investments for other clients of Subadviser, Subadviser may disclose such investments without direct reference to the Fund. Investment Manager agrees that Subadviser may identify Investment Manager or the Fund by name in Subadviser’s current client list. Such list may be used with third parties.

 

  (f) Cooperation . As reasonably requested by Investment Manager or the Board and in accordance with the scope of Subadviser’s obligations and responsibilities contained in this Agreement, Subadviser will cooperate with, and provide reasonable assistance to, Investment Manager or the Fund as needed in order for Investment Manager and the Fund to comply with applicable laws, rules and regulations, including, but not limited to, compliance with the Sarbanes-Oxley Act and the rules and regulations promulgated by the SEC thereunder and the evaluation of any actions under U.S. or foreign securities laws pursuant to which the Fund may be able to assert a potential claim.

 

2.

Investment Manager’s Duties . Investment Manager shall continue to have responsibility for all other services to be provided to the Fund pursuant to the Advisory Agreement and shall oversee and review Subadviser’s performance of its duties under this Agreement. Investment Manager shall also retain direct portfolio management responsibility with respect to any assets of the Fund which are not allocated by it to the portfolio management of Subadviser as provided in paragraph 1(a) hereof or to any other subadviser. Investment Manager will periodically provide to Subadviser a list of the affiliates of Investment Manager or the Fund to which investment restrictions apply, and will specifically identify in writing (a) all publicly traded companies that issue securities in which the Fund may not invest, together with ticker symbols for all such companies, and (b) any affiliated brokers and any restrictions that apply to the use of those brokers by Subadviser. Neither Subadviser nor any of its directors, officers, partners, principals, employees or agents shall have responsibility whatsoever for, and shall incur no liability on account of (i) diversification, selection or establishment of such investment objectives, policies and restrictions of the Fund, (ii) advice on, or management of, any assets for the Fund other than the assets for which Investment Manager has delegated investment discretion to Subadviser, (iii) filing of any tax or information returns or forms, withholding or paying any taxes, or seeking any exemption or refund, (iv) registration of

 

 

6 | Page


 

the Fund with any government or agency, (v) administration of the plans and trusts investing in the Fund, or (vi) overall Fund compliance with requirements of the 1940 Act and Subchapter M of the Code, relating to percentage limitations applicable to the Fund’s assets that would require knowledge of the Fund’s holdings other than the assets subject to this Agreement.

 

3. Documents Provided to Subadviser . Investment Manager has delivered or will deliver to Subadviser current copies and supplements thereto of each of the Prospectus and SAI pertaining to the Fund, and will promptly deliver to it all future amendments and supplements, if any.

 

4. Compensation of Subadviser . For the services provided and the expenses assumed pursuant to this Agreement, Investment Manager will pay to Subadviser, effective from the date of this Agreement, a fee which shall be accrued daily and paid monthly, on or before the last business day of the next succeeding calendar month, at the annual rates as a percentage of the Fund’s average daily net assets or the average daily net assets of the portion of the Fund’s assets that is managed by Subadviser, as applicable, set forth in the attached Schedule A which Schedule can be modified from time to time upon mutual agreement of the parties to reflect changes in annual rates, subject to appropriate approvals required by the 1940 Act, if any. If this Agreement becomes effective or terminates before the end of any month, the fee for the period from the effective date to the end of the month or from the beginning of such month to the date of termination, as the case may be, shall be prorated according to the proportion that such portion of the month bears to the full month in which such effectiveness or termination occurs. During the term of this Agreement, Subadviser will pay all expenses incurred by it in connection with its activities under this Agreement other than costs in connection with the purchase or sale of securities and other assets (including brokerage commissions, if any) for the Fund.

 

5.

Expenses . Subadviser shall bear all expenses incurred by it and its staff with respect to all activities in connection with the performance of Subadviser’s services under this Agreement, including but not limited to salaries, overhead, travel, preparation of Board materials, review of marketing materials relating to Subadviser or other information provided by Subadviser to Investment Manager and/or the Fund’s distributor, and marketing support. Subadviser agrees to pay to Investment Manager the cost of generating a prospectus supplement, which includes preparation, filing, printing, and distribution (including mailing) of the supplement, if the Subadviser makes any changes that require immediate disclosure in the prospectus or any required regulatory documents that may be caused by changes to its structure or ownership, to investment personnel, to investment style or management, or otherwise (“Changes”), and at the time of notification to the Fund or Investment Manager by the Subadviser of such Changes, the Fund is not generating a supplement for other purposes or the Fund or the Investment Manager does not wish to add such Changes to a pending supplement. In the event two or more subadvisers, if applicable, each require a supplement simultaneously, the expense (other than the costs of printing and mailing) of a combined supplement will be shared pro rata with such other subadviser(s) based upon the number of pages required by each

 

 

7 | Page


 

such subadviser, and each such subadviser shall pay its pro rata share of printing and mailing costs and expenses based upon the number of supplements required to be printed and mailed. All other expenses not specifically assumed by Subadviser hereunder or by Investment Manager under the Advisory Agreement are borne by the applicable Fund.

In the event that there is a proposed change in control of Subadviser that would act to terminate this Agreement, if a vote of shareholders to approve continuation of this Agreement is at that time deemed by counsel to the Fund to be required by the 1940 Act or any rule or regulation thereunder, Subadviser agrees to assume all reasonable costs associated with soliciting shareholders of the appropriate Fund(s), to approve continuation of this Agreement. Such expenses include the reasonable costs of preparation, filing and mailing of a proxy statement, and of soliciting proxies.

In the event that such proposed change in control of Subadviser shall occur and the Fund is operating under an exemptive order issued by the SEC to Investment Manager with respect to the appointment of subadvisers absent shareholder approval, Subadviser agrees to assume all reasonable costs and expenses (including the costs of preparation, mailing and filing) associated with the preparation of an information statement, required by the exemptive order containing all information that would be included in a proxy statement.

 

6. Representations of Subadviser . Subadviser represents and warrants as follows:

 

  (a)

Subadviser (i) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect; (ii) is not an affiliated person of the Investment Manager or of the Fund within the meaning of Section 2(a)(3) of the 1940 Act (other than by virtue of serving as a Subadviser to the Fund); (iii) is not prohibited by the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement; (iv) has appointed a Chief Compliance Officer under Rule 206(4)-7 of the Advisers Act; (v) has adopted written policies and procedures that are reasonably designed to prevent violations of the Advisers Act from occurring, detect violations that have occurred, correct promptly any violations that have occurred, and will provide prompt notice of any material violations relating to the Fund to Investment Manager; (vi) has met and will seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory agency necessary to be met in order to perform the services contemplated by this Agreement; (vii) has the authority to enter into and perform the services contemplated by this Agreement; and (viii) will promptly notify Investment Manager (1) in the event that Subadviser becomes an affiliated person of the Investment Manager or of the Fund within the meaning of Section 2(a)(3) of the 1940 Act; (2) of the occurrence of any event that would disqualify Subadviser from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act, (3) in the event the Securities and Exchange Commission (the “SEC”) or other governmental authority has: censured

 

 

8 | Page


 

Subadviser; placed limitations upon the activities, functions or operations of Subadviser; or has commenced proceedings or an investigation that may result in any of these actions, (4) upon having a reasonable basis for believing that the Fund has ceased to qualify or might not qualify as a regulated investment company under Subchapter M of the Code and (5) of any material fact known to Subadviser respecting or relating to Subadviser that is not contained in the Prospectus, and is required to be stated therein or necessary to make the statements therein not misleading, or of any statement relating to Subadviser contained therein that becomes untrue in any material respect.

 

  (b) Subadviser has adopted a written code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and will provide Investment Manager with a copy of the code of ethics. Within 60 days of the end of the last calendar quarter of each year that this Agreement is in effect, a duly authorized officer of Subadviser shall certify to Investment Manager that there has been no material violation of Subadviser’s code of ethics or, if such a violation has occurred, that appropriate action was taken in response to such violation. To the extent Subadviser has approved any material changes to its code of ethics, such revised code together with an explanation of such amendments shall be promptly (but in no event later than 60 days) provided to Investment Manager.

 

  (c) Subadviser has provided Investment Manager with a copy of a document intended to address the disclosures specified in Form ADV Part 2A, and promptly will furnish a copy of any amendments to such document to Investment Manager (at least annually). Investment Manager acknowledges that, under Rule 204-3 under the Advisers Act, as amended, to the extent Subadviser’s only clients are registered investment companies, Subadviser is not required to file a Form ADV, Part 2A, with the SEC.

 

  (d) Subadviser will promptly notify Investment Manager of any changes in the controlling shareholder, in the key personnel who are either the portfolio manager(s) responsible for the Fund or the Chief Executive Officer of Subadviser, or if there is otherwise an actual change in control or management of Subadviser.

 

7. Representations of Investment Manager . Investment Manager represents and warrants as follows:

 

  (a)

Investment Manager (i) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement; (iii) has appointed a Chief Compliance Officer under Rule 206(4)-7 of the Advisers Act; (iv) has adopted written policies and procedures that are reasonably designed to prevent violations of the Advisers Act from occurring, detect violations that have occurred, correct promptly any violations that have occurred, and will provide prompt notice of any material violations relating to the Fund to the Subadviser; (v) has met and will

 

 

9 | Page


 

seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory agency necessary to be met in order to perform the services contemplated by this Agreement; (vi) has the authority to enter into and perform the services contemplated by this Agreement; and (vii) will promptly notify Subadviser (1) of the occurrence of any event that would disqualify Investment Manager from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise, (2) in the event the SEC or other governmental authority has: censured Investment Manager; placed limitations upon its activities, functions or operations; or has commenced proceedings or an investigation that may result in any of these actions or (3) upon having a reasonable basis for believing that the Fund has ceased to qualify or might not qualify as a regulated investment company under Subchapter M of the Code.

 

  (b) Investment Manager agrees that neither it nor any of its affiliates will in any way refer directly or indirectly to its relationship with Subadviser, or any of its affiliates in offering, marketing, or other promotional materials without the prior written consent of Subadviser; provided that Investment Manager shall not be required to obtain Subadviser’s prior written consent to make factual statements regarding the fact that Subadviser serves as subadviser to the Fund, in responding to requests for information, in required disclosures or in responding to regulatory inquiries.

 

  (c) The Fund is and will continue to be the owner of all assets for which Investment Manager delegates investment discretion to Subadviser from time to time, and there are and will continue to be no restrictions on the pledge, hypothecation, transfer, sale or public distribution of such assets.

 

  (d) Investment Manager is establishing and will be maintaining the Fund’s account with Subadviser solely for the purpose of investing the relevant assets and not with a view to obtaining information regarding portfolio holdings or investment decisions in order to effect securities transactions based upon such information or to provide such information to another party, and that Investment Manager and its employees, officers and directors shall not use account holdings information for any of the foregoing purposes.

 

  (e) The Board has approved the appointment of Subadviser pursuant to this Agreement.

 

8. Liability and Indemnification .

 

  (a)

Except as may otherwise be provided by the 1940 Act or any other federal securities law, Subadviser, any of its affiliates and any of the officers, partners, employees, consultants, or agents thereof shall not be liable for any losses, claims, damages, liabilities, or litigation (including legal and other expenses) incurred or suffered by the Fund, Investment Manager, or any affiliated persons thereof

 

 

10 | Page


 

(within the meaning of Section 2(a)(3) of the 1940 Act) or controlling persons thereof (as described in Section 15 of the Securities Act of 1933, as amended (the “1933 Act”) ) (collectively, “Fund and Investment Manager Indemnitees”) as a result of any error of judgment or mistake of law by Subadviser with respect to the Fund, except that nothing in this Agreement shall operate or purport to operate in any way to exculpate, waive, or limit the liability of Subadviser for, and Subadviser shall indemnify and hold harmless the Fund and Investment Manager Indemnitees against any and all losses, claims, damages, liabilities, or litigation (including reasonable legal and other expenses) to which any of the Fund and Investment Manager Indemnitees may become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common law, or otherwise arising out of or based on (i) any willful misconduct, bad faith, reckless disregard, or negligence of Subadviser in the performance of any of its duties or obligations hereunder; (ii) any untrue statement of a material fact regarding Subadviser contained in the Prospectus and SAI, proxy materials, reports, advertisements, sales literature, or other materials pertaining to the Fund or the omission to state therein a material fact regarding Subadviser known to Subadviser which was required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon written information furnished to Investment Manager or the Fund by Subadviser Indemnitees (as defined below) for use therein; provided, however, that Subadviser has had a reasonable opportunity to review information regarding Subadviser contained in the Prospectus and SAI, proxy materials, reports, advertisements, sales literature or other materials pertaining to the Fund as set forth in section 11; or (iii) any violation of federal or state statutes or regulations by Subadviser. It is further understood and agreed that Subadviser may rely upon information furnished to it by Investment Manager that it reasonably believes to be accurate and reliable. Subadviser shall be liable for any loss incurred by the Fund, the Investment Manager or their respective affiliates to the extent such losses arise out of any act or omission directly attributable to Subadviser which results, directly or indirectly, in an error in the net asset value of the Fund. The federal securities laws impose liabilities in certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights which Investment Manager may have under any securities laws. Neither Subadviser nor any Subadviser Indemnitees (as defined below) shall be liable for any loss or damage arising or resulting from the acts or omissions of the custodian of the Fund, any broker, financial institution or any other third party with or through whom Subadviser arranges or enters into a transaction in respect of the Fund, except to the extent that Subadviser or its affiliate instructed such broker, financial institution or third party to take such action or omission. Investment Manager understands and acknowledges that Subadviser does not warrant that the portion of the assets of the Fund managed by Subadviser will achieve any particular rate of return or that its performance will match any benchmark index or other standard or objective.

 

 

11 | Page


  (b) Except as may otherwise be provided by the 1940 Act or any other federal securities law, Investment Manager and the Fund shall not be liable for any losses, claims, damages, liabilities, or litigation (including legal and other expenses) incurred or suffered by Subadviser or any of its affiliated persons thereof (within the meaning of Section 2(a)(3) of the 1940 Act) or controlling persons (as described in Section 15 of the 1933 Act) (collectively, “Subadviser Indemnitees”) as a result of any error of judgment or mistake of law by Investment Manager with respect to the Fund, except that nothing in this Agreement shall operate or purport to operate in any way to exculpate, waive, or limit the liability of Investment Manager for, and Investment Manager shall indemnify and hold harmless Subadviser Indemnitees against any and all losses, claims, damages, liabilities, or litigation (including reasonable legal and other expenses) to which any of Subadviser Indemnitees may become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under any other statute, at common law, or otherwise arising out of or based on (i) any willful misconduct, bad faith, reckless disregard, or negligence of Investment Manager in the performance of any of its duties or obligations hereunder; (ii) any untrue statement of a material fact contained in the Prospectus and SAI, proxy materials, reports, advertisements, sales literature, or other materials pertaining to the Fund or the omission to state therein a material fact known to Investment Manager which was required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission concerned Subadviser and was made in reliance upon written information furnished to Investment Manager or the Fund by a Subadviser Indemnitee for use therein, or (iii) any violation of federal or state statutes or regulations by Investment Manager or the Fund.

 

  (c)

After receipt by Investment Manager or Subadviser, its affiliates, or any officer, director, employee, or agent of any of the foregoing, entitled to indemnification as stated in (a) or (b) above (“Indemnified Party”) of notice of the commencement of any action, if a claim in respect thereof is to be made against any person obligated to provide indemnification under this section (“Indemnifying Party”), such Indemnified Party shall notify the Indemnifying Party in writing of the commencement thereof as soon as practicable after the summons or other first written notification giving information of the nature of the claim that has been served upon the Indemnified Party; provided that the failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability under this section, except to the extent that the omission results in damages to the Indemnifying Party caused solely as a result of the failure to give such notice. The Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel satisfactory to the Indemnified Party to represent the Indemnified Party in the proceeding, and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (1) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, or (2) the named parties to any such proceeding (including any impleaded parties)

 

 

12 | Page


 

include both the Indemnifying Party and the Indemnified Party and representation by both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment.

