UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-21852
Columbia Funds Series Trust II
(Exact name of registrant as specified in charter)
290 Congress Street
Boston, MA 02210
(Address of principal executive offices) (Zip code)
Daniel J. Beckman
c/o Columbia Management Investment Advisers, LLC
290 Congress Street
Boston, MA 02210
Ryan C. Larrenaga, Esq.
c/o Columbia Management Investment Advisers, LLC
290 Congress Street
Boston, MA 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 345-6611
Date of fiscal year end: May 31
Date of reporting period: May 31, 2021
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Annual Report
May 31, 2021
May 31, 2021
Columbia Flexible
Capital Income Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Flexible Capital Income Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Flexible Capital Income
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders current income, with long-term capital appreciation.
Portfolio management
David King, CFA
Co-Portfolio Manager
Managed Fund since 2011
Yan Jin
Co-Portfolio Manager
Managed Fund since 2011
Grace Lee, CAIA
Co-Portfolio Manager
Managed Fund since October 2020
Returns for Class A shares are shown
with and without the maximum initial sales charge of 5.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. Since the Fund launched more than one share class at its inception, Class A shares were used. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Blended Benchmark, established
by the Investment Manager, is composed of one-third each of the Russell 1000 Value Index, the Bloomberg Barclays U.S. Corporate Investment Grade & High Yield Index and the Bloomberg Barclays U.S. Convertible
Composite Index. The Russell 1000 Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The Bloomberg
Barclays U.S. Corporate Investment Grade & High Yield Index is a broad-based benchmark that measures the performance of investment grade and non-investment grade, fixed-rate and taxable corporate bonds. It
includes USD-denominated securities publicly issued by U.S. and non U.S. industrial, utility, and financial issuers that meet specified maturity, liquidity, and quality requirements. The Bloomberg Barclays U.S.
Convertible Composite Index measures the performance of all four major classes of USD equity-linked securities including: convertible cash coupon bonds, zero-coupon bonds, preferred convertibles with fixed par amounts
and mandatory equity-linked securities.
The Bloomberg Barclays U.S.
Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities,
mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage passthroughs), asset-backed securities, and commercial mortgage-backed securities.
The “Bloomberg Barclays”
indices will be re-branded as the “Bloomberg” indices effective August 24, 2021.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
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Columbia Flexible Capital Income Fund | Annual Report 2021
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3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (July 28, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Flexible Capital Income Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 40.7 |
| Convertible Bonds | 13.8 |
| Convertible Preferred Stocks | 14.0 |
| Corporate Bonds & Notes | 26.1 |
| Limited Partnerships | 1.1 |
| Money Market Funds | 3.2 |
| Preferred Debt | 0.7 |
| Senior Loans | 0.4 |
| Warrants | 0.0(a) |
| Total | 100.0 |
| (a) | Rounds to zero. |
Percentages indicated are based upon
total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended May 31, 2021, the Fund’s Class A shares returned 38.27% excluding sales charges. During the same time period, the Fund outperformed its Blended Benchmark, which returned 32.82%, as well as the Bloomberg
Barclays U.S. Aggregate Bond Index, which returned -0.40%.
Market overview
U.S. equities delivered
substantial gains for the 12 months ended May 31, 2021. Quick and unprecedented measures taken by policymakers and the U.S. Federal Reserve in the wake of the sharp COVID-19-driven market plunge in March 2020 spurred
markets to rally from the start of the period through to the end, marked by some spikes in volatility on headlines around increasing COVID-19 cases and stalled talks on further stimulus. Market participants, however,
were cheered by expectations that the rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. Passage of a fiscal stimulus package, together with the proposal of a $2 trillion
infrastructure bill in late March 2021, provided a further boost to the economic outlook.
While the rally during the first
half of the period was largely driven by outsize gains in faster growing market segments such as mega-cap technology stocks, the second half of the year saw a rotation into more economically-sensitive, value-oriented
market segments. This backdrop proved highly favorable for dividend-paying equities, which outperformed the broader market, as improving market conditions made investors more comfortable owning value stocks.
Convertible bonds also generated modest gains, which we viewed as a positive development given that returns were well above historical norms in each of the past two calendar years. The improving growth outlook, while
a headwind for rate-sensitive areas of the bond market, was generally supportive for the credit-oriented issues in which the Fund invests.
The Fund’s most notable
contributors during the period
| • | Equities delivered strong gains for the 12-month period ended May 31, 2021, and the Fund’s equity holdings were no exception, contributing strongly to the Fund’s results for the period. |
| ○ | United Parcel Service continued to capitalize on consumer needs to shop from home rather than in person, which further contributed to results. |
| ○ | The Fund’s outsized position in software giant Broadcom boosted relative return and made a significant contribution to return for the annual period. |
| ○ | We saw an opportunity to add to the Fund’s holding in Starwood Property Trust early in the period and it bounced back nicely in the second quarter of 2020, benefiting Fund performance. |
| • | The Fund also experienced solid returns from its convertible securities holdings. Our decision to participate in new issues and refinancing deals that came to market in the second and third quarters of 2020 benefited the Fund, particularly an American Eagle Outfitters convertible. |
The Fund’s most notable
detractors during the period
| • | FirstEnergy, an electric utility whose shares plunged in mid-July 2020 after it was revealed that the company was involved in a corruption scandal involving Ohio state representatives, was a key detractor. We sold the stock from the portfolio. |
| • | The Fund’s holding in Citigroup Inc. detracted from performance. Citigroup was sold during the first half of the period, as there were other names in our universe that we believed displayed more attractive risk/return characteristics at that point in time. |
| • | The Fund’s convertible preferred in American Electric Power Company was sold early in the period. The convertible preferred performed better during the market drawdown relative to the company’s common stock and we decided to sell the convertible preferred in favor of owning the common stock, which we believed offered a more attractive opportunity at that time. |
| • | A new position in ViacomCBS preferred stock hurt performance. The company’s common stock declined sharply due to forced selling by a hedge fund that was compelled to unwind its holdings. Viewing this as a short-term, technical phenomenon, we used the downturn to add to the position at what we viewed to be a more attractive valuation. |
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Columbia Flexible Capital Income Fund | Annual Report 2021
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Manager Discussion of Fund Performance (continued)
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more
pronounced for longer term securities. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. Convertible securities are subject to issuer default risk. A rise in interest rates may result in a price decline of fixed-income instruments held by the Fund, negatively impacting its performance and NAV. Falling rates may result in the Fund investing in lower yielding
debt instruments, lowering the Fund’s income and yield. These risks may be heightened for longer maturity and duration securities. The Fund may also be forced to convert a convertible security at an inopportune
time, which may decrease the Fund’s return. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. Foreign investments subject the Fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent
financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. See the Fund’s prospectus for more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
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Columbia Flexible Capital Income Fund | Annual Report 2021
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7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks 40.9% | ||
| Issuer | Shares | Value ($) |
| Communication Services 1.9% | ||
| Diversified Telecommunication Services 1.9% | ||
| AT&T, Inc. | 425,000 | 12,507,750 |
| Verizon Communications, Inc. | 210,000 | 11,862,900 |
| Total | 24,370,650 | |
| Total Communication Services | 24,370,650 | |
| Consumer Discretionary 2.3% | ||
| Hotels, Restaurants & Leisure 0.6% | ||
| Travel + Leisure Co. | 125,000 | 8,143,750 |
| Household Durables 1.1% | ||
| Newell Brands, Inc. | 250,000 | 7,172,500 |
| Whirlpool Corp. | 29,000 | 6,875,610 |
| Total | 14,048,110 | |
| Specialty Retail 0.6% | ||
| Home Depot, Inc. (The) | 22,500 | 7,175,475 |
| Total Consumer Discretionary | 29,367,335 | |
| Consumer Staples 3.4% | ||
| Food & Staples Retailing 0.7% | ||
| Walgreens Boots Alliance, Inc. | 175,000 | 9,215,500 |
| Food Products 1.3% | ||
| JM Smucker Co. (The) | 47,500 | 6,331,275 |
| Kraft Heinz Co. (The) | 225,000 | 9,807,750 |
| Total | 16,139,025 | |
| Household Products 0.4% | ||
| Kimberly-Clark Corp. | 45,000 | 5,878,350 |
| Tobacco 1.0% | ||
| Philip Morris International, Inc. | 130,000 | 12,535,900 |
| Total Consumer Staples | 43,768,775 | |
| Energy 2.8% | ||
| Oil, Gas & Consumable Fuels 2.8% | ||
| Chesapeake Energy Corp. | 4,107 | 216,849 |
| Chevron Corp. | 120,000 | 12,454,800 |
| Exxon Mobil Corp. | 215,000 | 12,549,550 |
| Valero Energy Corp. | 125,000 | 10,050,000 |
| Total | 35,271,199 | |
| Total Energy | 35,271,199 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Financials 8.5% | ||
| Banks 3.4% | ||
| JPMorgan Chase & Co. | 75,000 | 12,318,000 |
| PNC Financial Services Group, Inc. (The) | 67,500 | 13,140,900 |
| U.S. Bancorp | 155,000 | 9,420,900 |
| Zions Bancorp | 160,000 | 9,260,800 |
| Total | 44,140,600 | |
| Capital Markets 1.9% | ||
| Ares Capital Corp. | 675,000 | 13,142,250 |
| Morgan Stanley | 75,000 | 6,821,250 |
| TCG BDC, Inc. | 300,000 | 4,038,000 |
| Total | 24,001,500 | |
| Insurance 1.6% | ||
| Hartford Financial Services Group, Inc. (The) | 110,000 | 7,188,500 |
| MetLife, Inc. | 200,000 | 13,072,000 |
| Total | 20,260,500 | |
| Mortgage Real Estate Investment Trusts (REITS) 1.6% | ||
| Blackstone Mortgage Trust, Inc. | 225,000 | 7,206,750 |
| Starwood Property Trust, Inc. | 525,000 | 13,329,750 |
| Total | 20,536,500 | |
| Total Financials | 108,939,100 | |
| Health Care 3.1% | ||
| Biotechnology 1.0% | ||
| AbbVie, Inc. | 110,000 | 12,452,000 |
| Pharmaceuticals 2.1% | ||
| Amryt Pharma PLC, ADR(a) | 172,608 | 2,028,144 |
| Bristol-Myers Squibb Co. | 100,000 | 6,572,000 |
| Johnson & Johnson | 75,000 | 12,693,750 |
| Merck & Co., Inc. | 80,000 | 6,071,200 |
| Total | 27,365,094 | |
| Total Health Care | 39,817,094 | |
| Industrials 3.7% | ||
| Aerospace & Defense 1.0% | ||
| Raytheon Technologies Corp. | 150,000 | 13,306,500 |
| Air Freight & Logistics 1.2% | ||
| United Parcel Service, Inc., Class B | 70,000 | 15,022,000 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Electrical Equipment 1.0% | ||
| Eaton Corp. PLC | 85,000 | 12,346,250 |
| Machinery 0.5% | ||
| AGCO Corp. | 43,500 | 6,019,095 |
| Total Industrials | 46,693,845 | |
| Information Technology 8.9% | ||
| Communications Equipment 1.0% | ||
| Cisco Systems, Inc. | 235,000 | 12,431,500 |
| Electronic Equipment, Instruments & Components 1.3% | ||
| Corning, Inc. | 225,000 | 9,816,750 |
| Vishay Intertechnology, Inc. | 275,000 | 6,619,250 |
| Total | 16,436,000 | |
| IT Services 1.0% | ||
| International Business Machines Corp. | 90,000 | 12,936,600 |
| Semiconductors & Semiconductor Equipment 3.1% | ||
| Broadcom, Inc. | 42,500 | 20,074,025 |
| Intel Corp. | 115,000 | 6,568,800 |
| Texas Instruments, Inc. | 70,000 | 13,287,400 |
| Total | 39,930,225 | |
| Software 0.9% | ||
| NortonLifeLock, Inc. | 400,000 | 11,064,000 |
| Technology Hardware, Storage & Peripherals 1.6% | ||
| HP, Inc. | 425,000 | 12,422,750 |
| Seagate Technology Holdings PLC | 85,000 | 8,138,750 |
| Total | 20,561,500 | |
| Total Information Technology | 113,359,825 | |
| Materials 1.6% | ||
| Chemicals 1.6% | ||
| Dow, Inc. | 195,000 | 13,341,900 |
| Nutrien Ltd. | 110,000 | 6,836,500 |
| Total | 20,178,400 | |
| Total Materials | 20,178,400 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Real Estate 3.1% | ||
| Equity Real Estate Investment Trusts (REITS) 3.1% | ||
| Crown Castle International Corp. | 37,500 | 7,106,250 |
| Life Storage, Inc. | 70,000 | 6,960,800 |
| Medical Properties Trust, Inc. | 600,000 | 12,702,000 |
| VICI Properties, Inc. | 213,768 | 6,654,598 |
| Welltower, Inc. | 85,000 | 6,355,450 |
| Total | 39,779,098 | |
| Total Real Estate | 39,779,098 | |
| Utilities 1.6% | ||
| Electric Utilities 1.6% | ||
| Duke Energy Corp. | 60,000 | 6,013,200 |
| Edison International | 155,000 | 8,659,850 |
| Pinnacle West Capital Corp. | 72,500 | 6,132,050 |
| Total | 20,805,100 | |
| Total Utilities | 20,805,100 | |
|
Total Common Stocks
(Cost $407,908,413) |
522,350,421 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
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Columbia Flexible Capital Income Fund | Annual Report 2021
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9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Convertible Preferred Stocks 14.1% | |||
| Issuer | Shares | Value ($) | |
| Communication Services 0.6% | |||
| Diversified Telecommunication Services 0.5% | |||
| 2020 Cash Mandatory Exchangeable Trust(b) | 5.250% | 5,100 | 6,288,198 |
| Media 0.1% | |||
| ViacomCBS, Inc. | 5.750% | 26,500 | 1,879,670 |
| Total Communication Services | 8,167,868 | ||
| Consumer Discretionary 0.8% | |||
| Auto Components 0.8% | |||
| Aptiv PLC | 5.500% | 60,000 | 10,192,200 |
| Total Consumer Discretionary | 10,192,200 | ||
| Consumer Staples 0.5% | |||
| Household Products 0.5% | |||
| Energizer Holdings, Inc. | 7.500% | 65,000 | 6,244,550 |
| Total Consumer Staples | 6,244,550 | ||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Convertible Preferred Stocks (continued) | |||
| Issuer | Shares | Value ($) | |
| Gas Utilities 2.1% | |||
| South Jersey Industries, Inc. | 8.750% | 170,000 | 9,187,599 |
| Spire, Inc. | 7.500% | 170,000 | 9,026,042 |
| UGI Corp. | 7.250% | 82,500 | 8,580,000 |
| Total | 26,793,641 | ||
| Multi-Utilities 2.5% | |||
| DTE Energy Co. | 6.250% | 365,000 | 18,633,250 |
| NiSource, Inc. | 7.750% | 125,000 | 13,303,750 |
| Total | 31,937,000 | ||
| Total Utilities | 71,309,441 | ||
|
Total Convertible Preferred Stocks
(Cost $156,676,443) |
180,170,546 | ||
The accompanying Notes to Financial
Statements are an integral part of this statement.