 

9. Duration and Termination .

 

  (a) Unless sooner terminated as provided herein, this Agreement shall continue for two years from the date written above. Thereafter, if not terminated, this Agreement shall continue automatically for successive periods of 12 months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Board members who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party, and (ii) by the Board or by a vote of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund.

 

  (b) Notwithstanding the foregoing, this Agreement may be terminated at any time, without the payment of any penalty, by the Board or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund on 60 days’ written notice to Subadviser. This Agreement may also be terminated, without the payment of any penalty, by Investment Manager (i) upon 60 days’ written notice to Subadviser; (ii) upon material breach by Subadviser of any representations and warranties set forth in this Agreement, if such breach has not been cured within 20 days after written notice of such breach; or (iii) immediately if, in the reasonable judgment of Investment Manager, Subadviser becomes unable to discharge its duties and obligations under this Agreement, including circumstances such as the insolvency of Subadviser or other circumstances that could adversely affect the Fund. Subadviser may terminate this Agreement at any time, without payment of any penalty, (1) upon 60 days’ written notice to Investment Manager; or (2) upon material breach by Investment Manager of any representations and warranties set forth in the Agreement, if such breach has not been cured within 20 days after written notice of such breach. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon the termination of the Advisory Agreement.

 

  (c) In the event of termination of the Agreement, those paragraphs of the Agreement which govern conduct of the parties’ future interactions with respect to Subadviser having provided investment management services to the Fund(s) for the duration of the Agreement, including, but not limited to, paragraphs 1(a)(iv)(a), 1(c), 1(d), 1(e), 1(f), 8(a), 8(b), 8(c), 15, 17, 18, 20 and 21 shall survive such termination of the Agreement.

 

 

13 | Page


10. Subadviser’s Services Are Not Exclusive . Nothing in this Agreement shall limit or restrict the right of Subadviser or any of its partners, officers, or employees to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, or limit or restrict Subadviser’s right to engage in any other business or to render services of any kind to any other mutual fund, corporation, firm, individual, or association or other entity. Subadviser acts as adviser to other clients and may, subject to compliance with its fiduciary obligations, give advice, and take action, with respect to any of those which may differ from the advice given, or the timing or nature of action taken, with respect to the Fund. Subject to its fiduciary obligation to the Fund, Subadviser shall have no obligation to purchase or sell for the Fund, or to recommend for purchase or sale by the Fund, any security which Subadviser, its principals, affiliates or employees may purchase or sell for themselves or for any other clients.

 

11. References to Subadviser . Subadviser hereby grants to Investment Manager during the term of this Agreement, the right to use Subadviser’s name as required for public filings and marketing materials in accordance with the terms described herein. Investment Manager agrees to furnish to Subadviser at its principal office all prospectuses, SAI’s, proxy statements, reports to shareholders, sales literature, or other material prepared for distribution to sales personnel, shareholders of the Fund or the public, that refer to Subadviser prior to the use thereof, and not to use such material if Subadviser reasonably objects in writing five (5) business days (or such other time as may be mutually agreed upon) after receipt thereof. Such materials may be furnished to Subadviser hereunder by first-class or overnight mail, electronic or facsimile transmission, or hand delivery.

 

12. Notices . Any notice, statement, consent or approval required or permitted to be given in connection with this Agreement (“Notice”) shall be in writing and shall be sufficiently given if delivered (whether in person, by post, by courier service or other personal method of delivery), or if transmitted by facsimile or other electronic means of communication:

In the case of Subadviser:

William G. Butterly, III

Boston Partners

909 Third Avenue, 32rd Floor

New York, NY 10022

Tel: (212) 908-0443

In the case of Investment Manager:

Paul Mikelson

Vice President, Subadvised Strategies

Columbia Threadneedle Investments

707 2 nd Ave. S, Routing: H17 435

Minneapolis, MN 55402

Tel: (612) 671-4452

Fax: (612) 671-0618

 

 

14 | Page


with a copy to:

Christopher O. Petersen

Vice President and Lead Chief Counsel

Ameriprise Financial, Inc.

5228 Ameriprise Financial Center, Routing: 27/5228

Minneapolis, MN 55474

Tel: (612) 671-4321

Fax: (612) 671-2680

Any Notice delivered or transmitted to a party as provided above shall be deemed to have been given and received on the day it is delivered or transmitted, provided that it is delivered or transmitted on any day that is not a Saturday, Sunday, or statutory holiday in the jurisdiction where the Notice is received (“Business Day”) prior to 5:00 p.m. local time in the place of delivery or receipt. However, if the Notice is delivered or transmitted after 5:00 p.m. local time or if such day is not a Business Day then the Notice shall be deemed to have been given and received on the next Business Day.

Any party may, from time to time, change its address by giving Notice to the other party in accordance with the provisions of this section.

 

13. Amendments . This Agreement may be amended by mutual consent, subject to approval by the Board and the Fund’s shareholders to the extent required by the 1940 Act.

 

14. Assignment . No assignment (as defined in the 1940 Act, as amended) of this Agreement shall be made by Investment Manager or Subadviser without the prior written consent of the Fund, and, if required by law, the Fund’s shareholders, and Investment Manager or Subadviser (as applicable). Notwithstanding the foregoing, no assignment shall be deemed to result from any changes in the directors, officers, or employees of Investment Manager or Subadviser except as may be provided to the contrary in the 1940 Act or the rules and regulations thereunder.

 

15.

Governing Law . This Agreement, and, in the event of termination of the Agreement, those paragraphs that survive such termination of the Agreement under paragraph 9(c), shall be governed by the laws of the commonwealth of Massachusetts, without giving effect to the conflicts of laws principles thereof, or any applicable provisions of the 1940 Act. To the extent that the laws of the commonwealth of Massachusetts, or any of the provision of this Agreement, conflict with applicable provisions of the 1940 Act, the latter shall control. The Investment Manager and Subadviser hereby consent to the jurisdiction of a state of federal court situated in the Commonwealth of Massachusetts in connection with any dispute arising hereunder. Any action or dispute between the Investment Manager and the Subadviser arising out of this Agreement shall be brought exclusively in the state of federal courts of the Commonwealth of Massachusetts. The

 

 

15 | Page


 

Investment Manager and Subadviser hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which either party may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum.

 

16. Entire Agreement . This Agreement embodies the entire agreement and understanding among the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof.

 

17. Severability . Should any part of this Agreement be held invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement and, in the event of termination of the Agreement, those paragraphs that survive such termination of the Agreement under paragraph 9(c), shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors.

 

18. Interpretation . Any questions of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act shall be resolved by reference to such term or provision in the 1940 Act and to interpretation thereof, if any, by the federal courts or, in the absence of any controlling decision of any such court, by rules, regulations, or orders of the SEC validly issued pursuant to the 1940 Act. Where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is altered by a rule, regulation, or order of the SEC, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation, or order.

 

19. Headings . The headings in this Agreement are intended solely as a convenience and are not intended to modify any other provision herein.

 

20. Authorization . Each of the parties represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action by such party and when so executed and delivered, this Agreement will be the valid and binding obligation of such party in accordance with its terms.

 

21. No Third-Party Beneficiaries . The Fund is intended to be a third party beneficiary of this Agreement. For the avoidance of doubt, and without in any way implying that there are any other third-party beneficiaries to the Agreement or any other agreement with respect to the Trust or any of its series, no person other than the Investment Manager and the Subadviser is a party to this Agreement or shall be entitled to any right or benefit arising under or in respect of this Agreement (with the exception of the Fund), and there are no other third-party beneficiaries of this Agreement. Without limiting the generality of the foregoing, nothing in this Agreement is intended to, or shall be read to, (i) create in any other person (including without limitation any shareholder of any Fund) any direct, indirect, derivative, or other rights against the Investment Manager or Subadviser, or (ii) create or give rise to any duty or obligation on the part of the Investment Manager or Subadviser (including without limitation any fiduciary duty) to any person other than the Fund, all of which rights, benefits, duties, and obligations are hereby expressly excluded.

 

 

16 | Page


IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.

 

Columbia Management Investment

Advisers, LLC

    Boston Partners
By:  

/s/ Jeffrey L. Knight

    By:  

/s/ William G. Butterly, III

  Signature       Signature
Name:  

Jeffrey L. Knight

    Name:  

William G. Butterly, III

  Printed       Printed
Title:  

Managing Director, Global Head of Investment Solutions and

Head of Global Asset Allocation

    Title:   Chief Operating Officer
      By:  

/s/ Matthew J. Davis

        Signature
      Name:  

Matthew J. Davis

        Printed
      Title:   Chief Financial Officer

 

 

17 | Page


SUBADVISORY AGREEMENT

SCHEDULE A

[REDACTED DATA]

 

 

18 | Page

Distribution Agreement Schedule – CFST I

Schedule I

As of August 17, 2016

Columbia Funds Series Trust I

Active Portfolios ® Multi-Manager Alternative Strategies Fund

Active Portfolios ® Multi-Manager Directional Alternatives Fund

Active Portfolios ® Multi-Manager Growth Fund

Active Portfolios ® Multi-Manager Small Cap Equity Fund

Active Portfolios ® Multi-Manager Total Return Bond Fund

Columbia Adaptive Risk Allocation Fund

Columbia Alternative Beta Fund

Columbia AMT-Free Connecticut Intermediate Muni Bond Fund

Columbia AMT-Free Intermediate Muni Bond Fund

Columbia AMT-Free Massachusetts Intermediate Muni Bond Fund

Columbia AMT-Free New York Intermediate Muni Bond Fund

Columbia AMT-Free Oregon Intermediate Muni Bond Fund

CMG Ultra Short Term Bond Fund

Columbia Balanced Fund

Columbia Bond Fund

Columbia California Tax-Exempt Fund

Columbia Contrarian Core Fund

Columbia Corporate Income Fund

Columbia Diversified Absolute Return Fund

Columbia Diversified Real Return Fund

Columbia Dividend Income Fund

Columbia Emerging Markets Fund

Columbia Global Dividend Opportunity Fund

Columbia Global Energy and Natural Resources Fund

Columbia Global Technology Growth Fund

Columbia Greater China Fund

Columbia High Yield Municipal Fund

Columbia Large Cap Growth Fund

Columbia Mid Cap Growth Fund

Columbia Multi-Asset Income Fund

Columbia New York Tax-Exempt Fund

Columbia Pacific/Asia Fund

Columbia Real Estate Equity Fund

Columbia Select Large Cap Growth Fund

Columbia Small Cap Core Fund

Columbia Small Cap Growth Fund I

Columbia Small Cap Value Fund I

Columbia Strategic Income Fund

Columbia Tax-Exempt Fund

Columbia Total Return Bond Fund

Columbia U.S. Social Bond Fund

Columbia U.S. Treasury Index Fund


Distribution Agreement Schedule – CFST I

 

SCHEDULE II

COMPENSATION

COMPENSATION TO DISTRIBUTOR. In connection with the distribution of Shares, Distributor will be entitled to receive (i) payments pursuant to any Distribution Plan and related agreement from time to time in effect between any Fund and Distributor or any particular class of shares of a Fund (“12b-1 Plan”), (ii) any CDSC applicable to the redemption of a Fund’s Shares, determined in the manner set forth in the then current prospectus and Statement of Additional Information of that Fund, and (iii) any applicable front-end sales charges applicable to the sale of Shares, less any applicable dealer discount.

Approved as of: September 7, 2010

ADDENDUM TO MASTER GLOBAL CUSTODY AGREEMENT

The undersigned Columbia Funds Series Trust l, on behalf of each of its series listed on attached Appendix A (“Customer”), formed under the laws of the Commonwealth of Massachusetts as a business trust with a place of business at 50606 Ameriprise Financial Center, Minneapolis, MN 55474, hereby requests the securities custody services of JPMorgan Chase Bank, N .A., and Customer, by its signature below, agrees to the terms and conditions of that certain Second Amended and Restated Master Global Custody Agreement, dated March 7, 2011 (the “Agreement”), with JPMorgan Chase Bank, N.A. on behalf of each of the Funds listed on Schedule A thereto, which such Schedule A is hereby amended with the addition of the Customer pursuant to this addendum. Notwithstanding anything in the Agreement to the contrary, each of Customer and Bank hereby agree that Customer shall (i) be an Additional Customer, as such term is defined in the Agreement) and (ii) not be subject to the Initial Term (as defined in the Agreement) or the early termination fee set forth in Section 9 of the Agreement, and (iii) be entitled to terminate the Agreement upon 60 days’ written notice to JPMorgan Chase Bank, N.A. (unless entitled to a shorter notice period pursuant to Section 9.l (b)).

 

COLUMBIA FUNDS SERIES TRUST I, ON BEHALF OF EACH SERIES LISTED ON APPENDIX A
By:  

/s/ Tara W. Tilbury

Name:   Tara W. Tillbury
Title:   Assistant Secretary
Date:   September 21, 2016

 

JPMORGAN CHASE BANK, N.A.
By:  

/s/ Brian Eckert

Name:   Brian Eckert
Title:   Executive Director
Date:   September 23, 2016


APPENDIX

Columbia Funds Series Trust I

Active Portfolios ® Multi-Manager Directional Alternatives Fund

SCHEDULE A

Effective August 17, 2016

Columbia Funds Series Trust I

Active Portfolios ® Multi-Manager Alternative Strategies Fund

Active Portfolios ® Multi-Manager Directional Alternatives Fund

Active Portfolios ® Multi-Manager Growth Fund

Active Portfolios ® Multi-Manager Small Cap Equity Fund

Active Portfolios ® Multi-Manager Total Return Bond Fund

Columbia Adaptive Alternatives Fund

Columbia Adaptive Risk Allocation Fund

Columbia AMT-Free Connecticut Intermediate Muni Bond Fund

Columbia AMT-Free Intermediate Muni Bond Fund

Columbia AMT-Free Massachusetts Intermediate Muni Bond Fund

Columbia AMT-Free New York Intermediate Muni Bond Fund

Columbia AMT-Free Oregon Intermediate Muni Bond Fund

CMG Ultra Short Term Bond Fund

Columbia Balanced Fund

Columbia Bond Fund

Columbia California Tax-Exempt Fund

Columbia Contrarian Core Fund

Columbia Corporate Income Fund

Columbia Diversified Absolute Return Fund

Columbia Diversified Real Return Fund

Columbia Dividend Income Fund

Columbia Emerging Markets Fund

Columbia Global Dividend Opportunity Fund

Columbia Global Energy and Natural Resources Fund

Columbia Global Technology Growth Fund

Columbia Greater China Fund

Columbia High Yield Municipal Fund

Columbia Large Cap Growth Fund

Columbia Mid Cap Growth Fund

Columbia Multi-Asset Income Fund

Columbia New York Tax-Exempt Fund

Columbia Pacific/Asia Fund

Columbia Real Estate Equity Fund

Columbia Select Large Cap Growth Fund

Columbia Small Cap Core Fund

Columbia Small Cap Growth Fund I

Columbia Small Cap Value Fund I

Columbia Strategic Income Fund

Columbia Tax-Exempt Fund

Columbia Total Return Bond Fund

Columbia U.S. Social Bond Fund

Columbia U.S. Treasury Index Fund


SCHEDULE B

Effective October 1, 2015

Payments under the Agreement are payable to CMISC monthly.

Transfer agency costs are calculated separately for each of (i) Class Y shares, (ii) Class K and R5 shares, and (iii) all other classes of shares (except Class I, which pay no transfer agency fees).