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Columbia Flexible Capital Income Fund | Annual Report 2021
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11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Corporate Bonds & Notes (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| Wirelines 0.5% | ||||
| Front Range BidCo, Inc.(b) | ||||
| 03/01/2028 | 6.125% | 6,500,000 | 6,615,838 | |
|
Total Corporate Bonds & Notes
(Cost $324,132,393) |
335,543,061 | |||
| Limited Partnerships 1.1% | ||
| Issuer | Shares | Value ($) |
| Energy 1.1% | ||
| Oil, Gas & Consumable Fuels 1.1% | ||
| Enviva Partners LP | 125,000 | 6,112,500 |
| Rattler Midstream LP | 550,000 | 5,797,000 |
| Summit Midstream Partners LP(a) | 74,667 | 1,884,595 |
| Total | 13,794,095 | |
| Total Energy | 13,794,095 | |
|
Total Limited Partnerships
(Cost $17,264,145) |
13,794,095 | |
| Preferred Debt 0.7% | ||||
| Issuer |
Coupon
Rate |
Shares | Value ($) | |
| Banking 0.5% | ||||
| Citigroup Capital XIII(e) | ||||
| 10/30/2040 | 6.556% | 225,000 | 6,232,500 | |
| Finance Companies 0.2% | ||||
| GMAC Capital Trust I(e) | ||||
| 02/15/2040 | 5.941% | 104,679 | 2,648,379 | |
|
Total Preferred Debt
(Cost $8,640,804) |
8,880,879 | |||
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
13 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Warrants 0.0% | ||
| Issuer | Shares | Value ($) |
| Energy 0.0% | ||
| Oil, Gas & Consumable Fuels 0.0% | ||
| Chesapeake Energy Corp.(a) | 7,749 | 170,478 |
| Goodrich Petroleum Corp.(a),(c),(d) | 16,125 | 0 |
| Total | 170,478 | |
| Total Energy | 170,478 | |
|
Total Warrants
(Cost $135,607) |
170,478 | |
| Money Market Funds 3.2% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(j),(k) | 40,669,957 | 40,665,890 |
|
Total Money Market Funds
(Cost $40,665,890) |
40,665,890 | |
|
Total Investments in Securities
(Cost: $1,117,409,591) |
1,283,018,292 | |
| Other Assets & Liabilities, Net | (5,602,808) | |
| Net Assets | 1,277,415,484 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At May 31, 2021, the total value of these securities amounted to $377,133,714, which represents 29.52% of total net assets. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2021, the total value of these securities amounted to $1,741,667, which represents 0.14% of total net assets. |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | Represents a variable rate security with a step coupon where the rate adjusts 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 interest rate shown was the current rate as of May 31, 2021. |
| (f) | Represents a security purchased on a when-issued basis. |
| (g) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (h) | The stated interest rate represents the weighted average interest rate at May 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay, cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (i) | Variable rate security. The interest rate shown was the current rate as of May 31, 2021. |
| (j) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (k) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| — | 233,129,518 | (192,463,628) | — | 40,665,890 | — | 9,280 | 40,669,957 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
| LIBOR | London Interbank Offered Rate |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
15 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Limited Partnerships | ||||
| Energy | 13,794,095 | — | — | 13,794,095 |
| Total Limited Partnerships | 13,794,095 | — | — | 13,794,095 |
| Preferred Debt | 8,880,879 | — | — | 8,880,879 |
| Senior Loans | — | 4,907,530 | — | 4,907,530 |
| Warrants | ||||
| Energy | 170,478 | — | 0* | 170,478 |
| Total Warrants | 170,478 | — | 0* | 170,478 |
| Money Market Funds | 40,665,890 | — | — | 40,665,890 |
| Total Investments in Securities | 585,861,763 | 695,414,862 | 1,741,667 | 1,283,018,292 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,076,743,701) | $1,242,352,402 |
| Affiliated issuers (cost $40,665,890) | 40,665,890 |
| Cash | 37,137 |
| Receivable for: | |
| Capital shares sold | 3,525,536 |
| Dividends | 2,480,516 |
| Interest | 5,985,540 |
| Foreign tax reclaims | 30,388 |
| Prepaid expenses | 18,238 |
| Total assets | 1,295,095,647 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 3,938,495 |
| Investments purchased on a delayed delivery basis | 12,808,301 |
| Capital shares purchased | 720,349 |
| Management services fees | 22,020 |
| Distribution and/or service fees | 8,885 |
| Transfer agent fees | 78,045 |
| Compensation of board members | 65,526 |
| Other expenses | 38,542 |
| Total liabilities | 17,680,163 |
| Net assets applicable to outstanding capital stock | $1,277,415,484 |
| Represented by | |
| Paid in capital | 1,066,020,981 |
| Total distributable earnings (loss) | 211,394,503 |
| Total - representing net assets applicable to outstanding capital stock | $1,277,415,484 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
17 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $327,938,158 |
| Shares outstanding | 20,623,522 |
| Net asset value per share | $15.90 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $16.87 |
| Advisor Class | |
| Net assets | $55,969,247 |
| Shares outstanding | 3,488,355 |
| Net asset value per share | $16.04 |
| Class C | |
| Net assets | $242,639,920 |
| Shares outstanding | 15,361,699 |
| Net asset value per share | $15.80 |
| Institutional Class | |
| Net assets | $573,637,305 |
| Shares outstanding | 36,080,057 |
| Net asset value per share | $15.90 |
| Institutional 2 Class | |
| Net assets | $58,023,949 |
| Shares outstanding | 3,613,900 |
| Net asset value per share | $16.06 |
| Institutional 3 Class | |
| Net assets | $17,878,352 |
| Shares outstanding | 1,129,211 |
| Net asset value per share | $15.83 |
| Class R | |
| Net assets | $1,328,553 |
| Shares outstanding | 83,643 |
| Net asset value per share | $15.88 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $26,057,577 |
| Dividends — affiliated issuers | 9,280 |
| Interest | 26,653,194 |
| Interfund lending | 369 |
| Foreign taxes withheld | (26,496) |
| Total income | 52,693,924 |
| Expenses: | |
| Management services fees | 6,536,423 |
| Distribution and/or service fees | |
| Class A | 639,856 |
| Class C | 2,165,033 |
| Class R | 5,084 |
| Transfer agent fees | |
| Class A | 200,127 |
| Advisor Class | 18,268 |
| Class C | 169,904 |
| Institutional Class | 367,236 |
| Institutional 2 Class | 23,884 |
| Institutional 3 Class | 1,214 |
| Class R | 797 |
| Compensation of board members | 43,716 |
| Custodian fees | 8,326 |
| Printing and postage fees | 54,010 |
| Registration fees | 142,891 |
| Audit fees | 29,500 |
| Legal fees | 18,039 |
| Compensation of chief compliance officer | 201 |
| Other | 53,612 |
| Total expenses | 10,478,121 |
| Net investment income | 42,215,803 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 56,278,450 |
| Foreign currency translations | 373 |
| Net realized gain | 56,278,823 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 230,027,623 |
| Net change in unrealized appreciation (depreciation) | 230,027,623 |
| Net realized and unrealized gain | 286,306,446 |
| Net increase in net assets resulting from operations | $328,522,249 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
19 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $42,215,803 | $47,376,359 |
| Net realized gain (loss) | 56,278,823 | (7,893,342) |
| Net change in unrealized appreciation (depreciation) | 230,027,623 | (49,443,734) |
| Net increase (decrease) in net assets resulting from operations | 328,522,249 | (9,960,717) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (11,681,695) | (10,354,370) |
| Advisor Class | (1,041,902) | (976,979) |
| Class C | (8,676,472) | (8,738,038) |
| Institutional Class | (22,695,878) | (21,736,617) |
| Institutional 2 Class | (1,972,125) | (1,318,869) |
| Institutional 3 Class | (785,093) | (595,592) |
| Class R | (44,018) | (65,609) |
| Total distributions to shareholders | (46,897,183) | (43,786,074) |
| Increase in net assets from capital stock activity | 76,980,458 | 86,621,573 |
| Total increase in net assets | 358,605,524 | 32,874,782 |
| Net assets at beginning of year | 918,809,960 | 885,935,178 |
| Net assets at end of year | $1,277,415,484 | $918,809,960 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 5,322,315 | 77,541,655 | 5,490,720 | 70,565,071 |
| Distributions reinvested | 843,566 | 11,353,734 | 851,210 | 10,165,284 |
| Redemptions | (3,698,610) | (50,255,969) | (5,143,692) | (64,020,869) |
| Net increase | 2,467,271 | 38,639,420 | 1,198,238 | 16,709,486 |
| Advisor Class | ||||
| Subscriptions | 2,604,913 | 40,068,552 | 1,031,825 | 13,413,751 |
| Distributions reinvested | 76,486 | 1,041,476 | 81,132 | 976,853 |
| Redemptions | (792,435) | (10,756,117) | (1,413,713) | (17,994,813) |
| Net increase (decrease) | 1,888,964 | 30,353,911 | (300,756) | (3,604,209) |
| Class C | ||||
| Subscriptions | 2,276,242 | 33,016,199 | 4,093,060 | 53,056,336 |
| Distributions reinvested | 646,908 | 8,608,096 | 722,457 | 8,584,091 |
| Redemptions | (5,030,545) | (68,080,559) | (4,443,549) | (53,440,411) |
| Net increase (decrease) | (2,107,395) | (26,456,264) | 371,968 | 8,200,016 |
| Institutional Class | ||||
| Subscriptions | 9,267,356 | 133,181,568 | 14,476,075 | 187,063,867 |
| Distributions reinvested | 1,677,602 | 22,515,489 | 1,811,445 | 21,569,336 |
| Redemptions | (10,222,704) | (137,606,861) | (13,255,528) | (161,072,842) |
| Net increase | 722,254 | 18,090,196 | 3,031,992 | 47,560,361 |
| Institutional 2 Class | ||||
| Subscriptions | 2,351,676 | 33,076,201 | 2,010,293 | 25,036,107 |
| Distributions reinvested | 144,988 | 1,972,125 | 109,680 | 1,318,741 |
| Redemptions | (1,273,938) | (17,738,736) | (1,214,310) | (14,443,021) |
| Net increase | 1,222,726 | 17,309,590 | 905,663 | 11,911,827 |
| Institutional 3 Class | ||||
| Subscriptions | 231,727 | 3,362,456 | 633,469 | 8,176,022 |
| Distributions reinvested | 58,891 | 784,955 | 50,993 | 595,466 |
| Redemptions | (378,732) | (5,243,625) | (207,645) | (2,536,902) |
| Net increase (decrease) | (88,114) | (1,096,214) | 476,817 | 6,234,586 |
| Class R | ||||
| Subscriptions | 23,133 | 357,939 | 32,783 | 414,729 |
| Distributions reinvested | 3,283 | 43,890 | 5,441 | 65,493 |
| Redemptions | (18,444) | (262,010) | (74,269) | (870,716) |
| Net increase (decrease) | 7,972 | 139,819 | (36,045) | (390,494) |
| Total net increase | 4,113,678 | 76,980,458 | 5,647,877 | 86,621,573 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
21 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Total
distributions to shareholders |
|
| Class A | ||||||
| Year Ended 5/31/2021 | $12.06 | 0.58 | 3.90 | 4.48 | (0.64) | (0.64) |
| Year Ended 5/31/2020 | $12.56 | 0.62 | (0.53) | 0.09 | (0.59) | (0.59) |
| Year Ended 5/31/2019 | $12.98 | 0.55 | (0.44) | 0.11 | (0.53) | (0.53) |
| Year Ended 5/31/2018 | $12.49 | 0.52 | 0.52 | 1.04 | (0.55) | (0.55) |
| Year Ended 5/31/2017 | $11.06 | 0.51 | 1.48 | 1.99 | (0.56) | (0.56) |
| Advisor Class | ||||||
| Year Ended 5/31/2021 | $12.16 | 0.63 | 3.93 | 4.56 | (0.68) | (0.68) |
| Year Ended 5/31/2020 | $12.66 | 0.66 | (0.54) | 0.12 | (0.62) | (0.62) |
| Year Ended 5/31/2019 | $13.08 | 0.58 | (0.44) | 0.14 | (0.56) | (0.56) |
| Year Ended 5/31/2018 | $12.59 | 0.56 | 0.51 | 1.07 | (0.58) | (0.58) |
| Year Ended 5/31/2017 | $11.14 | 0.55 | 1.49 | 2.04 | (0.59) | (0.59) |
| Class C | ||||||
| Year Ended 5/31/2021 | $11.99 | 0.47 | 3.89 | 4.36 | (0.55) | (0.55) |
| Year Ended 5/31/2020 | $12.48 | 0.53 | (0.53) | 0.00(d) | (0.49) | (0.49) |
| Year Ended 5/31/2019 | $12.90 | 0.45 | (0.44) | 0.01 | (0.43) | (0.43) |
| Year Ended 5/31/2018 | $12.42 | 0.42 | 0.52 | 0.94 | (0.46) | (0.46) |
| Year Ended 5/31/2017 | $11.00 | 0.42 | 1.48 | 1.90 | (0.48) | (0.48) |
| Institutional Class | ||||||
| Year Ended 5/31/2021 | $12.06 | 0.61 | 3.91 | 4.52 | (0.68) | (0.68) |
| Year Ended 5/31/2020 | $12.56 | 0.66 | (0.54) | 0.12 | (0.62) | (0.62) |
| Year Ended 5/31/2019 | $12.98 | 0.58 | (0.44) | 0.14 | (0.56) | (0.56) |
| Year Ended 5/31/2018 | $12.49 | 0.56 | 0.51 | 1.07 | (0.58) | (0.58) |
| Year Ended 5/31/2017 | $11.06 | 0.54 | 1.48 | 2.02 | (0.59) | (0.59) |
| Institutional 2 Class | ||||||
| Year Ended 5/31/2021 | $12.17 | 0.62 | 3.95 | 4.57 | (0.68) | (0.68) |
| Year Ended 5/31/2020 | $12.67 | 0.67 | (0.55) | 0.12 | (0.62) | (0.62) |
| Year Ended 5/31/2019 | $13.09 | 0.59 | (0.45) | 0.14 | (0.56) | (0.56) |
| Year Ended 5/31/2018 | $12.60 | 0.57 | 0.51 | 1.08 | (0.59) | (0.59) |
| Year Ended 5/31/2017 | $11.15 | 0.55 | 1.50 | 2.05 | (0.60) | (0.60) |
| Institutional 3 Class | ||||||
| Year Ended 5/31/2021 | $12.01 | 0.62 | 3.89 | 4.51 | (0.69) | (0.69) |
| Year Ended 5/31/2020 | $12.51 | 0.67 | (0.54) | 0.13 | (0.63) | (0.63) |
| Year Ended 5/31/2019 | $12.93 | 0.59 | (0.44) | 0.15 | (0.57) | (0.57) |
| Year Ended 5/31/2018 | $12.44 | 0.58 | 0.50 | 1.08 | (0.59) | (0.59) |
| Year Ended 5/31/2017(e) | $12.48 | (5.60) | 5.70 | 0.10 | (0.14) | (0.14) |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $15.90 | 38.27% | 1.00% | 1.00% | 4.13% | 58% | $327,938 |
| Year Ended 5/31/2020 | $12.06 | 0.80% | 1.01% | 1.01% | 4.95% | 59% | $218,974 |
| Year Ended 5/31/2019 | $12.56 | 0.82% | 1.02% | 1.02% | 4.31% | 32% | $212,999 |
| Year Ended 5/31/2018 | $12.98 | 8.48% | 1.04% | 1.04%(c) | 4.06% | 50% | $156,011 |
| Year Ended 5/31/2017 | $12.49 | 18.45% | 1.06% | 1.06% | 4.31% | 71% | $134,698 |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $16.04 | 38.61% | 0.75% | 0.75% | 4.42% | 58% | $55,969 |
| Year Ended 5/31/2020 | $12.16 | 1.06% | 0.76% | 0.76% | 5.21% | 59% | $19,454 |
| Year Ended 5/31/2019 | $12.66 | 1.07% | 0.77% | 0.77% | 4.54% | 32% | $24,065 |
| Year Ended 5/31/2018 | $13.08 | 8.68% | 0.79% | 0.79%(c) | 4.30% | 50% | $21,291 |
| Year Ended 5/31/2017 | $12.59 | 18.79% | 0.81% | 0.81% | 4.55% | 71% | $18,460 |
| Class C | |||||||
| Year Ended 5/31/2021 | $15.80 | 37.25% | 1.75% | 1.75% | 3.40% | 58% | $242,640 |
| Year Ended 5/31/2020 | $11.99 | 0.06% | 1.76% | 1.76% | 4.20% | 59% | $209,401 |
| Year Ended 5/31/2019 | $12.48 | 0.07% | 1.77% | 1.77% | 3.56% | 32% | $213,342 |
| Year Ended 5/31/2018 | $12.90 | 7.64% | 1.79% | 1.79%(c) | 3.32% | 50% | $168,061 |
| Year Ended 5/31/2017 | $12.42 | 17.58% | 1.81% | 1.81% | 3.56% | 71% | $132,227 |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $15.90 | 38.60% | 0.75% | 0.75% | 4.39% | 58% | $573,637 |
| Year Ended 5/31/2020 | $12.06 | 1.07% | 0.76% | 0.76% | 5.22% | 59% | $426,343 |
| Year Ended 5/31/2019 | $12.56 | 1.08% | 0.77% | 0.77% | 4.56% | 32% | $406,033 |
| Year Ended 5/31/2018 | $12.98 | 8.75% | 0.79% | 0.79%(c) | 4.32% | 50% | $306,954 |
| Year Ended 5/31/2017 | $12.49 | 18.74% | 0.82% | 0.82% | 4.56% | 71% | $223,904 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $16.06 | 38.70% | 0.73% | 0.73% | 4.41% | 58% | $58,024 |
| Year Ended 5/31/2020 | $12.17 | 1.10% | 0.73% | 0.73% | 5.25% | 59% | $29,105 |
| Year Ended 5/31/2019 | $12.67 | 1.10% | 0.74% | 0.73% | 4.59% | 32% | $18,828 |
| Year Ended 5/31/2018 | $13.09 | 8.71% | 0.77% | 0.76% | 4.37% | 50% | $19,095 |
| Year Ended 5/31/2017 | $12.60 | 18.85% | 0.77% | 0.77% | 4.58% | 71% | $5,280 |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $15.83 | 38.70% | 0.68% | 0.68% | 4.47% | 58% | $17,878 |
| Year Ended 5/31/2020 | $12.01 | 1.16% | 0.68% | 0.68% | 5.36% | 59% | $14,621 |
| Year Ended 5/31/2019 | $12.51 | 1.16% | 0.70% | 0.69% | 4.66% | 32% | $9,267 |
| Year Ended 5/31/2018 | $12.93 | 8.82% | 0.72% | 0.71% | 4.50% | 50% | $5,009 |
| Year Ended 5/31/2017(e) | $12.44 | 0.84% | 0.74%(f) | 0.74%(f) | (184.79%)(f) | 71% | $2 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
23 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Total
distributions to shareholders |
|
| Class R | ||||||
| Year Ended 5/31/2021 | $12.05 | 0.54 | 3.90 | 4.44 | (0.61) | (0.61) |
| Year Ended 5/31/2020 | $12.55 | 0.59 | (0.54) | 0.05 | (0.55) | (0.55) |
| Year Ended 5/31/2019 | $12.97 | 0.52 | (0.45) | 0.07 | (0.49) | (0.49) |
| Year Ended 5/31/2018 | $12.48 | 0.49 | 0.52 | 1.01 | (0.52) | (0.52) |
| Year Ended 5/31/2017 | $11.05 | 0.47 | 1.49 | 1.96 | (0.53) | (0.53) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (d) | Rounds to zero. |
| (e) | Institutional 3 Class shares commenced operations on March 1, 2017. Per share data and total return reflect activity from that date. |
| (f) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class R | |||||||
| Year Ended 5/31/2021 | $15.88 | 37.88% | 1.25% | 1.25% | 3.88% | 58% | $1,329 |
| Year Ended 5/31/2020 | $12.05 | 0.52% | 1.26% | 1.26% | 4.68% | 59% | $912 |
| Year Ended 5/31/2019 | $12.55 | 0.57% | 1.27% | 1.27% | 4.08% | 32% | $1,402 |
| Year Ended 5/31/2018 | $12.97 | 8.22% | 1.29% | 1.29%(c) | 3.81% | 50% | $832 |
| Year Ended 5/31/2017 | $12.48 | 18.18% | 1.31% | 1.31% | 3.95% | 71% | $626 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
25 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Flexible Capital Income
Fund (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many
securities markets and
| 26 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
exchanges outside the U.S. close prior to the
close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York
Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the Fund may utilize a third-party pricing service to determine
these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and
foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New
York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In
addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when
purchased, may become illiquid.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
| 28 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid each calendar quarter. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.65% to 0.54% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.64% of the Fund’s average
daily net assets.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
29 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.08 |
| Advisor Class | 0.08 |
| Class C | 0.08 |
| Institutional Class | 0.08 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.08 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, no minimum account balance fees were charged by the Fund.