Each Fund shall pay to CMISC for the services to be provided by CMISC under the Agreement an amount equal to the sum of the following:

 

  (a) i) Base transfer agency fee paid monthly of:

1. an annual fee of $36.40 per account for accounts established directly with the Fund (direct accounts)*;

2. an annual fee of $8.50 per account for accounts established or maintained pursuant to the National Securities Clearing Corporation’s networking system (network accounts)*;

3. an annual rate of 0.0125% of the average daily value of accounts of intermediaries established with the Fund through CMISC that represents the combined holdings of, and transactions in, Fund shares of one or more clients of the intermediary (omnibus accounts)*;

*excluding Class I share accounts

PLUS

ii) The Fund’s Allocated Share of CMISC Reimbursable Out-of-Pocket Expenses (allocated among the Fund’s classes (other than Class I shares) based on the number of open accounts); PLUS

iii) Sub-transfer agency fees (generally intended to offset amounts paid by CMISC to intermediaries for services they provide) EITHER

1. (for all classes other than Class I, K, R5 or Y) for each position held in an omnibus account (i) for which American Enterprise Investment Services, Inc. is the broker of record or with respect to which the beneficial shareholder is a customer of Ameriprise Financial Services, Inc., at the rate of $16 per annum, calculated monthly based on the total number of positions in such account at the end of such month; and (ii) for all other accounts, at an annual rate of up to 0.20% of the average aggregate value of the fund’s shares maintained in each such omnibus account; OR

2. (for Class K and Class R5 shares) at an annual rate of 0.05% of the average aggregate value of the fund’s shares maintained in omnibus accounts.


  (b) For Class K and Class R5 shares the maximum annual rate for the fees set forth in paragraphs (a)(i) – (a)(iii)(2) shall be 0.05%.

In addition, CMISC shall be entitled to retain as additional compensation for its services all CMISC revenues for fees for wire, telephone, and redemption orders, IRA trustee agent fees and account transcripts due CMISC from shareholders of the Fund and interest (net of bank charges) earned with respect to balances in the accounts referred to in paragraph 2 of the Agreement. All determinations hereunder shall be in accordance with generally accepted accounting principles and subject to audit by the Funds’ independent accountants.

Definitions

“Allocated Share” for any month means that percentage of CMISC Reimbursable Out-of-Pocket Expenses which would be allocated to a Fund for such month in accordance with the methodology described below under the heading “Methodology of Allocating CMISC Reimbursable Out-of-Pocket Expenses.”

“CMISC Reimbursable Out-of-Pocket Expenses” means (i) networking account fees paid to dealer firms by CMISC on shareholder accounts established or maintained pursuant to the National Securities Clearing Corporation’s networking system, subject to a maximum annual rate of up to 0.20% of the month end value of the Fund’s shares maintained in networked accounts of each dealer firm, and (ii) out-of-pocket expenses incurred on behalf of the Funds by CMISC for stationery, forms, postage and similar items and those expenses identified as “Out-of-Pocket Expenses” below.

“Out-of-Pocket Expenses” also include, but are not limited to, the following items:

 

    Printing, storage and programming costs associated with, but not limited to envelopes, checks, confirmations and stationery

 

    Postage bulk, pre-sort, ZIP+4, barcoding, first class

 

    Telephone and telecommunication costs, including all lease, maintenance and line costs

 

    Proxy solicitations, mailings and tabulations

 

    Daily & Distributions advice mailings

 

    Implementing, monitoring or processing any Stop Orders

 

    Shipping, Certified and Overnight mail and insurance

 

    Year-end forms and mailings

 

    Duplicating services

 

    Courier services

 

    National Securities Clearing Corporation charges related to fund transactions

 

    Record retention costs including but not limited to the storage, movement, destruction, retrieval and handling charges

 

    Data processing and storage for anti-market timing omnibus monitoring

 

    Creation and maintenance of on-line records including reports, shareholder and dealer statements, year-end forms, and regulatory mailings


    Third party quality control assessments

 

    Compliance items including, but not limited to, lost shareholder review, lost certificate filings and compliance programs

 

    Electronic website linkages to third party account management applications

 

    Regulatory mailings inclusive of costs related to electronic delivery of such documents.

 

    At the request, or with the consent of the Trust, such other miscellaneous expenses reasonably incurred by CMISC in performing its duties and responsibilities under this Agreement.

The Funds agree that postage and mailing expenses will be paid on the day of or prior to mailing as agreed with CMISC. In addition, the Funds will promptly reimburse CMISC for any other unscheduled expenses incurred by CMISC whenever the Funds and CMISC mutually agree that such expenses are not otherwise properly borne by CMISC as part of its duties under the Agreement.


Methodology of Allocating CMISC Reimbursable Out-of-Pocket Expenses

CMISC Reimbursable Out-of-Pocket Expenses are allocated to the Funds as follows:

 

A.             Identifiable    Based on actual services performed and invoiced to a Fund.
B.             Unidentifiable    Allocation will be based on three evenly weighted factors.
  

•       number of shareholder accounts

  

•       number of transactions

  

•       average assets


IN WITNESS WHEREOF, the parties hereto have caused the forgoing Schedule A and Schedule B to be duly executed as of August 17, 2016.

 

COLUMBIA FUNDS SERIES TRUST I,
on behalf of their respective series listed on Schedule A
By:  

/s/ Christopher O. Petersen

  Name:   Christopher O. Petersen
  Title:   President
COLUMBIA MANAGEMENT INVESTMENT SERVICES CORP.
By:  

/s/ Lyn Kephart-Strong

  Name:   Lyn Kephart-Strong
  Title:   President

Fee Waiver – CFST I & CFVIT

S CHEDULE A

List of Registrants and Funds

As of October 1, 2016

Registrant

FUNDS

Columbia Funds Series Trust I

Active Portfolios ® Multi-Manager Alternative Strategies Fund 1

Active Portfolios ® Multi-Manager Directional Alternatives Fund 1

Active Portfolios ® Multi-Manager Growth Fund 1

Active Portfolios ® Multi-Manager Small Cap Equity Fund 1

Active Portfolios ® Multi-Manager Total Return Bond Fund 1

Columbia Adaptive Risk Allocation Fund 1

Columbia Alternative Beta Fund 2

Columbia AMT-Free Connecticut Intermediate Muni Bond Fund 1

Columbia AMT-Free Intermediate Muni Bond Fund 1

Columbia AMT-Free Massachusetts Intermediate Muni Bond Fund 1

Columbia AMT-Free New York Intermediate Muni Bond Fund 1

Columbia AMT-Free Oregon Intermediate Muni Bond Fund 1

CMG Ultra Short Term Bond Fund 1

Columbia Balanced Fund 1

Columbia Bond Fund 1

Columbia California Tax-Exempt Fund 1

Columbia Contrarian Core Fund 1

Columbia Corporate Income Fund 1

Columbia Disciplined Small Core Fund 1

Columbia Diversified Absolute Return Fund 2

Columbia Diversified Real Return Fund 1

Columbia Dividend Income Fund 1

Columbia Emerging Markets Fund 1

Columbia Global Dividend Opportunity Fund 1

Columbia Global Energy and Natural Resources Fund 1

Columbia Global Technology Growth Fund 1

Columbia Greater China Fund 1

Columbia High Yield Municipal Fund 1

Columbia Large Cap Growth Fund 1

Columbia Mid Cap Growth Fund 1

Columbia Multi-Asset Income Fund 2

Columbia New York Tax-Exempt Fund 1

Columbia Pacific/Asia Fund 1

Columbia Real Estate Equity Fund 1

Columbia Select Large Cap Growth Fund 1

Columbia Small Cap Growth Fund I 1

Columbia Small Cap Value Fund I 1

Columbia Strategic Income Fund 1

Columbia Tax-Exempt Fund 1

Columbia Total Return Bond Fund 1

Columbia U.S. Social Bond Fund 1

Columbia U.S. Treasury Index Fund 1

Columbia Funds Variable Insurance Trust

Columbia Variable Portfolio – Asset Allocation Fund 3

Columbia Variable Portfolio – Contrarian Core Fund 1

Columbia Variable Portfolio – Diversified Absolute Return Fund 2

Columbia Variable Portfolio – Long Government/Credit Bond Fund 1

Columbia Variable Portfolio – Managed Volatility Conservative Fund 2

Columbia Variable Portfolio – Managed Volatility Conservative Growth Fund 2

Columbia Variable Portfolio – Managed Volatility Growth Fund 2


F ee Waiver – CFST I & CFVIT

 

Columbia Variable Portfolio – Select Large Cap Growth Fund 1

Columbia Variable Portfolio – Small Cap Value Fund 1

Columbia Variable Portfolio – Small Company Growth Fund 1

Columbia Variable Portfolio – Strategic Income Fund 1

Variable Portfolio – AQR Managed Futures Strategy Fund 1

Variable Portfolio – Lazard International Equity Advantage Fund 1

Variable Portfolio – Multi-Manager Diversified Income Fund 2

Variable Portfolio – Multi-Manager Interest Rate Adaptive Fund 2

 

1   The following fees and expenses are excluded from the Fund’s operating expenses when calculating the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes (including foreign transaction taxes), expenses associated with investment in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Fund’s Board.
2   The following fees and expenses are excluded from the Fund’s operating expenses when calculating the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes (including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed money, interest and infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Fund’s Board.
3   The following fees and expenses are excluded from the Fund’s operating expenses when calculating the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: management service fee, taxes (including foreign transaction taxes), expenses associated with investment in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Fund’s Board.


F ee Waiver – CFST I & CFVIT

 

IN WITNESS THEREOF, the parties hereto have executed the foregoing Schedule A as of October 1, 2016.

 

COLUMBIA FUNDS SERIES TRUST I
COLUMBIA FUNDS VARIABLE INSURANCE TRUST
Each for itself and on behalf of its respective series listed on this Schedule A
By:  

/s/ Christopher O. Petersen

Name:   Christopher O. Petersen
Title:   President
COLUMBIA MANAGEMENT INVESTMENT ADVISERS, LLC
By:  

/s/ Amy K. Johnson

Name:   Amy K. Johnson
Title:   Head of Operations
COLUMBIA MANAGEMENT INVESTMENT DISTRIBUTORS, INC.
By:  

/s/ Jeffrey F. Peters

Name:   Jeffrey F. Peters
Title:   Managing Director and Head of Global Institutional Distribution
COLUMBIA MANAGEMENT INVESTMENT SERVICES CORP.
By:  

/s/ Lyn Kephart-Strong

Name:   Lyn Kephart-Strong
Title:   President
LOGO        

ROPES & GRAY LLP

PRUDENTIAL TOWER

800 BOYLSTON STREET

BOSTON, MA 02199-3600

WWW.ROPESGRAY.COM

September 28, 2016

Columbia Funds Series Trust I

225 Franklin Street

Boston, Massachusetts 02110

Ladies and Gentlemen:

You have informed us that you propose to register under the Securities Act of 1933, as amended (the “ Act ”), and to offer and to sell from time to time shares of beneficial interest (the “ Shares ”) of Active Portfolios ® Multi-Manager Directional Alternatives Fund (the “ Fund ”), a series of Columbia Funds Series Trust I (the “ Trust ”).

We act as counsel for the Trust and have examined the Trust’s Agreement and Declaration of Trust and amendments thereto on file at the office of the Secretary of the Commonwealth of Massachusetts (collectively, the “ Agreement and Declaration of Trust ”) and the Trust’s By-Laws. We have also examined such other documents as we deem necessary for the purpose of this opinion.

Based on the foregoing, we are of the opinion that the issue and sale by the Trust of an unlimited number of Shares of the Fund has been duly authorized under Massachusetts law. Upon the original issue and sale of any such authorized but unissued Shares and upon receipt by the Trust of the authorized consideration therefor in an amount not less than the applicable net asset value, the Shares so issued will be validly issued, fully paid and nonassessable by the Trust.

The Trust is an entity of the type commonly known as a “Massachusetts business trust.” Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or its trustees. The Agreement and Declaration of Trust provides for indemnification out of the property of the Fund for all loss and expense of any shareholder of the Fund held personally liable solely by reason of his or her being or having been such a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself would be unable to meet its obligations.


LOGO

We understand that this opinion is to be used in connection with the registration of an indefinite number of Shares of each Fund for offering and sale pursuant to the Act. We consent to the filing of this opinion with and as part of your registration statement on Form N-1A relating to such offering and sale.

 

Very truly yours,
/s/ Ropes & Gray LLP                        
Ropes & Gray LLP

AMENDED AND RESTATED DISTRIBUTION PLAN

This Distribution Plan (the “Plan”) relating to the shares (collectively, the “Shares”) of the legal entities listed on Exhibits I through IV hereto (each a “Trust” and collectively, the “Trusts”), on behalf of each series thereof listed on the applicable exhibit (each a “Fund”), has been adopted by the trustees of the applicable Trust (the “Trustees”) in conformity with Rule 12b-1 under the Investment Company Act of 1940 (the “1940 Act”). The terms and conditions of this Plan shall apply with respect to each Trust on behalf of each Fund that is a series thereof.

Section 1 . The Trust, on behalf of each Fund that is a series thereof, will pay to Columbia Management Investment Distributors, Inc. (“CMID”), or to such other person as may from time to time be engaged and appointed to act as the distributor of its Shares (each such person, including CMID, a “Distributor”), a fee (the “Distribution Fee”) at an aggregate annual rate not to exceed the percentage of the Fund’s average daily net assets attributable to such Shares set forth for such Fund on the applicable exhibit, as compensation for services rendered in connection with the sale of such Shares by the Distributor and related expenses incurred by the Distributor. Subject to such limit and subject to the provisions of Section 6 hereof, the Distribution Fee shall be as approved from time to time by (a) the Trustees and (b) the Disinterested Trustees (as defined below). The Distribution Fee shall be accrued daily and paid monthly or at such other intervals as the Trustees shall determine.

Each distribution agreement shall provide that the Distributor that is a party to such agreement will receive its Allocable Portion of the fee specified in such agreement. Unless and until a person other than CMID shall serve as a distributor of the Shares of any Trust, CMID’s “Allocable Portion” of the total Distribution Fee payable in respect of such Shares shall be 100%, and thereafter each Distributor’s Allocable Portion of the total Distribution Fee payable in respect of Shares of any Fund shall be the portion of the Distribution Fee attributable to (i) outstanding Shares of the Fund sold by the Distributor (“Commission Shares”), plus (ii) Shares of the Fund issued in connection with the exchange of Commission Shares of another Fund and/or Shares of the Fund issued in reinvestment of dividends or capital gain distributions in respect of Commission Shares of another Fund, plus (iii) Shares of the Fund issued in reinvestment of dividends or capital gain distributions in respect of Commission Shares of the Fund; provided that the mechanics of attributing the portion of the Distribution Fee for a Fund to particular Shares for purposes of calculating a Distributor’s Allocable Portion shall be as agreed by the Trust and the Distributor in light of systems capabilities for tracking the aging, exchange and reinvestment experience of Shares sold by the Distributor.

A Distributor will be deemed to have fully earned its Allocable Portion of the Distribution Fee payable in respect of Shares of a Trust upon the sale of the Commission Shares of the Trust taken into account in determining such Distributor’s Allocable Portion of such Distribution Fee.

The Distribution Fee shall be payable to the relevant Distributor or, with respect to such portion of the Distribution Fee as the Distributor may from time to time instruct, to the person or persons to whom such Distributor may from time to time instruct the Trust to make payments.

 

- 1 -


Section 2 . Payments made to a Distributor pursuant to Section 1 may be used by the Distributor for any purpose, including (but not limited to) to compensate or reimburse the Distributor and any banks, broker/dealers or other financial institutions that have entered agreements with the Distributor in conformity with Section 8 (“Selling Agents”) for distribution or sales support services rendered, and related expenses incurred, for or on behalf of a Fund. The Distributor may pay all or any portion of the Distribution Fee to any Selling Agents (including, but not limited to, any affiliate of the Distributor) as commissions, asset-based sales charges or other compensation with respect to the sale of the Shares, and may retain all or any portion of the Distribution Fee as compensation for the Distributor’s services as agent for the distribution of Shares. All payments under this Distribution Plan are intended to qualify as “asset-based sales charges” as defined in Rule 2830 of the NASD Manual of the Financial Industry Regulatory Authority, Inc. (or any successor provision) as in effect from time to time. Notwithstanding anything contained herein to the contrary, no Fund or class of Shares shall make any payments under the Plan that exceed the maximum amounts payable under applicable rules of the Financial Industry Regulatory Authority, Inc.