| 30 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $1,098,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 726,031 |
| Class C | — | 1.00(b) | 7,862 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
31 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
agreement may be modified or amended only with
approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the
Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, re-characterization of distributions for investments, principal and/or interest of fixed
income securities, earnings and profits distributed to shareholders on the redemption of shares, investments in partnerships, foreign currency transactions and deemed distributions. To the extent these differences
were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Undistributed net
investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| 2,762,845 | (4,102,255) | 1,339,410 |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 46,897,183 | — | 46,897,183 | 43,786,074 | — | 43,786,074 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 7,088,128 | 41,387,929 | — | 162,982,215 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 1,120,036,077 | 179,924,161 | (16,941,946) | 162,982,215 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at May 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended May 31,
2021, capital loss carryforwards utilized, if any, were as follows:
|
No expiration
short-term ($) |
No expiration
long-term ($) |
Total ($) | Utilized ($) |
| — | — | — | 13,053,584 |
| 32 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $635,178,874 and $584,712,261, respectively, for the year ended May 31, 2021. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Lender | 2,771,429 | 0.68 | 7 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank,
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
33 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank,
N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
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.
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer 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. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to 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 rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting
in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The
Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. 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. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
| 34 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, one unaffiliated
shareholder of record owned 10.2% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated shareholders of
record owned 36.1% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case
of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid
positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
35 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 36 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Flexible Capital Income Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Flexible Capital Income Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes,
and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the financial
highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, agent banks, transfer agent and brokers; when
replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
37 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Section
199A dividends |
Capital
gain dividend |
| 42.22% | 40.42% | 2.63% | $44,875,637 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Section 199A dividends. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents Section 199A dividends potentially eligible for a 20% deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 38 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
39 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 40 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
41 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 42 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
43 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 44 | Columbia Flexible Capital Income Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Flexible Capital Income Fund | Annual Report 2021
|
45 |
Columbia Flexible Capital Income Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN148_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Mortgage
Opportunities Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Mortgage Opportunities Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Mortgage Opportunities
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks total return, consisting of long-term capital appreciation and current income.
Portfolio management
Jason Callan
Co-Portfolio Manager
Managed Fund since 2014
Tom Heuer, CFA
Co-Portfolio Manager
Managed Fund since 2014
Ryan Osborn, CFA
Co-Portfolio Manager
Managed Fund since 2019
Returns for Class A shares are shown
with and without the maximum initial sales charge of 3.00%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, which are since Fund inception) include the returns of the Fund’s oldest share class. Since the Fund launched more than one share class at its inception, Class A shares were used. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The FTSE One-Month U.S. Treasury
Bill Index is an unmanaged index that measures the rate of return for 30-day U.S. Treasury Bills.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (April 30, 2014 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Mortgage Opportunities Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Asset-Backed Securities — Non-Agency | 18.8 |
| Commercial Mortgage-Backed Securities - Agency | 0.2 |
| Commercial Mortgage-Backed Securities - Non-Agency | 9.4 |
| Money Market Funds | 4.5 |
| Options Purchased Puts | 1.4 |
| Residential Mortgage-Backed Securities - Agency | 25.3 |
| Residential Mortgage-Backed Securities - Non-Agency | 40.4 |
| Total | 100.0 |
Percentages indicated are based
upon total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| Quality breakdown (%) (at May 31, 2021) | |
| AAA rating | 28.0 |
| AA rating | 1.1 |
| A rating | 0.9 |
| BBB rating | 9.0 |
| BB rating | 21.0 |
| B rating | 11.0 |
| CCC rating | 0.3 |
| Not rated | 28.7 |
| Total | 100.0 |
Percentages indicated are based
upon total fixed income investments.
Bond ratings apply to the underlying
holdings of the Fund and not the Fund itself and are divided into categories ranging from highest to lowest credit quality, determined by using the middle rating of Moody’s, S&P and Fitch, after dropping the
highest and lowest available ratings. When ratings are available from only two rating agencies, the lower rating is used. When a rating is available from only one rating agency, that rating is used. If a security is
not rated but has a rating by Kroll and/or DBRS, the same methodology is applied to those bonds that would otherwise be not rated. When a bond is not rated by any rating agency, it is designated as “Not
rated.” Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. The ratings assigned by credit rating agencies are but one
of the considerations that the Investment Manager and/or Fund’s subadviser incorporates into its credit analysis process, along with such other issuer-specific factors as cash flows, capital structure and
leverage ratios, ability to de-leverage (repay) through free cash flow, quality of management, market positioning and access to capital, as well as such security-specific factors as the terms of the security (e.g.,
interest rate and time to maturity) and the amount and type of any collateral.
| 4 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended May 31, 2021, the Fund’s Class A shares returned 23.28% excluding sales charges. The Fund’s benchmark, the FTSE One-Month U.S. Treasury Bill Index, returned 0.07% for the same period.
Market overview
The period saw risk sentiment
continue to be supported by the extraordinary monetary and fiscal policy support that was initiated in March of 2020 as the COVID-19 pandemic led to widespread economic shutdowns. The Federal Reserve (Fed) maintained
short-term interest rates at zero while engaging in broad-based bond purchases even as $1.9 trillion in stimulus under the CARES Act rolled out.
Credit sentiment wavered in
September as an additional economic relief package stalled in the Senate and there was speculation around the potential for a disputed outcome to the November presidential election. November’s election results
helped reduce uncertainty, while the emergency use authorization of a pair of COVID-19 vaccines in December raised the prospect of a return to economic normalcy in the months that followed. Finalization of a $900
billion relief package as 2020 concluded further boosted sentiment.
Treasury yields began to move off
historic lows in October of 2020 and continued to drift higher through the first quarter of 2021. The 10-year Treasury yield ended May of 2021 at 1.58%, 93 basis points higher than its starting point of 0.65% 12
months earlier.
The Fund’s most notable
contributors
| • | The Fund’s allocation to more credit-sensitive, non-government guaranteed sectors of the securitized market offering higher yields than agency mortgage-backed securities (MBS) added notably to performance as these areas rebounded sharply from distressed levels on the back of strong policy support. |
| ○ | In this vein, exposure to non-agency residential MBS led positive contributions as housing fundamentals were boosted by the Fed’s actions to keep borrowing costs low. |
| ○ | Smaller allocations to commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) and collateralized loan obligations also added to performance as stimulus efforts supported consumer fundamentals. |
| ○ | Within CMBS, positioning in the single-asset/single-borrower segment characterized by “trophy” properties in prime markets proved additive, while subprime auto and unsecured consumer loans were among the best performing holdings within ABS. |
| • | The Fund’s exposure to agency MBS passthroughs contributed positively to performance versus the benchmark. |
| ○ | In terms of selection, an emphasis on current, lower coupon mortgage pools that have been a focus of the Fed’s bond purchase program added to relative return. |
| • | The Fund’s positioning over the period with respect to overall portfolio duration and corresponding interest rate sensitivity added to performance relative to the benchmark. Specifically, the Fund held a net short duration position as Treasury yields rose in the first quarter of 2021. |
The Fund’s most notable
detractors
| • | There were no material detractors relative to the benchmark over the 12-month period ended May 31, 2021. |
Derivative usage
The Fund used three types of
derivative securities investments during the period to control risks. The Fund invested in Treasury futures contracts and options on interest rate swaps to manage interest rate risk and protect against market
volatility. In addition, the Fund utilized credit default swap options in order to manage credit risk. The Fund’s use of derivatives had a positive impact on results overall.
Funds that seek to generate absolute
returns are generally not designed to outperform stocks and bonds in strong markets. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Mortgage- and asset-backed securities are affected by interest rates, financial health of issuers/originators, creditworthiness of entities providing credit enhancements and the value of underlying assets. Investing in
derivatives is a specialized
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
activity that involves special risks, which may
result in significant losses. The Fund’s use of leverage allows for investment exposure in excess of net assets, thereby magnifying volatility of returns and risk of loss. Fixed-income securities present issuer default risk. A rise in interest rates may result in a price decline of fixed-income instruments held by the Fund, negatively impacting its performance and NAV. Falling rates may result in the Fund investing
in lower yielding debt instruments, lowering the Fund’s income and yield. These risks may be heightened for longer maturity and duration securities. Non-investment-grade securities (high-yield or junk bonds) are volatile and carry more risk to principal and income than investment-grade securities. Prepayment and extension risk exists because the timing of payments on a loan, bond or other investment may accelerate when interest rates fall or decelerate when interest rates rise
which may reduce investment opportunities and potential returns. As a non-diversified fund, fewer investments could have a greater effect on performance. See the Fund’s prospectus for more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Asset-Backed Securities — Non-Agency (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| Exeter Automobile Receivables Trust(a),(c) | ||||
| Subordinated Series 2021-2A Class E | ||||
| 07/17/2028 | 2.900% | 12,500,000 | 12,431,398 | |
| FREED ABS Trust(a) | ||||
| Series 2019-1 Class C | ||||
| 06/18/2026 | 5.390% | 10,000,000 | 10,289,902 | |
| Series 2020-3FP Class C | ||||
| 09/20/2027 | 6.960% | 7,219,000 | 7,696,422 | |
| Subordinated Series 2018-2 Class C | ||||
| 10/20/2025 | 5.880% | 7,450,000 | 7,553,055 | |
| Subordinated Series 2019-2 Class C | ||||
| 11/18/2026 | 4.860% | 31,000,000 | 32,029,963 | |
| GLS Auto Receivables Issuer Trust(a) | ||||
| Subordinated Series 2020-4A Class E | ||||
| 10/15/2027 | 3.510% | 3,320,000 | 3,431,860 | |
| Subordinated Series 2021-1A Class E | ||||
| 01/18/2028 | 3.140% | 7,000,000 | 7,081,790 | |
| LendingClub Receivables Trust(a) | ||||
| Series 2019-1 Class A | ||||
| 07/17/2045 | 4.000% | 4,812,198 | 4,919,029 | |
| Series 2019-11 Class A | ||||
| 12/15/2045 | 3.750% | 1,890,435 | 1,911,959 | |
| Series 2019-2 Class A | ||||
| 08/15/2025 | 4.000% | 3,185,271 | 3,244,654 | |
| Series 2019-3 Class A | ||||
| 10/15/2025 | 3.750% | 7,274,521 | 7,401,631 | |
| Series 2019-5 Class A | ||||
| 12/15/2045 | 3.750% | 9,117,615 | 9,262,560 | |
| Series 2019-7 Class A | ||||
| 01/15/2027 | 3.750% | 3,401,398 | 3,446,313 | |
| Series 2019-8 Class A | ||||
| 12/15/2045 | 3.750% | 3,272,336 | 3,308,237 | |
| Series 2020-1 Class A | ||||
| 01/16/2046 | 3.500% | 4,085,052 | 4,132,252 | |
| Series 2020-T1 Class A | ||||
| 02/15/2046 | 3.500% | 5,187,397 | 5,205,333 | |
| LendingClub Receivables Trust(a),(d),(e) | ||||
| Series 2020-2 Class R | ||||
| 02/15/2046 | 0.000% | 865,000 | 7,460,625 | |
| LendingClub Receivables Trust(a),(d),(e),(f) | ||||
| Series 2020-JPSL Class R | ||||
| 02/15/2025 | 0.000% | 340,000 | 9,506,400 | |
| Lendingpoint Asset Securitization Trust(a) | ||||
| Series 2019-1 Class C | ||||
| 08/15/2025 | 4.504% | 4,846,206 | 4,874,467 | |
| Subordinated Series 2019-2 Class C | ||||
| 11/10/2025 | 4.660% | 19,620,000 | 19,837,519 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
13 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Residential Mortgage-Backed Securities - Agency (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| Federal National Mortgage Association REMICS(i) | ||||
| CMO Series 2021-22 Class LI | ||||
| 04/25/2051 | 3.000% | 46,597,197 | 7,845,617 | |
| Government National Mortgage Association(i) | ||||
| CMO Series 2014-184 Class CI | ||||
| 11/16/2041 | 3.500% | 6,996,076 | 688,946 | |
| CMO Series 2018-78 Class GI | ||||
| 04/20/2048 | 4.000% | 16,778,804 | 1,997,096 | |
| CMO Series 2019-129 Class AI | ||||
| 10/20/2049 | 3.500% | 47,601,649 | 6,297,289 | |
| CMO Series 2020-104 Class IY | ||||
| 07/20/2050 | 3.000% | 46,440,660 | 6,774,791 | |
| CMO Series 2020-129 Class GI | ||||
| 09/20/2050 | 3.000% | 23,135,347 | 3,631,252 | |
| CMO Series 2020-129 Class YI | ||||
| 09/20/2050 | 2.500% | 28,880,441 | 3,958,648 | |
| CMO Series 2020-138 Class JI | ||||
| 09/20/2050 | 2.500% | 41,137,521 | 5,372,334 | |
| CMO Series 2020-148 Class AI | ||||
| 10/20/2050 | 2.500% | 131,574,464 | 17,357,632 | |
| CMO Series 2020-160 Class DI | ||||
| 10/20/2050 | 2.500% | 23,571,117 | 3,350,684 | |
| CMO Series 2020-160 Class HI | ||||
| 10/20/2050 | 2.500% | 18,010,806 | 2,569,447 | |
| CMO Series 2020-160 Class IA | ||||
| 10/20/2050 | 2.500% | 48,165,114 | 7,028,937 | |
| CMO Series 2020-160 Class ID | ||||
| 10/20/2050 | 2.500% | 19,317,853 | 2,750,994 | |
| CMO Series 2020-162 Class EI | ||||
| 10/20/2050 | 2.500% | 19,396,012 | 2,860,662 | |
| CMO Series 2020-164 Class CI | ||||
| 11/20/2050 | 3.000% | 25,378,082 | 3,735,303 | |
| CMO Series 2020-173 Class MI | ||||
| 11/20/2050 | 2.500% | 98,020,642 | 13,098,596 | |
| CMO Series 2020-175 Class KI | ||||
| 11/20/2050 | 2.500% | 85,525,077 | 12,826,093 | |
| CMO Series 2020-181 Class AI | ||||
| 12/20/2050 | 2.500% | 36,848,726 | 5,498,607 | |
| CMO Series 2020-181 Class BI | ||||
| 12/20/2050 | 2.500% | 59,837,158 | 8,015,612 | |
| CMO Series 2020-185 Class KI | ||||
| 12/20/2050 | 2.500% | 48,411,052 | 6,551,589 | |
| CMO Series 2020-187 Class AI | ||||
| 12/20/2050 | 2.500% | 59,360,833 | 8,029,520 | |
| CMO Series 2020-188 Class KI | ||||
| 12/20/2050 | 2.500% | 64,138,280 | 9,261,382 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
15 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Residential Mortgage-Backed Securities - Agency (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| CMO Series 2018-155 Class LS | ||||
|
-1.0 x 1-month USD LIBOR + 6.150%
Cap 6.150% 11/20/2048 |
6.051% | 15,580,147 | 2,631,665 | |
| CMO Series 2018-40 Class SC | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 03/20/2048 |
6.101% | 11,336,921 | 2,418,268 | |
| CMO Series 2018-63 Class HS | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 04/20/2048 |
6.101% | 13,629,984 | 2,941,092 | |
| CMO Series 2018-63 Class SH | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 04/20/2048 |
6.101% | 14,637,501 | 2,965,638 | |
| CMO Series 2018-78 Class SB | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 06/20/2048 |
6.101% | 12,331,030 | 2,425,842 | |
| CMO Series 2018-94 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 05/20/2048 |
6.101% | 11,365,483 | 2,589,241 | |
| CMO Series 2019-103 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 6.050%
Cap 6.050% 08/20/2049 |
5.951% | 25,865,036 | 5,429,919 | |
| CMO Series 2019-120 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 3.400%
Cap 3.400% 09/20/2049 |
3.301% | 34,471,975 | 3,534,239 | |
| CMO Series 2019-43 Class NS | ||||
|
-1.0 x 1-month USD LIBOR + 3.270%
Cap 3.270% 04/20/2049 |
3.171% | 29,442,719 | 2,397,562 | |
| CMO Series 2020-104 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
07/20/2050 |
6.101% | 18,580,775 | 3,683,821 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
17 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
19 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
21 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Options Purchased Puts 1.7% | ||||
| Value ($) | ||||
| (Cost $25,975,000) | 68,134,554 | |||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Money Market Funds 5.6% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(j),(k) | 222,352,487 | 222,330,251 |
|
Total Money Market Funds
(Cost $222,320,881) |
222,330,251 | |
|
Total Investments in Securities
(Cost: $4,873,435,047) |
4,965,747,322 | |
| Other Assets & Liabilities, Net | (984,524,820) | |
| Net Assets | 3,981,222,502 | |
At May 31, 2021, securities and/or
cash totaling $35,882,417 were pledged as collateral.