Joint distribution or sales support financing with respect to a Fund (which financing may also involve other investment portfolios or companies that are affiliated persons of the Fund, or affiliated persons of the Distributor) shall be permitted in accordance with applicable regulations of the Securities and Exchange Commission as in effect from time to time.

For each Fund Share class, the shareholders of which have approved (or may be deemed to have approved because the plan was adopted before any public offering of such Fund’s Shares or the sale of such Shares to persons that are not affiliated persons of the Fund or affiliated persons of such persons) a distribution or servicing plan under Rule 12b-1 under the 1940 Act providing for payments in excess of the annual rate at which Distribution Fees are paid hereunder, to the extent any payments made by such Fund pursuant to a Shareholder Servicing Plan and/or Servicing Agreement are deemed to be payments for activity primarily intended to result in the sale of Shares, such payments shall be deemed to have been approved pursuant to this Plan.

Section 3 . Any officer designated by a Trust is authorized to execute and deliver, in the name of and on behalf of the Trust, a written agreement with a Distributor in such a form as may be approved by the Trustees from time to time. Such agreement shall authorize the Distributor to enter into written agreements with Selling Agents, based on such form(s) of sales support agreements as may be approved by the Trustees from time to time and on such additional forms of agreement as the Distributor deems appropriate, provided that the Distributor determines that the Trust’s responsibility or liability to any person under, or on account of any acts or statements of any such Selling Agent under, any such sales support agreement does not exceed its responsibility or liability under the form(s) approved by the Trustees, and provided further that the Distributor determines that the overall terms of any such sales support agreement are not materially less advantageous to the Trust than the overall terms of the form(s) approved by the Trustees.

 

- 2 -


Section 4 . Any person authorized to direct the disposition of monies paid or payable by the Trust pursuant to this Plan or any related agreement shall provide to the Trustees of the Trust, and the Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made.

Section 5 . This Plan shall continue in effect with respect to any class of Shares of a Fund for a period of more than one year only so long as such continuance is specifically approved at least annually by votes of a majority of the Trustees and a majority of the Disinterested Trustees (as defined below), cast in person at a meeting called for the purpose of voting on this Plan.

Section 6 . This Plan may not be amended to increase materially the amount to be spent with respect to any class of Shares of a Fund for distribution hereunder without approval by a vote of at least a majority of the outstanding Shares of such class, and all material amendments of this Plan shall be approved in the manner provided for continuation of this Plan in Section 5.

Section 7 . This Plan is terminable at any time with respect to any class of Shares of any Fund by vote of a majority of the Disinterested Trustees, or by vote of a majority of the outstanding Shares of such class.

Section 8 . All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide:

A. That such agreement may be terminated with respect to any class of Shares of a Fund at any time, without payment of any penalty, by vote of a majority of the Disinterested Trustees or by vote of a majority of the outstanding Shares of such class, on not more than 60 days’ written notice to any other party to the agreement; and

B. That such agreement shall terminate automatically in the event of its assignment.

Section 9 . The Trust will preserve copies of this Plan, and any agreement or written report regarding this Plan presented to the Trustees, for a period of not less than six years.

Section 10. As used in this Plan, (a) the term “Disinterested Trustees” shall mean those Trustees who are not interested persons of the Trust, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (b) the terms “assignment” and “interested person” shall have the respective meanings specified in the 1940 Act and the rules and regulations thereunder, and the term “majority of the outstanding Shares” of a class of Shares shall mean the lesser of the 67% or the 50% voting requirements specified in clauses (A) and (B), respectively, of the third sentence of Section 2(a)(42) of the 1940 Act, all subject to such exemptions as may be granted by the Securities and Exchange Commission.

Section 11 . A copy of the Agreement and Declaration of Trust of each Trust is on file with the Secretary of The Commonwealth of Massachusetts. This Plan is adopted by the Trustees as Trustees of each Trust, and not individually, and the obligations of any Trust

 

- 3 -


hereunder are not binding upon any of the Trustees, shareholders, officers, representatives or agents of the Trust personally, but bind only the assets of the Trust, and all persons dealing with the Trust, a Fund or a class of Shares thereof must look solely to the property belonging to the Trust, such Fund or such class of Shares, respectively, for the enforcement of any claims against the Trust, such Fund or such class of Shares.

 

Approved:    May 11, 2005
Revised:    March 27, 2006 (to reflect fund reorganizations and distributor name change)
   October 11, 2006 (to reflect fund reorganizations)
   December 12, 2007 (to reflect newly formed funds)
   October 28, 2008 (to reflect newly formed funds and other changes)
   April 20, 2010 (to reflect change of Distributor)
   September 7, 2010 (to reflect new share classes)
   March 14, 2012 (to reflect fund reorganizations, fund name changes and share class name changes, to add new funds and to establish “standard” distribution fee arrangements to be applicable to new funds except as the Trustees may otherwise determine)
   March 10, 2014 (to reflect newly formed fund and fund name changes)
   May 1, 2016 (to reflect fund name changes)
   August 17, 2016 (to add the newly formed Active Portfolios ® Multi-Manager Directional Alternatives Fund)

 

- 4 -


EXHIBIT I

I. List of Funds

 

Trust

  

Series

Columbia Funds Series Trust I

   All series other than those noted on Exhibits II, IV and V

II. Fees

Fees are payable as follows with respect to the Funds listed above.

 

  A. PLANS APPLYING TO CLASS A, B AND C SHARES

Except as indicated below, each Fund having Class A, B or C shares shall pay a distribution fee at the annual rate of 0.75% of the average daily net assets of its Class B and C shares.

COLUMBIA INTERMEDIATE MUNICIPAL BOND FUND shall pay an annual distribution fee at the annual rate of 0.65% of the average daily net assets of its Class B and C shares.

 

  B. PLANS APPLYING TO CLASS W SHARES

Each Fund having Class W shares shall pay a distribution fee at the annual rate of 0.25% of the average daily net assets of its Class W shares, provided that the Fund’s combined distribution fee and servicing fee shall not exceed 0.25% of the average daily net assets of its Class W shares.

 

  C. PLANS APPLYING TO OTHER CLASSES OF SHARES

CLASS R SHARES. Class R shares shall pay a distribution fee at the annual rate of 0.50% of the average daily net assets of its Class R shares.


EXHIBIT II

I. List of Funds

 

Trust

  

Series

Columbia Funds Series Trust I

   Columbia Corporate Income Fund
   Columbia Intermediate Bond Fund
   Columbia High Yield Municipal Fund
   Columbia Dividend Income Fund
   Columbia Large Cap Growth Fund
   Columbia Small Cap Core Fund

II. Fees

Fees are payable as follows with respect to the Funds listed above.

 

  A. PLANS APPLYING TO CLASS A, B AND C SHARES

Each Fund having Class A, B or C shares (other than Columbia Income Fund and Columbia High Yield Municipal Fund) shall pay a distribution fee at the annual rate of 0.10% of the average daily net assets of its Class A shares and 0.75% of the average daily net assets of its Class B and C shares.

Columbia Income Fund Class B and C shares shall pay a distribution fee at the annual rate of 0.75% of the average daily net assets of its Class B and C shares.

Columbia High Yield Municipal Fund Class B and C shares shall pay a distribution fee at the annual rate of 0.75% of the average daily net assets of its Class B and C shares.

 

  B. PLANS APPLYING TO CLASS W SHARES

Each Fund having Class W shares shall pay a distribution fee at the annual rate of 0.25% of the average daily net assets of its Class W shares, provided that the Fund’s combined distribution fee and servicing fee shall not exceed 0.25% of the average daily net assets of its Class W shares.

 

  C. PLANS APPLYING TO OTHER CLASSES OF SHARES

COLUMBIA LARGE CAP GROWTH FUND

CLASS E SHARES. Class E shares shall pay a distribution fee at the annual rate of 0.10% of the average daily net assets of its Class E shares.

CLASS F SHARES. Class F shares shall pay a distribution fee at the annual rate of 0.75% of the average daily net assets of its Class F shares.


COLUMBIA DIVIDEND INCOME FUND

COLUMBIA INTERMEDIATE BOND FUND

COLUMBIA LARGE CAP GROWTH FUND

CLASS R SHARES. Class R shares shall pay a distribution fee at the annual rate of 0.50% of the average daily net assets of its Class R shares.


EXHIBIT III

I. List of Funds

 

Trust

  

Series

Columbia Funds Variable Insurance Trust

   All series

II. Fees

Fees are payable as follows with respect to the Funds listed above.

Each Fund having Class 2 shares shall pay a distribution fee at the annual rate of 0.25% of the average daily net assets of its Class 2 shares.

Each Fund having Class 3 shares shall pay a distribution fee at the annual rate of 0.125% of the average daily net assets of its Class 3 shares, provided that the Fund’s combined distribution fee and servicing fee shall not exceed 0.125% of the average daily net assets of its Class 3 shares.


EXHIBIT IV

I. List of Funds

 

Trust

  

Series

Columbia Funds Series Trust I

  

Columbia AMT-Free Oregon Intermediate Muni Bond Fund

Columbia Balanced Fund

Columbia Contrarian Core Fund

Columbia Global Dividend Opportunity Fund

Columbia Global Technology Growth Fund1

Columbia Mid Cap Growth Fund

Columbia Real Estate Equity Fund

Columbia Small Cap Growth Fund I

II. Fees

Fees are payable as follows with respect to the Funds listed above.

Class A:

For all Funds except Columbia Global Dividend Opportunity Fund: 0.10% distribution fee

Class A:

For Columbia Global Dividend Opportunity Fund: 0.00% distribution fee

Class B:

0.75% distribution fee

Class C:

0.75% distribution fee

Class R:

0.50% distribution fee

Class W:

Each Fund having Class W shares shall pay a distribution fee at the annual rate of 0.25% of the average daily net assets of its Class W shares, provided that the Fund’s combined distribution fee and servicing fee shall not exceed 0.25% of the average daily net assets of its Class W shares.


EXHIBIT V

I. List of Funds

 

Trust

  

Series

Columbia Funds Series Trust I

  

Active Portfolios ® Multi-Manager Alternative Strategies Fund

Active Portfolios ® Multi-Manager Directional Alternatives Fund

Active Portfolios ® Multi-Manager Growth Fund

Active Portfolios ® Multi-Manager Small Cap Equity Fund

Active Portfolios ® Multi-Manager Total Return Bond Fund

II. Fees

Fees are payable as follows with respect to the Funds listed above.

Class A:

Each Fund having Class A shares shall pay a distribution fee at the annual rate of 0.25% of the average daily net assets of its Class A shares, provided that the Fund’s combined distribution fee and servicing fee shall not exceed 0.25% of the average daily net assets of its Class A shares.

CODE OF ETHICS

AMENDED AND RESTATED

FEBRUARY 2016

II. CODE OF ETHICS

A. Fiduciary Obligations

The Firm is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”) under the Advisers Act. As a registered investment adviser, the Firm owes a fiduciary duty to its Clients. The fiduciary standard imposes an affirmative duty of utmost good faith upon the Firm to provide full and fair disclosure of all material facts to its Clients. The fiduciary standard requires the Firm to avoid misleading its Clients and prospective Clients, particularly where the Firm’s interests may conflict with those of its Clients.

Fundamental to the fiduciary standard are the duties of loyalty and care. The duty of loyalty requires the Firm to serve the best interests of its Clients and put its Clients’ interests ahead of those of the Firm. The duty of care requires the Firm to reasonably ensure that it bases its recommendations on materially accurate and complete information.

More specifically, as a fiduciary, the Firm requires its Employees to:

 

    Have a reasonable, independent basis for its investment advice;

 

    Ensure that its investment advice is suitable to the Client’s objectives, needs and circumstances;

 

    Obtain best execution for Clients’ transactions where the Firm is in a position to direct brokerage transactions;

 

    Refrain from effecting personal transactions inconsistent with Client interests; and

 

    Avoid actual or potential conflicts of interest.

B. Confidential Information

Confidential Information includes any non-public information, records, files, documents or correspondence regarding the Firm, Employees, Clients or the business of the Firm. Confidential Information includes, but is not limited to, the following:

 

    The identity of the Firm’s Clients and information related to Client accounts or any personal information;

 

    Employee personal information;

 

    Information related to the Firm’s operational or organizational structure, performance, financial assets, net worth, revenues or net income;

 

    Information related to the Firm’s portfolio, trading and/or execution strategies, research, models and/or capital deployment; and

 

    Software or programs developed by the Firm.

 

    Employees should take special caution to safeguard the Firm’s Confidential Information. Employees should not circulate or discuss Confidential Information inside or outside of the Firm with unauthorized individuals. Employees should not use, disclose, or divulge any Confidential Information except as may otherwise be required in connection with the business of the Firm.


Other than in the ordinary course of the Employee’s duties for the Firm, during and subsequent to the Employee’s employment, the Employee shall not copy, take pictures of, remove or forward from the Firm’s premises, either directly or indirectly, any drawings, writings, prints, documents, telephone/address directories (whether in hard copy or digital), computer discs, hard drives, thumb or flash drives, cloud systems or anything else containing, embodying, or disclosing any Confidential Information of the Firm or any of its Clients without the prior written permission of the CCO or the General Counsel. Upon the termination or resignation of the Employee’s employment with the Firm for any reason, the Employee is expected to immediately return any such items to the Firm.

Nothing in this Manual shall prohibit or restrict an Employee from participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency, legislative body, or any self-regulatory organization, provided that, to the extent permitted by law, upon an Employee’s receipt of any subpoena, court order or other legal process compelling the disclosure of any such information, documents, or testimony, an Employee shall give prompt prior written notice to the CCO or any member of the Compliance Department in order to provide the Firm reasonable opportunity to take appropriate steps to protect its Confidential Information.

While the Firm endeavors to preserve the confidentiality of Confidential Information, such information may be made available to certain other Firm employees for compliance monitoring and other purposes. In addition, such information may be disclosed to relevant regulatory or self-regulatory organizations to fulfill the Firm’s various regulatory obligations, or otherwise when disclosure is required by law, or is necessary for the purpose of, or in connection with, legal proceedings or to defend legal rights.

C. Personal Securities Transactions and Private Investments

1. Reporting of Transactions in Personal Accounts

a. General Policy

It is the general policy of the Firm that Covered Persons may trade Securities in Personal Accounts in which they have a direct or indirect Beneficial Interest only if they comply with the Firm’s Personal Trading policies outlined herein. This policy applies to all of the transactions and holdings of a Covered Person in Covered Securities. All exceptions to this policy must be approved by the CCO.

b. Duplicate Trade Confirmations and Statements

Covered Persons are required to disclose all Personal Accounts 1 to the Compliance Department. Upon disclosure of the accounts, the Compliance Department will notify the broker(s) to provide (i) copies or electronic transmissions of all trade confirmations relating to transactions in the Covered Person’s Personal Accounts, and (ii) duplicate copies of periodic brokerage statements or electronic transmissions of monthly holdings.

 

 

1   New Employees and their Members of Household must disclose all Personal Accounts and securities holdings within ten (10) days of the time the new Employee is hired. Holdings must be current as of a date not more than 45 days prior to the date the individual becomes a Covered Person. This includes Limited Offerings, or Private Placements or Private Investments and all Covered Securities not held at a broker/dealer.


Trade confirmations should include the following information, as applicable:

 

    Personal Account holder’s name and account number;

 

    Ticker symbol or CUSIP;

 

    Interest rate and maturity date;

 

    Quantity of shares or Securities, and the principal amount;

 

    Date and nature of transaction (i.e., purchase, sale or other acquisition or disposition);

 

    Price of the Security; and

 

    Name of broker, dealer or bank through which the transaction was effected.