Investments in derivatives
| Short futures contracts | ||||||
| Description |
Number of
contracts |
Expiration
date |
Trading
currency |
Notional
amount |
Value/Unrealized
appreciation ($) |
Value/Unrealized
depreciation ($) |
| U.S. Treasury 10-Year Note | (2,231) | 09/2021 | USD | (294,352,563) | — | (878,222) |
| Put option contracts purchased | ||||||||
| Description | Counterparty |
Trading
currency |
Notional
amount |
Number of
contracts |
Exercise
price/Rate |
Expiration
date |
Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 125,000,000 | 125,000,000 | 1.00 | 09/30/2021 | 2,175,000 | 7,689,612 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 530,000,000 | 530,000,000 | 1.25 | 11/16/2021 | 7,420,000 | 23,463,047 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 135,000,000 | 135,000,000 | 1.25 | 12/03/2021 | 2,092,500 | 6,196,028 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 550,000,000 | 550,000,000 | 1.25 | 01/05/2022 | 9,405,000 | 26,680,335 |
| 5-Year OTC interest rate swap with Morgan Stanley to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 465,000,000 | 465,000,000 | 1.50 | 05/20/2022 | 4,882,500 | 4,105,532 |
| Total | 25,975,000 | 68,134,554 | ||||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
23 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Cleared interest rate swap contracts | |||||||||||
| Fund receives | Fund pays |
Payment
frequency |
Counterparty |
Maturity
date |
Notional
currency |
Notional
amount |
Value
($) |
Upfront
payments ($) |
Upfront
receipts ($) |
Unrealized
appreciation ($) |
Unrealized
depreciation ($) |
| 3-Month USD LIBOR | Fixed rate of 1.635% | Receives Quarterly, Pays SemiAnnually | Morgan Stanley | 03/18/2031 | USD | 345,000,000 | (3,285,898) | — | — | — | (3,285,898) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 24 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Credit default swap contracts - sell protection (continued) | |||||||||||||
|
Reference
entity |
Counterparty |
Maturity
date |
Receive
fixed rate (%) |
Payment
frequency |
Implied
credit spread (%)* |
Notional
currency |
Notional
amount |
Value
($) |
Periodic
payments receivable (payable) ($) |
Upfront
payments ($) |
Upfront
receipts ($) |
Unrealized
appreciation ($) |
Unrealized
depreciation ($) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 10,000,000 | (1,125,000) | 3,333 | — | (1,979,498) | 857,831 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 13,000,000 | (1,462,500) | 4,333 | — | (2,112,002) | 653,835 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 5,000,000 | (562,500) | 1,666 | — | (840,605) | 279,771 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 45,000,000 | (5,062,500) | 15,000 | — | (5,314,032) | 266,532 | — |
| Markit CMBX North America Index, Series 11 BBB- | Morgan Stanley | 11/18/2054 | 3.000 | Monthly | 3.997 | USD | 20,000,000 | (1,093,750) | 6,667 | — | (3,942,737) | 2,855,654 | — |
| Markit CMBX North America Index, Series 11 BBB- | Morgan Stanley | 11/18/2054 | 3.000 | Monthly | 3.997 | USD | 5,000,000 | (273,438) | 1,667 | — | (755,165) | 483,394 | — |
| Markit CMBX North America Index, Series 11 BBB- | Morgan Stanley | 11/18/2054 | 3.000 | Monthly | 3.997 | USD | 25,000,000 | (1,367,187) | 8,333 | — | (1,320,728) | — | (38,126) |
| Markit CMBX North America Index, Series 12 BBB- | Morgan Stanley | 08/17/2061 | 3.000 | Monthly | 3.992 | USD | 22,000,000 | (1,326,875) | 7,334 | — | (3,259,749) | 1,940,208 | — |
| Markit CMBX North America Index, Series 12 BBB- | Morgan Stanley | 08/17/2061 | 3.000 | Monthly | 3.992 | USD | 5,000,000 | (301,563) | 1,667 | — | (770,686) | 470,790 | — |
| Markit CMBX North America Index, Series 12 BBB- | Morgan Stanley | 08/17/2061 | 3.000 | Monthly | 3.992 | USD | 25,000,000 | (1,507,812) | 8,333 | — | (1,466,647) | — | (32,832) |
| Markit CMBX North America Index, Series 12 BBB- | Morgan Stanley | 08/17/2061 | 3.000 | Monthly | 3.992 | USD | 25,000,000 | (1,507,812) | 8,333 | — | (1,411,086) | — | (88,393) |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 12.867 | USD | 2,550,000 | (511,195) | 850 | — | (221,369) | — | (288,976) |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 12.867 | USD | 5,000,000 | (1,002,344) | 1,666 | — | (284,960) | — | (715,718) |
| Total | (38,336,664) | 132,950 | — | (56,848,519) | 19,808,850 | (1,164,045) | |||||||
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
| Reference index and values for swap contracts as of period end | ||
| Reference index | Reference rate | |
| 3-Month USD LIBOR | London Interbank Offered Rate | 0.131% |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
25 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At May 31, 2021, the total value of these securities amounted to $3,314,426,173, which represents 83.25% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of May 31, 2021. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | Security represents a pool of loans that generate cash payments generally over fixed periods of time. Such securities entitle the security holders to receive distributions (i.e. principal and interest, net of fees and expenses) that are tied to the payments made by the borrower on the underlying loans. Due to the structure of the security the cash payments received are not known until the time of payment. The interest rate shown is the stated coupon rate as of May 31, 2021 and is not reflective of the cash flow payments. |
| (e) | Valuation based on significant unobservable inputs. |
| (f) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2021, the total value of these securities amounted to $144,609,637, which represents 3.63% of total net assets. |
| (g) | Zero coupon bond. |
| (h) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of May 31, 2021. |
| (i) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (j) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (k) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 117,544,851 | 1,714,091,284 | (1,609,299,864) | (6,020) | 222,330,251 | (9,207) | 154,815 | 222,352,487 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| STRIPS | Separate Trading of Registered Interest and Principal Securities |
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 767,389,677 | 168,084,049 | 935,473,726 |
| Commercial Mortgage-Backed Securities - Agency | — | 7,008,800 | — | 7,008,800 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 468,388,288 | — | 468,388,288 |
| Residential Mortgage-Backed Securities - Agency | — | 1,257,572,602 | — | 1,257,572,602 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 1,821,898,534 | 184,940,567 | 2,006,839,101 |
| Options Purchased Puts | — | 68,134,554 | — | 68,134,554 |
| Money Market Funds | 222,330,251 | — | — | 222,330,251 |
| Total Investments in Securities | 222,330,251 | 4,390,392,455 | 353,024,616 | 4,965,747,322 |
| Investments in Derivatives | ||||
| Asset | ||||
| Swap Contracts | — | 20,007,859 | — | 20,007,859 |
| Liability | ||||
| Futures Contracts | (878,222) | — | — | (878,222) |
| Options Contracts Written | — | (9,287,967) | — | (9,287,967) |
| Swap Contracts | — | (4,449,943) | — | (4,449,943) |
| Total | 221,452,029 | 4,396,662,404 | 353,024,616 | 4,971,139,049 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The following table is a
reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
|
Balance
as of 05/31/2020 ($) |
Increase
(decrease) in accrued discounts/ premiums ($) |
Realized
gain (loss) ($) |
Change
in unrealized appreciation (depreciation)(a) ($) |
Purchases
($) |
Sales
($) |
Transfers
into Level 3 ($) |
Transfers
out of Level 3 ($) |
Balance
as of 05/31/2021 ($) |
|