For any transaction or holding (e.g., Private Investments) that does not appear on a trade confirmation or brokerage statement, the Employee must provide the Compliance Department with the same information enumerated above within ten (10) days of the end of the calendar quarter in which the transaction occurred. These transactions generally require pre-clearance via the Firm’s Compliance System (see Section C.2.c “Transactions in Private Investments” before engaging in such transactions).

c. Personal Accounts Limited to Approved Brokers

Covered Persons are permitted to maintain third-party managed accounts (subject to the Compliance Department’s prior approval) with Approved Brokers that provide the Firm with a copy of the account management agreement and certify to the Firm that the investment manager has exclusive discretionary authority over the account. Transactions within Personal Accounts managed by an independent third-party with exclusive discretionary authority are exempt from the Firm’s pre-clearance requirement.

Note - If such an arrangement is not in writing, pre-clearance of transactions within such accounts will be required.

All transactions and holdings within third-party managed accounts are subject to periodic monitoring by the Compliance Department.

e. Annual Holdings Reports and Certifications

On an annual basis, each Employee is required to certify to their holdings in all Covered Securities and certify to all transactions in Covered Securities no later than 45 days after the end of the calendar year. Additionally, Employees must certify on a quarterly basis adherence to this -7-

policy. Please note that such certifications are required even if the Employee does not hold Personal Accounts or does not or enter into any transactions during the reporting period.


2. Pre-clearance Requirements

a. Transactions in Covered Securities

Employees are required to pre-clear all transactions in Covered Securities through the Firm’s Compliance System.

Employees must adhere to the following pre-clearance procedures:

 

    If a pre-clearance request is approved, the approval is effective until local market close on the date of approval;

 

    The Compliance Department reserves the right to deny any trade for any reason. The reasons for any such denial may not be shared with the Employee; and

 

    If a pre-clearance request is approved, there may be a possibility that the trade will subsequently be denied by the Compliance Department.

Note - Facts and circumstances may occur, post pre-clearance approval, which may compel the Compliance Department to require a reversal of the trade and disgorgement of any resulting gains.

b. Transactions in Exempt Securities

Employees are not required to pre-clear or report positions in the following Exempt Securities:

 

    Direct obligations of the Government of the United States;

 

    Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements;

 

    Shares issued by open-end registered investment companies (mutual funds), excluding AQR Affiliated Mutual Funds; and

 

    Currency futures, currencies, currency forwards and derivatives thereof.

c. Transactions in Private Investments

Employees are required to pre-clear all transactions in Private Investments through the Firm’s Compliance System. Employees are also required to provide the Compliance Department with a copy of any offering memorandum, term sheet, subscription agreement, or other information, as required.

d. Personal Loans

Employees must pre-clear with the Compliance Department any personal loan with a Financial Institution that will be collateralized by Securities. Pre-clearance involves supplying the Compliance Department with the name of the Financial Institution, the Security or Securities used as collateral and a description of the loan’s purpose.

The pre-clearance request should be emailed to the Compliance Department at employeetrading@aqr.com .

e. Transactions in Affiliated Managers Group, Inc. (“AMG”) Securities

Employees are prohibited from trading AMG Securities in their Personal Accounts. Note - The Firm’s investment management teams are prohibited from purchasing or selling AMG Securities in Client portfolios.


f. Transactions and Holdings in ETFs and AQR Affiliated Mutual Funds

Employees are not required to pre-clear transactions in ETFs or AQR-Affiliated mutual funds. However, Employees must report positions in AQR Affiliated Mutual Funds 2 and ETFs in the same manner as Section C.1.b (Duplicate Trade Confirmations and Statements) above.

g. Prohibitions and Restrictions on Personal Transactions

 

    Material Nonpublic Information.

The purchase or sale of any Securities while in possession of material nonpublic information (“MNPI”) regarding the issuer of such Securities is strictly prohibited. Any Employee who comes into possession of MNPI must immediately contact the CCO or any member of the Compliance Department .

 

    Restricted List

Trading in Securities of issuers on the Firm’s Restricted List (including derivatives relating to such Securities) is strictly prohibited. ( see Section D.3 “Restricted List” below for further information.)

 

    Market Timing

The Firm strictly prohibits Employees from engaging in any personal transactions in mutual funds that could be perceived as market timing or in a manner inconsistent with a mutual fund’s prospectus.

 

    Required Holding Period

A Covered Person may not purchase and sell, or sell and purchase, the same stock or equivalent (including a Narrow-Based Securities Index) within 30 calendar days. Exceptions may be granted by the CCO under certain circumstances (i.e., extreme financial need).

Note - This policy does not apply to Broad-Based unaffiliated, closed-end funds, unit trusts, ETFs or Exempt Securities.

 

    Short Sales

A Covered Person is prohibited from engaging in short sales. If a Covered Person commences employment with an outstanding short position, such position must be exited within 120 days. Prior to exiting the position, the transaction must be pre-cleared with the Compliance Department at employeetrading@aqr.com .

 

    Options

A Covered Person is prohibited from trading options. If a Covered Person has an outstanding option position prior to the imposition of this policy or commences employment with such a position, the position must be exercised (subject to the Compliance Department’s pre-clearance at employeetrading@aqr.com) or held until expiration.

 

 

2   Employees holding shares in AQR Affiliated Mutual Funds directly through ALPS Fund Services, Inc. do not need to report these positions to the Compliance Department. However, any AQR Affiliated Mutual Funds held in accounts outside of ALPS must be reported pursuant to Section C.1.b (Duplicate Trade Confirmations and Statements).


    Warrants

A Covered Person is prohibited from trading warrants. If a Covered Person has an outstanding warrant position prior to the imposition of this policy or commences employment with such a position, the position must be exercised (subject to the Compliance Department’s pre-clearance at employeetrading@aqr.com) or held until expiration.

 

    Initial Public Offerings

A Covered Person is prohibited from purchasing any Security issued in an Initial Public Offering.

 

    Futures

With the exception of currency futures, a Covered Person is prohibited from trading in all other futures. If a Covered Person has an outstanding futures position prior to the imposition of this policy or commences employment with such a position, the position may be held until the expiration date or exited within 120 days.

Note - if a Covered Person wishes to exit an existing futures position, this transaction must be pre-cleared with the Compliance Department at employeetrading@aqr.com .

 

    Front Running

Front running is prohibited. Front running is taking a position (or selling a position) in a Security or interest in a Personal Account with knowledge that the Firm will soon take a position (or sell a position) in the same Security or interest.

 

    Scalping

Scalping is prohibited. Scalping refers to taking improper advantage of a Client’s trading for the benefit of a Covered Person’s Personal Account.

 

    Excessive Personal Trading Activity

Personal Trading should not interfere with an Employee’s responsibilities to the Firm. The Compliance Department reviews the volume of all Employees’ personal trading and reserves the right to restrict personal trading for a particular Employee or for all Employees.

h. Personal Trading Violations

The CCO reserves the right to prohibit a Covered Person’s personal trading at any time for any reason. If a Covered Person does not comply with the Firm’s personal trading policies outlined herein, the Firm may require the Covered Person to trade out of the applicable position. Each Covered Person agrees to exit or liquidate, or to cause such positions to be exited or liquidated, upon instructions from the CCO, with the understanding that no explanation is required if such instruction is given, and no liability will accrue to the Firm as a result of losses arising out of such exit or liquidation.


Personal trading violations may lead to disciplinary action, including the suspension of personal trading privileges or termination of employment or referral of the matter to the appropriate regulatory or government agency for civil or criminal investigation.

D. Policy to Prevent Trading on Material Nonpublic Information

1. Insider Trading

It is a criminal violation of law and a violation of Firm policy to trade securities on the basis of MNPI or to communicate MNPI. Violation of these restrictions could have severe consequences for both the Firm and its Employees. Any Employee engaging in activity in violation of the provisions set forth in this section may be subject to disciplinary action, including suspension or termination of employment or referral of the matter to the appropriate regulatory agency for civil or criminal investigation. Any Employee who learns of any actual or potential violation of the law or provisions of this section must promptly notify the CCO or any member of the Compliance Department.

ANY EMPLOYEE WHO BELIEVES THAT THEY MAY BE IN POSSESSION OF MNPI MUST:

 

    PROMPTLY REPORT THE ISSUE TO THE CCO OR ANY MEMBER OF THE COMPLIANCE DEPARTMENT.

 

    NOT TRANSACT IN THE SECURITIES OF THE RELEVANT ISSUER IN A CLIENT, FIRM OR PERSONAL ACCOUNT.

 

    NOT DISCUSS THE INFORMATION WITH ANYONE INSIDE OR OUTSIDE OF THE FIRM EXCEPT FOR THE CCO OR THE COMPLIANCE DEPARTMENT.

 

    NOT FACILITATE THE USE OR DISCLOSURE BY OTHERS (INCLUDING AN EMPLOYEE) OF MNPI.

Federal, state and international securities laws and regulations prohibit Securities transactions while in possession of MNPI under certain circumstances, including, but not limited to:

 

    “Misappropriated” information or information improperly obtained by the purchaser or seller;

 

    Information provided by a corporate insider to the purchaser or seller in exchange for a monetary or non-monetary consideration;

 

    Information provided to purchaser or seller with the understanding that it was confidential; or

 

    An individual prohibited from trading under items referenced above “tips” the information to the purchaser or seller.

Trading on MNPI or communicating MNPI could result in civil and/or criminal penalties under both federal and state securities laws, including but not limited to:

 

    The Firm and/or the offending Employee may be subject to criminal prosecution, and if convicted, significant monetary fines and imprisonment of up to 25 years;

 

    The Firm may face SEC action (or action pursuant to a non U.S. law or regulation) seeking monetary and administrative sanctions;

 

    The Firm and/or the offending Employee may be subject to lawsuits by private plaintiffs; and

 

    The Firm and/or the offending Employee may face suspension, revocation or termination of their registrations or memberships.


2. Recognizing MNPI

Information is considered “material” if there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision. Generally, this includes any information the disclosure of which would have a meaningful effect on the price of an outstanding Security.

The assessment of materiality is highly fact-specific. When in doubt, Employees should err on the side of caution and treat the information in question as material and bring it to the attention of the CCO or any member of the Compliance Department for further consideration.

Information is considered “nonpublic” if the issuer to which such information relates has not broadly disseminated that information to investors in the marketplace, such as releasing the information over the news wires, disclosing it in public filings made with a regulatory agency ( e.g., Forms 10-K or 10-Q) or otherwise disseminating the information in a manner that makes it fully available to investors in the marketplace.

Examples of where MNPI may arise, depending on the circumstances, include, but are not limited to, the following events :

 

    Impending or potential mergers, acquisitions, tender offers, joint ventures, or changes in assets, such as large disposal of the same;

 

    Earnings or revenue information and changes in previously disclosed financial information;

 

    Liquidity issues or impending bankruptcy;

 

    Events regarding the issuer’s securities (e.g., advance knowledge of a ratings downgrade, defaults on securities, calls of securities for redemption, public or private sales of additional securities, stock splits or changes in dividends, repurchase plans or changes to the rights of Security holders);

 

    New products or discoveries, or developments regarding clients or suppliers (e.g., the acquisition or loss of a major contract);

 

    Major government action involving the issuer (e.g., FDA decision on a new drug);

 

    Significant changes in control or management;

 

    Content of forthcoming brokerage research reports;

 

    Changes in auditors or auditor notification that the issuer may no longer rely on an auditor’s report;

 

    Actual or threatened litigation;

 

    Information relating to the market for an issuer’s securities, such as a large order to purchase or sell securities;

 

    Prepublication of information regarding articles or reports in the financial press; and

 

    Information regarding Public Companies in which accounts managed by the Firm hold an investment.


3. Restricted List

The Firm’s Restricted List is maintained by the Compliance Department and includes a list of Securities for which Personal Account and Firm trading is either partially of wholly prohibited unless pre-approved by the CCO. Securities are placed on the Restricted List for a variety of business or legal reasons. Employees should not speculate as to why a Security was placed on the Restricted List. The Restricted List is highly confidential to the Firm and should not be disclosed externally without the Firm’s permission.

If a particular issuer is placed on the Restricted List, trading is prohibited in all Securities related to the issuer, including: equity, options, rights, swaps, debt, warrants, convertible securities and any other derivative whose market value is determined principally with reference to those Securities.

4. Expert Networks and Consultants

Another possible source of MNPI involves the use of expert networks or consultants to provide information, advice, analysis, market or industry expertise for use in formulating investment views and decisions. Such expert networks or consultants may have confidential information and/or MNPI by having relationships with current or recent employees of Public Companies; known significant suppliers or distributors to Public Companies; attorneys, accountants and consultants engaged by Public Companies; government officials; or doctors serving on data safety monitoring boards for clinical trials. The use of any and all expert networks or consultants must be pre-approved by the Compliance Department.

E. Outside Business Activities

Certain outside business activities engaged in by Employees may present a conflict of interest for the Firm. As such, Employees must pre-clear any outside business activities through the Firm’s Compliance System. The Compliance System will notify the Employee’s supervisor to review and approve/deny the outside business activity. If the outside business activity is approved by the Employee’s supervisor, the Compliance System will escalate it to the CCO for final approval. Employees must obtain both the prior approval from their supervisor and the CCO before engaging in any such outside business activities. Outside business activities include, but are not limited to, the following:

 

    Being employed by or affiliated with any bank, investment adviser, broker/dealer, futures or Commodities broker;

 

    Serving as an officer, director, principal, general partner, employee, consultant of a Public Company or private company or partnership;

 

    Serving on a creditors’ or similar committee;

 

    Serving on the board of governors/trustees/directors or investment committee or similar committee of any public or private institution ( e.g., charity/non-profit, educational institution);

 

    Serving as a political appointee or elected official, whether federal, state or local, or with a political party; or

 

    Any other outside business activity in which the Employee receives compensation or has a reasonable expectation of compensation.


Note - Volunteer work for a civic, charitable, educational or religious organization does not require pre-clearance unless the Employee is involved in the financial matters of the organization. Volunteer work for a Political Official, political candidate or Political Organization must be done in strict compliance with Section H “Political Contributions” below.

F. Related Persons

Certain family or personal relationships of Employees may present a conflict of interest for the Firm. As such, Employees are required to disclose to the Compliance Department at ConflictReporting@aqr.com any Related Person employed by or affiliated with:

 

    Governmental agency or entity;

 

    Vendor or service provider of the Firm;

 

    Client of the Firm;

 

    Bank, broker/dealer, futures broker or Commodities broker;

 

    Hedge fund (other than the Firm), private equity fund or other institutional money manager or any affiliate thereof;

 

    Any other asset manager or investment firm; or

 

    An officer or director of a Public Company

Additionally, Employees should disclose to the Compliance Department at ConflictReporting@aqr.com any non-Related Person engaged in activities they believe may be deemed or appear to be a potential conflict of interest.

Note - All Employees must promptly notify the Compliance Department at ConflictReporting@aqr.com of any material changes with respect to the employment or affiliations of a Related Person .

G. Charitable Contributions

1. Overview

The Firm encourages Employee involvement and contributions to qualified charitable, religious or civic organizations. 3 Even where it concerns Charitable Contributions, Employees are reminded of their obligation to avoid conflicts of interest that could impact a Clients’ interest or the Firm’s reputation.

2. Prohibited Charitable Contributions

The following Charitable Contributions are prohibited :

 

    Charitable Contributions that are solicited or directed by existing Clients or prospective Clients for the purpose of influencing the award or continuation of a business relationship;

 

    Charitable Contributions given as a bribe, payoff or kickback ( e.g., in order to obtain or retain business or to secure an improper advantage); or

 

    Charitable Contributions that create the appearance or an implied obligation that the giver is entitled to preferential treatment, an award of business, better prices or improved terms.

 

 

3   Only organizations exempt from Federal income taxation under Internal Revenue Code section 501(c)(3) are permitted under this policy.


3. Charitable Contributions - Guidelines

The following guidelines related to Charitable Contributions must be adhered to:

 

    Pre-Approval of Charitable Contributions to Clients and Prospective Clients. All Charitable Contributions made by Employees to Clients and prospective Clients, or as a result of a client or prospective client solicitation, must be pre-approved by the Compliance Department at BusinessConduct@aqr.com .

 

    Pre-Approval of Charitable Contributions Made by the Firm. All Charitable Contributions made by the Firm must be pre-approved by the Compliance Department at BusinessConduct@aqr.com.

 

    Report Conflicts of Interest. Employees must report to the Compliance Department any Charitable Contribution which might create an actual or potential conflict of interest with the Firm or Employees and/or its Clients.

4. Charitable Contributions to Foreign Charities

The Firm does not prohibit or discourage donations to foreign charities. However, the Firm needs to be certain that donations to foreign-based charities are not illegal payments to Foreign Officials in violation of the various anti-bribery laws ( see Section III “Anti-Bribery Policy” of the Manual). The Firm must also confirm that the charity does not act as a conduit to fund illegal activities in violation of U.S. anti-money laundering or other applicable laws.

All Firm and Employee foreign Charitable Contributions must be pre-approved by the Compliance Department at BusinessConduct@aqr.com.

H. Political Contributions

The Firm’s commitment to the highest level of ethical standards and business conduct extends to the Firm’s business interactions with government officials and entities. In particular, if the Firm is seeking to do business with a governmental entity, the political activities of the Firm and its covered associates can have a significant impact on current and potential business relationships. As such, the Firm has adopted policies to comply with federal, state and local rules and regulations and “Pay-to-Play” rules in order to prevent material conflicts. Failure to comply with these rules and regulations could result in civil or criminal penalties for the Firm and the covered associates involved.

Specifically, Rule 206(4)-5 under the Advisers Act addresses “Pay-to-Play” practices under which direct or indirect payments by investment advisers to state and local government officials are perceived to improperly influence the award of government investment business. The rule does not ban or limit the amount of Political Contributions that can be made by an investment adviser or an employee subject to its provisions but rather imposes a “time out” on the ability of an investment adviser to receive compensation for conducting advisory business with a government entity for two years after certain contributions are made to an official of a government entity. The rule also prohibits an adviser and its covered associates from coordinating or soliciting any contribution or payment to an official of the government entity, or a related local or state political party.


Political Contributions to state or local Political Officials or candidates for state or local public office and state and local Political Organizations are prohibited.

All other Political Contributions should be pre-cleared by the Compliance Department through the Firm’s Compliance System or at BusinessConduct@aqr.com .

I. Gifts and Entertainment

1. General Policy

The Firm monitors the nature, quantity and frequency of the Gifts and Entertainments that its Employees give and receive. This policy is designed not to deter legitimate business Gifts or Entertainment but to reasonably prevent Gifts or Entertainment from creating an actual or potential conflict of interest or a violation of law, as well to protect the Firm’s reputation. An actual or potential conflict of interest occurs when the personal interests of Employees interfere or could potentially interfere with their responsibilities to the Firm and its Clients. The giving, receiving or solicitation of Gifts or Entertainment could create an appearance of impropriety or may raise a potential conflict of interest. Employees should use common sense in determining whether or not to accept Gifts or Entertainment and to be aware of potential conflicts, and continue to make all decisions in the best interests of the Firm and its Clients.

2. Pre-clearance and Reporting Requirements

a. U.S. and Foreign Officials

Under certain circumstances, Gifts and Entertainment can be provided to or received from U.S. Officials and/or Foreign Officials. However, those circumstances are limited. The Compliance Department must pre-approve all Gifts, Entertainment and hospitality provided to or received from U.S. Officials and/or Foreign Officials. Employees must pre-clear these Gifts, Entertainment and hospitality through the Firm’s Compliance System or at BusinessConduct@aqr.com.

Please see section III. “Anti-Bribery Policy”, below for further discussion on interacting with U.S. and Foreign Officials.

b. Non-Officials

i. Reporting of Gifts and Entertainment

Employees are required to promptly report to the Compliance Department through the Firm’s Compliance System all Gift and Entertainment benefits they give to, or receive from, persons or entities with which the Firm is currently or potentially conducting business.

Exclusions: De Minimis or Promotional Items. This reporting requirement does not apply to logo items or Gifts of a nominal or de minimis value (less than $25), such as pens, notepads, hats, etc. Gifts valued at or above $25 would not be considered nominal, such as expensive luggage or fleece sweaters, even if they do contain the firm’s logo, and therefore should be reported.

ii. Pre-clearance of Gifts

Employees must pre-clear all Gifts or promotional items ( e.g., books and logo items) exceeding $50 given to, or received from persons with which the Firm is currently or potentially conducting business through the Firm’s Compliance System or at BusinessConduct@aqr.com .


Individual employees should not provide or accept any Gift that would result in the total amount of Gifts given to or received from persons with which the Firm is currently or potentially conducting business to be in excess of $100 in total value during any calendar year unless approved by the CCO.

Employee acceptance of accommodations, tickets or other entertainment when the persons or representatives of the entities with which the Firm is currently or potentially conducting business are not present will be considered a Gift under this policy. Employees should not solicit tickets from any person or entity with which the Firm is currently or potentially conducting business.

The Firm may determine that a Gift is inappropriate or excessive and may direct such gift to be returned or donated to a charity of the Firm’s choosing.

iii. Pre-clearance of Entertainment

Employees must pre-clear all Entertainment exceeding $150 per person , per occurrence given to, or received from persons with whom the Firm is currently or potentially conducting business through the Firm’s Compliance System or at BusinessConduct@aqr.com .

Individual employees should not provide or accept any Entertainment (including non-educational events) that would result in the total amount of Entertainment given to or received from persons with which the Firm is currently or potentially conducting business to be in excess of $1000 in value during any calendar year unless approved by the CCO.

c. Educational Events

All educational and training events that the Firm or its Employees are hosting for persons outside the Firm ( e.g., AQR Forum, AQR University) must be pre-cleared with the Compliance Department through the Firm’s Compliance System or at BusinessConduct@aqr.com. In addition, any educational or training event where an outside firm will cover the cost for an Employee to attend must be pre-cleared with the Compliance Department through the Firm’s Compliance System or at BusinessConduct@aqr.com. The event must be intended to provide training or education to an attendee. Payment or reimbursement, whether given or received by the Firm or an Employee, for associated meals, lodging and transportation is permissible but reimbursement or payment for other forms of entertainment while at a location ( e.g., golf outings, tours) for the purpose of training or education would not be permissible. Additionally, any expenses for a spouse/partner/guest of the attendee at an educational event will not be reimbursed.

3. Prohibitions and Restrictions on Gifts and Entertainment

a. General Prohibitions

The following Gifts and Entertainment are prohibited and may not be given or accepted:

 

    Gifts and Entertainment prohibited by law;

 

    Gifts and Entertainment given as a bribe, payoff or kickback ( e.g., in order to obtain or retain business or to secure an improper advantage);


    Gifts and Entertainment that create the appearance or an implied obligation that the provider is entitled to preferential treatment, an award of business, better prices or improved terms;

 

    Gifts and Entertainment that could influence the Employee or recipient or appear to influence the Employee’s or recipient’s ability to act in the best interest of AQR or its Clients or the recipient’s organization;

 

    Gifts and Entertainment that would negatively impact the Firm’s reputation;

 

    Gifts and Entertainment the Employee/recipient knows are prohibited by the provider’s or recipient’s organization;

 

    Gifts of cash, or cash equivalents (such as gift cards or gift certificates);

 

    Gifts given in the form of non-cash benefits ( e.g., the promise of employment);

 

    Entertainment not in good taste or occurs at a venue that is not business appropriate; or

 

    Entertainment that might be viewed as excessive in the context of the business occasion.

b. Travel and Accommodations

Generally, travel and accommodations benefits offered to or by persons or entities with which the Firm is currently or potentially conducting business will be denied. Employees should contact the Compliance Department to discuss reimbursement requirements related to air travel ( e.g., travel on a private plane) and accommodations concerning an educational event or business meeting.

J. Whistleblowing Policy

1. General Policy

All Employees shall report to the CCO, the General Counsel or the AQR Hotline evidence of a:

 

    Violation of any applicable federal, state or international securities laws;

 

    Breach of fiduciary duty arising under any applicable federal or state laws; or

 

    Any similar violation of any federal, state or international law by the Firm or any of its officers, principals, employees or agents.

Note - Nothing contained in this Manual prohibits or restricts an Employee from initiating communications directly with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation.

2. Escalation, Investigation and Remediation

Depending on the details of the report, the CCO or the General Counsel may escalate the matter to the Strategic Planning Committee after receiving the report from the Employee(s). The Strategic Planning Committee shall maintain the report in strict confidence. Upon receipt of any such report, the Firm may work with external legal counsel to determine whether further investigation is necessary.


If it is determined that an investigation is warranted, the CCO or the General Counsel will:

 

    Initiate an investigation, which may be conducted by the Compliance Department and/or external legal counsel; and

 

    Retain such additional experts as the Strategic Planning Committee, in consultation with the CCO and the General Counsel, may deem necessary.

At the conclusion of any such investigation, the CCO or the General Counsel shall:

 

    Recommend an appropriate response to any finding of a material violation;

 

    Inform the Strategic Planning Committee of the results of the investigation and the appropriate remedial measures to be adopted; and

 

    Inform the whistleblower of the findings of the investigation as well as any remedial actions recommended, if any, to ensure that the violations are addressed.

3. Post-Investigation

The CCO, General Counsel and the Strategic Planning Committee shall monitor the status of the whistleblower to ensure that he or she is not retaliated against due to the reporting of the potentially improper activities.

The CCO, General Counsel and the Strategic Planning Committee shall take all necessary actions to ensure the successful implementation of any remediation efforts.

The Firm’s Whistleblowing Policy shall be reviewed periodically to ensure its effectiveness.

LOGO

 

Code of Ethics

Boston Partners has built a reputation for integrity and professionalism among its clients. We value the confidence and trust those clients have placed in us and strive to protect that trust. This Code of Ethics (the “Code”) is our commitment to protecting our clients’ trust by establishing formal standards for general personal and professional conduct. Furthermore, this Code does not attempt to identify all potential conflicts of interest or conduct abuses, and violations regarding the spirit of the Code may be subject to disciplinary action. Questions regarding the interpretation of the Code or its application to particular conduct should be addressed with Legal or the CD.

 

A. APPLICABILITY AND DEFINITIONS

This Code and all sections, unless specifically noted otherwise, apply to all Supervised Persons.

Supervised Persons” for purposes of this Code means:

 

1. Directors, and officers of Boston Partners (or other persons occupying a similar status or performing similar functions);

 

2. Employees of Boston Partners and registered representatives of Robeco Securities LLC (collectively “Employees”);

 

3. Any other person who provides investment advisory advice on behalf of Boston Partners and is subject to Boston Partners’ supervision and control; and

 

4. Certain other persons designated by the CD, such as temporary/contract workers who support our businesses.

Access Person ” for purposes of this Code means any Supervised Person:

 

1. Who has access to non-public information regarding any client’s purchases or sales of securities, or

 

2. Who has non-public information regarding the portfolio holdings of any mutual fund, managed account, or private investment fund managed by Boston Partners (“client accounts”); or

 

3. Who is involved in making securities recommendations to clients or who has access to such recommendations that are nonpublic; or

 

4. Who is a director or officer of Boston Partners. Excepted from this requirement are Directors of Boston Partners who are not involved in the day-to-day business activities of the firm or do not have access to confidential information regarding client securities holdings, transactions, or recommendations. Also exempted from this requirement are Robeco Investment Funds’ directors who are not employees of Boston Partners nor have access to confidential information regarding client securities holdings, transactions or recommendations; or

 

5. Certain other persons designated by the CD, such as temporary/contract workers who support our businesses.

The CD will notify all individuals of their status as either a Supervised Person or an Access Person.

 

As of March, 2016


LOGO

 

B. STANDARDS OF BUSINESS CONDUCT

The following principles are intended to guide in the applicability of this Code of Ethics:

 

1. Boston Partners is a fiduciary and its Supervised Persons have a duty to act for the benefit of Boston Partners’ clients and shall at all times place the financial interests of the client ahead of Boston Partners;

 

2. Boston Partners holds all Supervised Persons responsible to high standards of integrity, professionalism, and ethical conduct; and

 

3. Boston Partners fosters a spirit of cohesiveness and teamwork while ensuring the fair treatment of all Supervised Persons.

 

C. COMPLIANCE WITH FEDERAL SECURITIES LAWS

All Supervised Persons must comply with applicable federal securities laws. Federal securities laws means the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach- Bliley Act, any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted thereunder by the Commission or the Department of the Treasury. The applicable laws are designed to prevent the following practices, which should not be viewed as all encompassing and are not intended to be exclusive of others.

Supervised Persons must never:

 

    Defraud any client in any manner;

 

    Mislead any client, including by making a statement that omits material facts;

 

    Engage in any act, practice or course of conduct which operates or would operate as a fraud or deceit upon any client, including misappropriation of an investment opportunity;

 

    Engage in any manipulative practice with respect to any client or security, including price manipulation.

 

D. CONFLICTS OF INTEREST

As a fiduciary, Boston Partners has an affirmative duty of care, loyalty, honesty to its clients and a duty of utmost good faith to act in the best interests of Boston Partners’ clients. Compliance with this fiduciary responsibility can be accomplished by avoiding conflicts of interest and by fully, adequately, and fairly disclosing all material facts concerning any conflict which arises with respect to any client.

The following specific guidelines should not be viewed as all encompassing and are not intended to be exclusive of others:

 

    No Supervised Person shall take inappropriate advantage of their position with respect to a client, advancing their position for self-gain.

 

    No Supervised Person shall use knowledge about pending or currently considered client securities transactions to profit personally as a result of such transactions.

 

    All securities transactions affected for the benefit of a client account shall avoid inappropriate favoritism of one client over another client.

 

    All securities transactions affected for the benefit of a Supervised Person shall be conducted in such a manner as to avoid abuse of that individual’s position of trust and responsibility.

 

As of March, 2016


LOGO

 

E. CONFIDENTIALITY

Boston Partners generates, maintains, and possesses information that it views as proprietary, and it must be held strictly confidential by all Supervised Persons. This information includes, but is not limited to:

 

    the financial condition and business activity of Boston Partners or any enterprise with which Boston Partners is conducting business.

 

    investment management agreements and partnership agreements;

 

    client specific information;

 

    holdings in client accounts;

 

    research analyses and trading strategies;

 

    internal communications;

 

    legal advice; and

 

    computer access codes.

Supervised Persons may not use proprietary information for their own benefit or for the benefit of any party other than the client. Failure to maintain the confidentiality of this information may have serious detrimental consequences for Boston Partners, its clients, and the Supervised Person who breached the confidence.

In order to safeguard Boston Partners’ proprietary information, Supervised Persons are expected to abide by the following:

 

    Never share proprietary information with anyone at Boston Partners except on a needs-to-know basis.

 

    Never disclose proprietary information to anyone outside of Boston Partners, except in connection with Boston Partners’ business and in a manner consistent with the client’s interests, or unless required in order to make a statement not misleading, or to otherwise comply with the law.

 

    Disclosing proprietary information in connection with Boston Partners’ business is permissible in accordance with Boston Partners’ Selective Disclosure Policy, Boston Partners’ Investment Recommendations Policy, Boston Partners’ Privacy and Disposal Policy, and Boston Partners’ Media Policy.

 

    Never remove any proprietary information from Boston Partners’ premises, unless absolutely necessary for business purposes (and, if so, the information must be kept in the possession of the Supervised Person or in a secure place at all times and returned promptly to Boston Partners’ premises);

 

    Exercise caution in displaying documents or discussing information in public places such as in elevators, restaurants, or airplanes, or in the presence of outside vendors or others not employed by Boston Partners;

 

    Exercise caution when using e-mail, cellular telephones, facsimile machines or messenger services;

 

    Never leave documents containing proprietary information in conference rooms, wastebaskets, or desks, or anywhere else where the information could be seen or retrieved;

Boston Partners’ restrictions on the use of proprietary information continue in effect after termination of employment with Boston Partners, unless specific written permission is obtained from the General Counsel. For purposes of clarification, the terms of any separate confidentiality agreement between an Employee and Boston Partners or any of its affiliates shall supersede this general restriction, to the extent applicable.

 

As of March, 2016


LOGO

 

Any questions regarding policies and procedures on the use of proprietary information should be brought to the attention of the General Counsel or the CCO.

 

F. EMPLOYEE PERSONAL SECURITIES MONITORING

DEFINITIONS

Covered Security ” shall include any type of equity or debt instrument, including any rights, warrants, derivatives, convertibles, options, puts, calls, straddles, exchange traded funds, shares of closed-end mutual funds, shares of open end mutual funds that are advised or sub advised by Boston Partners, its affiliates or, in general, any interest or investment commonly known as a security.

“Non-Covered Security” shall include shares of open-ended mutual funds that are not advised or sub- advised by Boston Partners or its affiliates, direct obligations of the US government, bankers’ acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments, including repurchase agreements, which have a maturity at issuance of less than 366 days and that are rated in one of the two highest rating categories by a Nationally Recognized Statistical Rating Organization (“NRSRO”).

Investment Personnel shall include portfolio managers, research analysts, traders and any other person who provides information or advice to portfolio managers, or who helps execute or implement the portfolio manager’s decisions as designated by the CD.

“Beneficial Interest” shall include any Covered Security in which a Supervised Person has an opportunity directly or indirectly to provide or share in any profit derived from a transaction in a Covered Security, including:

 

    accounts personally held by the Supervised Person;

 

    accounts held by the Supervised Person’s immediate family members related by blood or marriage sharing the same household;

 

    any person or organization (such as an investment club) with whom a Supervised Person has an opportunity to directly or indirectly share in any profit from a transaction in a Covered Security; or

 

    any trusts of which a Supervised Person is trustee.

“Designated Broker/Dealer” is one who has contracted with Boston Partners to make available Supervised Persons’ investment accounts, statements and confirmations via electronic download. A list of designated broker/dealers is available upon request from the CD.

“Outside Account” shall include any Supervised Person’s Covered Securities account not held at a Designated Broker/Dealer.

 

  1. ACCESS TO SUPERVISED PERSONS’ ACCOUNTS, CONFIRMATIONS AND STATEMENTS

Supervised Persons are required to maintain all discretionary or non-discretionary securities or commodities accounts with a Designated Broker/Dealer, unless prior written permission to maintain an Outside Account has been granted by the CD. This includes any account over which the Supervised Person has the power to exercise investment control, including but not limited to accounts in which the Supervised Person has a direct or indirect Beneficial Interest. If an Outside Account is approved, the Supervised Person must instruct their broker to send duplicate statements and confirmations to the CD.

 

As of March, 2016


LOGO

 

All Supervised Persons whose accounts are custodied outside of Boston Partners’ Designated Broker/Dealer(s) must instruct their broker to submit copies of confirmations and/or account statements to:

Financial Tracking

2 Sound View Drive, Suite 100

Greenwich, CT 06830

The CD will supervise the review of all confirmations and/or account statements to ensure the required pre-approvals were obtained and to verify the accuracy of the information submitted in the quarterly reports.

 

  2. INVESTMENT ACTIVITIES

 

    Supervised Persons may not offer investment advice or manage any person’s portfolio in which he/she does not have a beneficial interest without prior written approval.

 

    Supervised Persons may not participate in an investment club without prior written approval.

 

  3. PRE-CLEARANCE

Unless otherwise noted, the following provisions apply to all Covered Securities beneficially owned by Supervised Persons:

 

  A. Covered Securities Transactions

Mandatory written/electronic pre-clearance prior to the execution of any transaction involving a Covered Security. The CD may approve transactions. See Section 6 for exemptions.

 

  B. Approvals

Pre-clearance is valid only for the day of approval. If the trade is not executed on the approved date, the pre-clearance process must be repeated prior to execution on the day the transaction is to be effected.

 

  C. Initial Public Offering (IPO) Transactions

Mandatory written/electronic pre-clearance prior to participation in an IPO, except for Government Bonds and Municipal Securities. Approval is determined on a case-by-case basis; documentation supporting the decision rationale will be maintained on all requests.

 

  D. Private Limited Opportunity Investments

Mandatory written/electronic pre-clearance prior to the execution of any private limited opportunity investment in a security. Private limited opportunity investments include, but are not limited to, private investments in hedge funds and Delaware Statutory Trusts, as well as any private business investment in a security, including a family business. Any questions regarding whether or not a particular investment requires written/electronic consent should be addressed with the CD prior to investment. Approval is determined on a case-by-case basis; documentation supporting the decision rationale will be maintained on all requests.

 

  E. Short Sales/Cover Shorts/Options

Mandatory written/electronic pre-clearance prior to execution of any personal transaction involving a short position or option position. Supervised Persons may not sell a security

 

As of March, 2016


LOGO

 

short if it is currently held long in a client account. This prohibition includes writing naked call options or buying naked put options. Approval is determined based on the underlying security and transactions are subject to all blackout policies including the short-term profit prohibition.

 

  F. Gifts of Securities

Gifts of securities do not need pre-clearance but must be reported on quarterly transaction and annual holdings statements.

 

  4. HOLDING PERIODS

Unless otherwise noted, the following provisions apply to all Covered Securities beneficially owned by Supervised Persons:

 

  A. Supervised Persons may not profit from the purchase and sale, or sale and purchase, of the same (or equivalent) securities within 30 calendar days. “Equivalent” security means any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege at a price related to the subject security or similar securities with a value derived from the value of the subject security.

 

  B. Multiple purchases/sales of the same or equivalent security will be considered on a First-In- First-Out (“FIFO”) basis.

 

  C. Closing transactions resulting in a loss may be made after a holding period of one day.

 

  D. Trading of a security in both directions (buy/sell or sell/buy), (“Day Trading”) is prohibited.

 

  5. BLACK OUT PERIODS

 

  A. No purchase or sale of any Covered Security for which an open order currently exists.

 

  B. Investment Personnel are prohibited from purchasing or selling any Covered Security for which they have responsibility for a Client Transaction or should have knowledge that the security may be under active consideration 3 days before a “Client Transaction.” Transactions are allowed on the third day.

 

  C. Supervised Persons are prohibited from purchasing or selling any Covered Security that is also held in client accounts 3 calendar days after a “Client Transaction.” Employee trades are allowed on the third day.

“Client Transaction” is generally defined as any trade across all or a significant number of portfolios in one strategy whereby the Covered Security: 1) has been newly established, or 2) the percent holding has been increased or decreased, 3) or a new account is being funded and a significant position, as determined by Boston Partners, is being established.

 

As of March, 2016


LOGO

 

  6. EXEMPT TRANSACTIONS

Outlined below are certain exemptions to the Code; however, such exemptions may be withheld by Boston Partners in its sole discretion. Additional exemptions may be permitted on a case-by- case basis to any provision in this Code when the circumstances of the situation strongly support an exemption.

 

  A. Black Out Period Exemptions

Covered Security transactions for which a Supervised Person has requested and received preclearance from the CD will not be deemed to have violated any blackout period in Section 5 based upon subsequent information on events unless the Supervised Person is the Portfolio Manager or other Investment Person directly responsible for recommending, approving/initiating, or executing the client transaction.

 

  B. Pre-Clearance and Black Out Period Exemptions

The following transactions are exempt from the Pre-Clearance provisions as defined in Section 3 and from the Black Out Period provisions as defined in Section 5.

These transactions are NOT exempt from Holding Period provisions as defined in Section 4 or from the Reporting provisions as defined in Section 7.

1. Purchases and Sales of shares of mutual funds advised or sub-advised by Boston Partners or its affiliates.

2. Purchases and sales involving a long* position in a common stock, exchange-traded fund, or a closed end fund when:

 

  i) the market cap is in excess of $3 billion; AND

 

  ii) the aggregate share amount executed across all accounts in which the Employee has a Beneficial Interest is 1,000 shares or fewer over a 30-day period.

 

* Note, this exemption does not apply to short positions or options.

 

  C. Pre-Clearance, Holding, and Black Out Period, Period Exemptions

The following transactions are exempt from all Pre-Clearance provisions defined in Section 3, Holding Period provisions as defined in Section 4, and Black Out Period provisions as defined in Section 5.

These transactions are NOT exempt from the Reporting provisions as defined in Section 7.

 

  1. Covered Security transactions executed on a fully discretionary basis by a Registered Investment Adviser (other than Boston Partners) on behalf of a Supervised Person and a letter stating such is maintained in the file;

 

As of March, 2016


LOGO

 

  2. Purchases and sales of Exchange traded funds (“ETFs”) or options on ETFs. (*Exemption applies to 30 day hold for profit, does not apply to prohibition of Day Trading. Day Trading of ETFs or options on ETFs is prohibited);

 

  3. Purchases or sales effected in any account over which there is no direct or indirect influence or control;

 

  4. Purchases or sales that are non-volitional such as margin calls, stock splits, stock dividends, bond maturities, automatic dividend reinvestment plans, mergers, consolidations, spin-offs, or other similar corporate reorganizations or distributions generally applicable to all holders of the same class of securities;

 

  5. Systematic investment plans provided the CCO, or designee, has been previously notified of the participation in the plan;

 

  6. Any acquisition of a Covered Security through the exercise of rights issued pro rata to all holders of the class, to the extent such rights were acquired in the issue (and not through the acquisition of transferable rights);

 

  7. Transactions by an Investment Person acting as a portfolio manager for an investment limited partnership or investment company where Boston Partners is the contractual investment adviser and in which the Investment Person has a Beneficial Interest or for or any account in which Boston Partners has a proprietary interest.

 

  7. REPORTING REQUIREMENTS

 

  A. Quarterly Transaction Reports

All Supervised Persons must submit to the CD a report of every Covered Security transaction, IPO, private limited opportunity investment, and gift of covered securities in which they received/participated or in which they beneficially owned/participated during the calendar quarter no later than 30 days after the end of that quarter.

The report shall include the following:

 

  1. The name of the security, the date of the transaction, the interest rate and maturity (if applicable), the number of shares, and the principal amount of each Covered Security involved;

 

  2. The nature of the transaction (i.e., purchase, sale or other type of acquisition or disposition);

 

  3. The price at which the transaction was effected;

 

  4. The name of the broker, dealer, or bank through which the transaction was effected;

 

  5. Factors relevant to a potential conflict of interest, including the existence of any substantial economic relationship between the transaction and securities held or to be acquired by an account managed by Boston Partners;

 

  6. With respect to any account established by an Access Person during the quarter, the name of the broker, dealer, or bank with whom the account was established;

 

  7. The date the account was established; and

 

  8. The date the report was submitted.

 

As of March, 2016


LOGO

 

ACCOUNTS HELD AT DESIGNATED BROKER/DEALERS EXCEPTION

For securities transactions for which the CD has direct access through a Designated Broker/Dealer electronic confirmation, such electronic access is deemed to be sufficient reporting to comply with the above requirement although a quarterly certification of completeness is still required. Each Supervised Person must verify that the CD has this required access prior to taking advantage of this exception.

 

  B. Initial Holdings Report

All Access Persons shall disclose to the CD, no later than 10 days after becoming an Access Person, a listing of Covered Securities in which the Access Person has a Beneficial Interest as of a date no more than 45 days before the report is submitted.

The report shall include the following:

 

  1. The name of the security, the number of shares, and the principal amount of each Covered Security in which the Access Person had any direct or indirect Beneficial Interest when the person became an Access Person;

 

  2. The name of any broker, dealer, or bank with whom the Access Person maintained an account in which any securities are held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and

 

  3. The date the report is submitted.

The CD will review all Initial Holdings Reports in an effort to monitor potential conflicts of interest and to understand the full nature of the Access Person’s current holdings.

 

  C. Annual Holdings Reports

Annually, on a date determined by the CD, Access Persons shall deliver to the CD, a listing of Covered Securities in which the Access Person has a Beneficial Interest that must be current as of a date no more than 45 days before the report is submitted.

The report shall include the following:

 

  1. The name of the security, the number of shares, and the principal amount of each Covered Security in which the Access Person had any direct or indirect Beneficial Interest;

 

  2. The name of any broker, dealer, or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and

 

  3. The date the report is submitted.

The CD will review all Annual Holdings Reports in an effort to monitor potential conflicts of interest and to understand the full nature of the Access Person’s current holdings.

 

  8. RESTRICTED SECURITIES LIST

The CD maintains a Restricted Security List (the “Restricted List”) which includes all securities where a Supervised Person has, or is in a position to receive, material non-public information about a company, such as information about a company’s earnings or dividends, as a result of a special relationship between Boston Partners or a Supervised Person and the company.

 

As of March, 2016


LOGO

 

If a Supervised Person knows or believes they have material, non-public information, they must immediately notify Legal or the CD. The decision whether to place a security on the Restricted List and the amount of time a security will remain on the Restricted List is made by Legal.

If it is determined that the Supervised Person is in possession of material, non-public information, the CD will establish a “Protective Wall” around the Supervised Person, to the extent reasonably possible. In order to avoid inadvertently imposing greater restrictions on trading than are necessary, a Supervised Person may not discuss this information with anyone without the approval of Legal. In addition, Supervised Persons having access to the Restricted List are to be reminded that the securities on the list are confidential and proprietary and should not be disclosed to anyone without the prior approval of Legal.

When an order is received from a Supervised Persons in a security on the Restricted List, the Preclearance System will automatically flag the transaction. The CD maintains procedures for adding securities to the Restricted List as well as monitoring and removal of those securities from the list.

 

  9. ACTIVITY REVIEW

Supervised Persons are expected to devote their full time and attention to their work responsibilities. Boston Partners may take steps to curtail an individual’s trading activity if, in the judgment of the appropriate department manager or the CD, the Supervised Person’s trading activity is having or may have an adverse impact on their job performance.

 

G. INSIDER TRADING AND MATERIAL NON-PUBLIC INFORMATION

Boston Partners has developed the following policies to monitor, restrict if necessary, and educate Supervised Persons with respect to acquiring and investing when in possession of material, non-public information.

Insider trading is generally defined as purchasing or selling securities while in the possession of material, non-public information in violation of a duty not to trade. However, if no duty exists, it is permissible to trade when in possession of this information. The question of duty is complex and depends on facts and circumstances. Situations which could require a fiduciary duty not to act include but are not limited to: information gained directly from corporate insiders or temporary insiders (i.e. officers, directors and employees of a company), information gained from participation on formal or informal creditors’ committees, and information prohibited from disclosure by confidentiality agreements. Additionally, a misappropriation theory exists whereby an individual who possesses inside information would be prohibited from trading on such information if they are found to owe a duty to a third party and not the corporation whose securities are being traded. You must refer any questions to Legal for a correct interpretation if you believe you may be in possession of material non-public information.

 

1. What is Material Information?

There is no statutory definition of material information. Information an investor would find useful in deciding whether or when to buy or sell a security is generally material. In most instances, any non-public information that, if announced, could affect the price of the security should be considered to be material information. If you are not sure whether non-public information is material, you must consult Legal.

 

As of March, 2016


LOGO

 

2. What is Non-public Information?

Non-public information is information that is not generally available to the investing public. Information is public if it is generally available through the media or disclosed in public documents such as corporate filings with the SEC. If it is disclosed in a national business or financial wire service (such as Dow Jones or Bloomberg), in a national news service (such as AP or Reuters), in a newspaper, magazine, on the television, on the radio or in a publicly disseminated disclosure document (such as a proxy statement, quarterly or annual report, or prospectus), consider the information to be public. If the information is not available in the general media or in a public filing, consider the information to be non-public. If you are uncertain as to whether material information is non-public, you must consult Legal.

While Supervised Persons must be especially alert to sensitive information, you may consider information directly from a company representative to be public information unless you know or have reason to believe that such information is not generally available to the investing public. In addition, information you receive from company representatives during a conference call that is open to the investment community is public. The disclosure of this type of information is covered by SEC Regulation FD. Please contact Legal if you have any questions with regard to this Regulation.

Boston Partners Supervised Persons working on a private securities transaction who receive information from a company representative regarding the transaction or who have knowledge of an affiliate’s private equity transactions should treat the information as non-public. The termination or conclusion of the negotiations in many instances will not change the status of that information.

 

3. Examples of Material, Non-Public Information

 

  A. Material information may be about the issuer itself such as:

 

    Information about a company’s earnings or dividends, (such as whether they will be increasing or decreasing);

 

    any merger, acquisition, tender offer, joint venture or similar transaction involving the company;

 

    information about a company’s physical assets (e.g., an oil discovery, or an environmental problem);

 

    information about a company’s personnel (such as a valuable employee leaving or becoming seriously ill); or

 

    information about a company’s financial status (e.g., any plans or other developments concerning financial restructuring or the issuance or redemption of, or any payments on, any securities).

 

  B. Information may be material that is not directly about a company, if the information is relevant to that company or its products, business, or assets such as:

 

    Information that a company’s primary supplier is going to increase dramatically the prices it charges; or

 

    information that a competitor has just developed a product that may cause sales of a company’s products to decrease.

 

As of March, 2016


LOGO

 

  C. Material information may include information about Boston Partners’ portfolio management activities such as:

 

    any information that Boston Partners is considering when assessing whether to purchase or sell a security;

 

    any actual purchase or sale decisions; or

 

    all client holdings.

 

4. Boston Partners’ Use of Material, Non-Pubic Information

Supervised Persons may receive or have access to material, non-public information in the course of their work at Boston Partners. Company policy, industry practice and federal and state law establish strict guidelines for the use of material, non-public information. To ensure that Supervised Persons adhere to the applicable laws, Boston Partners has adopted the following policies:

Supervised Persons:

 

    may not use material, non-public information about an issuer for investment purposes to benefit client or proprietary accounts, for personal gain, or share such information with others for their personal benefit;

 

    may not pass material, non-public information about an issuer on to others or recommend that others trade the issuer’s securities;

 

    must treat as confidential all information defined in Section E, Confidentiality, of this Code and preserve the confidentiality of such information and disclose it only as defined in that section;

 

    must consider all client holdings as material, nonpublic information. In addition, if a Supervised Person is aware that Boston Partners is considering or actually trading any security for any account it manages, the Supervised Person must regard that as material, nonpublic information. While deemed material, nonpublic information, securities which Boston Partners is considering or actually trading for client accounts may be traded by Boston Partners and are exempt from reporting to Legal, but remain subject to all other confidentiality provisions discussed above in Section E as well as Boston Partners’ Privacy Policy, Selective Disclosure Policy, and Investment Recommendations Policy;

 

    are prohibited from discussing the following when sourcing or analyzing investment ideas with buy-side investment professionals:

 

    disclosing whether or not a particular security is held in client accounts;

 

    disclosing Boston Partners’ immediate buy/sell intent with respect to a specific security, or

 

    making consensus buy/sell decisions; and

 

    for material nonpublic information other than Boston Partners client holdings or transactions must contact Legal immediately and disclose that they are in possession of material nonpublic information and may not communicate such information to anyone without the advance approval of Legal.

 

As of March, 2016


LOGO

 

5. Penalties for Insider Trading

Trading securities while in possession of material, nonpublic information or improperly communicating that information to others may expose you to stringent penalties. Criminal sanctions may include a fine of up to $5,000,000 and/or twenty years imprisonment. The SEC can recover the profits gained or losses avoided through the volatile trading, a penalty of up to three times the illicit windfall and an order permanently barring you from the securities industry. Finally, investors seeking to recover damages for insider trading violations may sue you.

Regardless of whether a government inquiry occurs, Boston Partners views seriously any violation of this Policy Statement. Disciplinary sanctions may be imposed on any person committing a violation, including, but not necessarily limited to, censure, suspension, or termination of employment.

 

6. Monitoring

In addition to maintaining a Restricted List, Boston Partners maintains Value Added Investor Procedures to monitor potential conflicts of interest and potential insider trading due to the nature of these relationships. Furthermore, the CD maintains monitors for instances of insider trading which include, but are not limited to, reviews of personal trading activity and email surveillance.

 

7. Engagement of Research Consultants.

No research consultant may be engaged by Boston Partners without the prior approval of the Head of Research and the CCO or his delegate in the CD. An engagement of a research consultant must be undertaken with appropriate safeguards to prevent the transmission of inside information from the consultant to Boston Partners. Any engagement of a research consultant shall be pursuant to a written agreement that shall, at a minimum, (i) impose confidentiality obligations on the consultant, (ii) contain an acknowledgement by the Consultant that Boston Partners is not requesting and does not want to be provided with material non-public information regarding any issuer of securities or information the provision of which would breach any duty, and (iii) contain a covenant by the consultant not to provide any material non-public information to Boston Partners. Prior to approval, the CD shall undertake sufficient due diligence to ensure that the consultant is suitable for retention by Boston Partners, including, in particular, that the consultant has in place reasonable procedures to prevent the transmission to Boston Partners of material nonpublic information. Boston Partners personnel should notify any prospective consultant as soon as reasonably possible at the inception of any discussions about the engagement or services that the consultant may perform for Boston Partners that Boston Partners does not wish to receive any material nonpublic information and requests that the consultant not provide any such information.

 

H. GIFTS AND ENTERTAINMENT POLICY

Supervised Persons should not offer gifts, favors, entertainment or other things of value that could be viewed as overly generous or aimed at influencing decision-making or making a client feel beholden to the firm or the Supervised Person. The following guidelines will further clarify this general principal.

DEFINITIONS:

“Gift” – anything of value, including, but not limited to gratuities, tokens, objects, clothing, or certificates for anything of value. The definition also includes any meal, tickets or admission to events where the person supplying the meal or event is not present.

 

As of March, 2016


LOGO

 

“Entertainment” – business meals and events such as sporting events, shows, concerts where the person supplying the meal or event is present.

 

1. GIFTS POLICY

 

  A. No Supervised Person shall accept any gift of more than $100 value from any person or entity that does business with or on behalf of a client (or any of its portfolios), or any entity that provides a service to Adviser. Gifts of greater than $100 value are to be declined or returned in order not to compromise the reputation of Adviser or the individual. Gifts valued at less than $100 and considered customary in the industry, are considered appropriate.

 

  B. No Supervised Person shall provide gifts of more than $100 value, per person, per year, to existing clients, prospective clients, or any entity that does business with or on behalf of a client (or any of its portfolios), or any entity that provides a service to Adviser. Gifts valued at less than $100 and considered customary in the industry, are considered appropriate.

 

  C. Generally, a Supervised Person may not accept or provide a gift of cash or cash equivalent, (such as a gift card, gift certificate or gift check). Exceptions are permissible with the approval of a member of Boston Partners’ Management Committee.

 

  D. Supervised Persons are expressly prohibited from soliciting anything of value from a client, or other entity with which the firm does business.

 

  E. Similarly, Supervised Persons should not agree to provide anything of value that is requested by a client, or other entity with which the firm does business, (such as concert, sporting event or theater tickets,), except that assisting a client or other entity in acquiring tickets for which they intend to pay full value, is permitted under the policy.

 

2. ENTERTAINMENT POLICY

 

  A. Supervised Persons may engage in normal and customary business entertainment. Entertainment that is extraordinary or extravagant, or that does not pertain to business, is not permitted.

 

  B. Certain rules and regulations enacted by the client or a regulator of the client may exist which prevent any form of gift or entertainment. You must be cognizant of what each client allows, especially pertaining to public funds, where rules may be very stringent by specific.

 

  C. Prior to providing entertainment to a representative of a public entity, contact the CD in order to verify interpretation of state or municipal regulations.

 

3. STANDARD OF REASONABLENESS

The terms “extraordinary” or “extravagant,” “customary in the industry,” and “normal and customary” may be subjective. Reasonableness is a standard that may vary depending on the facts and circumstances. If you have questions regarding a gift or entertainment, contact your Supervisor, or Legal or the CD.

 

4. RECORDS

Boston Partners must retain records of all gifts and gratuities given or received for a period of three years.

 

As of March, 2016


LOGO

 

I. CHARITABLE CONTRIBUTIONS POLICY

From time to time, Boston Partners or its Supervised Persons may be asked by a client to make a charitable contribution. To avoid any real or perceived conflict of interests, Boston Partners has adopted the following procedures.

If a contribution is requested by a client, Boston Partners may agree to charitable contributions subject to the following terms.

 

  a. The check must be made in Boston Partners’ name (not the client or the supervised person)

 

  b. Any tax benefit is taken by Boston Partners

 

  c. The contribution does not directly benefit the client

 

  d. The contribution is not made to satisfy a pledge made by the client

 

  e. The contribution must be made payable to the 501c3 Charitable organization (otherwise, the contribution may be subject to LM-10 filing with the DOL)

Charitable contributions must be pre-approved by your Supervisor.

 

J. POLITICAL CONTRIBUTIONS POLICY

From time to time, Boston Partners or its employees may be asked by a client to make political contributions. In addition, Supervised Persons, by their own volition, may seek to make individual political contributions. As an investment manager, Boston Partners is often eligible to manage money on behalf of a state or municipality. To avoid any real or perceived conflict of interests, Boston Partners requires that all personal political contributions be subject to a preclearance policy.

For the purposes of this policy, political contribution includes a direct payment of money or contribution of goods or services to, purchase of a ticket to and costs of hosting a fundraising event for, a campaign organization, volunteer work, or fund raising work done on behalf of, or to benefit, a political campaign organization or candidate.

Certain contributions, even within your voting jurisdiction, may restrict or prohibit Boston Partners from transacting business with a related public entity. If a Supervised Person exceeds the stated contribution guidelines, Boston Partners is prohibited from providing advisory services for compensation to the effected government entity for two years after the contribution.

 

1. FIRM CONTRIBUTIONS

Boston Partners does not make political contributions.

 

2. INDIVIDUAL CONTRIBUTIONS

For all Supervised Persons

 

a. Boston Partners will not reimburse any employee for individual political contributions. In addition, the Boston Partners corporate credit card cannot be used to make contributions.

 

b. Preclearance is required for all individual contributions to state, municipal and local candidates and campaigns, whether inside or outside your voting jurisdiction.

 

c. Preapproval is required prior to becoming a member of or contributor to any Political Action Committee (“PAC”).

 

As of March, 2016


LOGO

 

d. Preclearance is not required prior to individual personal contributions to national election campaigns, national political parties, or candidates for national office such as president of the US or members of the US Senate or House of Representatives unless the candidate is a current state or municipal office holder.

 

e. Personal contributions for which preclearance is required will be limited to:

 

    $350 per election per year for candidates for whom a supervised person is eligible to vote.

 

    $150 per election per year for candidate for whom a supervised person is not eligible to vote.

 

f. Coordinating or soliciting contributions or payments to elected officials or any state or local political party is prohibited.

 

g. If a supervised person becomes aware that he or she has exceeded the limitations above, he or she shall contact compliance immediately and the contribution may be required to be returned.

 

h. If there is a chance that an individual contribution may cause a conflict of interest with Boston Partners’ business, please consult with the Head of Sales or the CD.

Political contribution preclearance form can be effectuated through Financial Tracking’s system.

 

K. OUTSIDE BUSINESS ACTIVITIES

A potential conflict of interest exists between a Supervised Person’s duties to Boston Partners and its clients when individuals are permitted to engage in outside business activities.

Written requests must be submitted to the Supervised Person’s supervisor with a copy to the CD prior to a Supervised Person seeking to:

 

    engage in any outside business activity, or

 

    accept any position as an officer or director of any corporation, organization, association, or mutual fund.

The written request must contain all of the information necessary to review the activity. The request should contain the name of the organization, whether the organization is public or private, profit or non- profit or charitable, the nature of the business, the capacity in which the employee will serve, an identification of any possible conflicts, the term of the contemplated relationships and any compensation to be received. Investment personnel are prohibited from serving on the boards of directors of publicly traded companies.

The CD, in conjunction with the Supervised Person’s supervisor and the Director of Human Resources, will review and/or identify any potential conflicts.

If approved, the CD will provide the Supervised Person with written approval. In addition, if applicable, the CD will ensure that a registered representative’s Form U-4 is updated with FINRA. In the event that a resolution to the conflict cannot be reached, the Supervised Person may be asked to terminate either his outside employment or his position with Boston Partners.

 

As of March, 2016


LOGO

 

Finally, upon employment and annually thereafter, Supervised Persons are required to fill out the New Employee/Annual Compliance Acknowledgement Form and accompanying Conflicts Questionnaire (“Questionnaire”). The Questionnaire requests information regarding a Supervised Person’s outside business activities. The CD will verify items reported on the Questionnaire against written requests received throughout the year.

 

L. REPORTING VIOLATIONS

All Supervised Persons must report violations of this Code promptly to the CD and the General Counsel. Boston Partners is committed to treating all Supervised Persons in a fair and equitable manner.

Individuals are encouraged to voice concerns regarding any personal or professional issue that may impact their ability or the firm’s ability to provide a quality product to its clients while operating under the highest standards of integrity. Retaliation against any individual making such a report is prohibited and constitutes a violation of the Code. Any such reports will be treated confidentially to the extent permitted by law and investigated promptly and appropriately. Based on facts and circumstances, the CD may escalate the matter to Boston Partners’ Management Committee for resolution. Supervised Persons may make use of Boston Partners’ Global Whistle Blowing Policy.

 

M. ANNUAL REVIEWS AND CERTIFICATIONS

The CD will review the Code annually and update any provisions and/or attachments which Boston Partners deems require revision.

Upon employment, all Supervised Persons are required to certify that they have:

 

  1. Received a copy of the Code;

 

  2. Read and understand all provisions of the Code; and

 

  3. Agreed to comply with all provisions of the Code.

At the time of any material amendments to this Code, all Supervised Persons are required to:

 

  1. Certify they have read and understood the amendments to the Code; and

 

  2. Agree to comply with the amendment and all other provisions of the Code.

Annually, all Supervised Persons are required to:

 

  1. Certify they have read and understand all provisions of the Code; and

 

  2. Agree to comply with all provisions of the Code.

 

N. SANCTIONS

Regardless of whether a government inquiry occurs, Boston Partners views seriously any violation of its Code of Ethics. Disciplinary sanctions may be imposed on any Supervised Persons committing a violation, including, but not necessarily limited to, censure, suspension, monetary penalties, or termination of employment.

 

As of March, 2016


LOGO

 

O. FURTHER INFORMATION

Any Supervised Person that has any questions with regard to the applicability of the provisions of this Code, generally or with regard to any attachment referenced herein, should consult Legal or the CD.

 

P. RECORDKEEPING

The Company shall maintain the following records at its principal offices as follows:

 

A. This Code and any related procedures, and any code of ethics of the Company that has been in effect during the past five years, shall be maintained in an easily accessible place;

 

B. A record of any violation of this Code and of any action taken as a result of the violation, to be maintained in an easily accessible place for at least five years after the end of the fiscal year in which the violation occurs;

 

C. A copy of each report under this Code made by (or duplicate brokerage statements and/or confirmations for the account of) an Access Person, to be maintained for at least five years after the end of the fiscal year in which the report is made or the information is provided, the first two years in an easily accessible place;

 

D. A copy of each report by the CCO to the Board, to be maintained for at least five years after the end of the fiscal year in which it is made, the first two years in an easily accessible place; and

 

E. F. A record of any decision, and the reasons supporting the decision, to approve an acquisition by an Investment Person of securities offered in an Initial Public Offering or in a Limited Offering, to be maintained for at least five years after the end of the fiscal year in which the approval is granted.

 

As of March, 2016