| Asset-Backed Securities — Non-Agency | 59,087,472 | (18,391,716) | 10,264 | 6,228,862 | 134,279,548 | (13,130,381) | — | — | 168,084,049 |
| Residential Mortgage-Backed Securities — Non-Agency | 64,052,153 | 2,143 | — | 541,526 | 191,742,177 | (7,345,280) | — | (64,052,152) | 184,940,567 |
| Total | 123,139,625 | (18,389,573) | 10,264 | 6,770,388 | 326,021,725 | (20,475,661) | — | (64,052,152) | 353,024,616 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at May 31, 2021 was $6,670,951, which is comprised of Asset-Backed Securities — Non-Agency of $6,129,425 and Residential Mortgage-Backed Securities —
Non-Agency of $541,526.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
27 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage-backed securities and asset-backed securities classified as Level 3 are valued using the market approach and utilize single market quotations from broker dealers which may have included, but not limited to, the distressed nature of the security and observable transactions for similar assets in the market. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage-backed securities and asset-backed securities classified as Level 3 are valued using the market approach and utilize single market quotations from broker dealers which may have included, but not limited to, the distressed nature of the security and observable transactions for similar assets in the market. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
Financial assets were transferred from
Level 3 to Level 2 as observable market inputs were utilized and management determined that there was sufficient, reliable and observable market data to value these assets as of period end.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 28 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $4,625,139,166) | $4,675,282,517 |
| Affiliated issuers (cost $222,320,881) | 222,330,251 |
| Options purchased (cost $25,975,000) | 68,134,554 |
| Cash | 13,678 |
| Cash collateral held at broker for: | |
| Swap contracts | 12,133,000 |
| TBA | 157,000 |
| Other(a) | 2,182,000 |
| Margin deposits on: | |
| Futures contracts | 3,742,503 |
| Swap contracts | 17,667,914 |
| Unrealized appreciation on swap contracts | 20,007,859 |
| Upfront payments on swap contracts | 344,533 |
| Receivable for: | |
| Capital shares sold | 17,291,133 |
| Dividends | 8,409 |
| Interest | 10,961,304 |
| Prepaid expenses | 28,688 |
| Total assets | 5,050,285,343 |
| Liabilities | |
| Option contracts written, at value (premiums received $8,596,800) | 9,287,967 |
| Unrealized depreciation on swap contracts | 1,164,045 |
| Upfront receipts on swap contracts | 56,848,519 |
| Payable for: | |
| Investments purchased | 16,209,503 |
| Investments purchased on a delayed delivery basis | 982,049,454 |
| Capital shares purchased | 2,132,224 |
| Variation margin for futures contracts | 348,594 |
| Variation margin for swap contracts | 567,471 |
| Management services fees | 67,668 |
| Distribution and/or service fees | 3,267 |
| Transfer agent fees | 260,705 |
| Compensation of board members | 57,603 |
| Other expenses | 65,821 |
| Total liabilities | 1,069,062,841 |
| Net assets applicable to outstanding capital stock | $3,981,222,502 |
| Represented by | |
| Paid in capital | 3,842,659,989 |
| Total distributable earnings (loss) | 138,562,513 |
| Total - representing net assets applicable to outstanding capital stock | $3,981,222,502 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
29 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $191,161,374 |
| Shares outstanding | 17,587,414 |
| Net asset value per share | $10.87 |
| Maximum sales charge | 3.00% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $11.21 |
| Advisor Class | |
| Net assets | $424,803,402 |
| Shares outstanding | 39,122,539 |
| Net asset value per share | $10.86 |
| Class C | |
| Net assets | $71,914,567 |
| Shares outstanding | 6,618,019 |
| Net asset value per share | $10.87 |
| Institutional Class | |
| Net assets | $2,005,277,859 |
| Shares outstanding | 184,574,175 |
| Net asset value per share | $10.86 |
| Institutional 2 Class | |
| Net assets | $794,472,701 |
| Shares outstanding | 73,155,414 |
| Net asset value per share | $10.86 |
| Institutional 3 Class | |
| Net assets | $493,592,599 |
| Shares outstanding | 45,421,378 |
| Net asset value per share | $10.87 |
| (a) | Includes collateral related to options purchased, options contracts written and swap contracts. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 30 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $9,992,884 |
| Dividends — affiliated issuers | 154,815 |
| Interest | 114,594,690 |
| Interfund lending | 268 |
| Total income | 124,742,657 |
| Expenses: | |
| Management services fees | 14,245,789 |
| Distribution and/or service fees | |
| Class A | 335,586 |
| Class C | 498,618 |
| Transfer agent fees | |
| Class A | 131,256 |
| Advisor Class | 221,543 |
| Class C | 48,830 |
| Institutional Class | 1,074,237 |
| Institutional 2 Class | 216,760 |
| Institutional 3 Class | 19,289 |
| Compensation of board members | 51,781 |
| Custodian fees | 33,684 |
| Printing and postage fees | 80,729 |
| Registration fees | 343,152 |
| Audit fees | 49,500 |
| Legal fees | 31,585 |
| Interest on collateral | 25,710 |
| Compensation of chief compliance officer | 408 |
| Other | 82,900 |
| Total expenses | 17,491,357 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (266,697) |
| Expense reduction | (20) |
| Total net expenses | 17,224,640 |
| Net investment income | 107,518,017 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 24,485,916 |
| Investments — affiliated issuers | (9,207) |
| Futures contracts | 15,592,258 |
| Options purchased | (14,698,000) |
| Swap contracts | 24,892,106 |
| Net realized gain | 50,263,073 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 196,292,795 |
| Investments — affiliated issuers | (6,020) |
| Futures contracts | (249,601) |
| Options purchased | 49,749,194 |
| Options contracts written | (691,167) |
| Swap contracts | 3,120,390 |
| Net change in unrealized appreciation (depreciation) | 248,215,591 |
| Net realized and unrealized gain | 298,478,664 |
| Net increase in net assets resulting from operations | $405,996,681 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
31 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $107,518,017 | $70,749,745 |
| Net realized gain (loss) | 50,263,073 | (5,372,229) |
| Net change in unrealized appreciation (depreciation) | 248,215,591 | (164,613,489) |
| Net increase (decrease) in net assets resulting from operations | 405,996,681 | (99,235,973) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (7,571,546) | (4,659,559) |
| Advisor Class | (13,189,471) | (8,894,631) |
| Class C | (2,478,953) | (1,332,170) |
| Institutional Class | (63,411,891) | (37,632,662) |
| Institutional 2 Class | (22,697,693) | (9,080,519) |
| Institutional 3 Class | (21,932,800) | (9,399,836) |
| Total distributions to shareholders | (131,282,354) | (70,999,377) |
| Increase in net assets from capital stock activity | 2,255,218,897 | 217,778,884 |
| Total increase in net assets | 2,529,933,224 | 47,543,534 |
| Net assets at beginning of year | 1,451,289,278 | 1,403,745,744 |
| Net assets at end of year | $3,981,222,502 | $1,451,289,278 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 32 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 15,195,476 | 160,736,787 | 6,534,169 | 66,097,520 |
| Distributions reinvested | 729,495 | 7,568,938 | 467,716 | 4,655,565 |
| Redemptions | (8,258,662) | (87,508,287) | (9,240,015) | (91,798,075) |
| Net increase (decrease) | 7,666,309 | 80,797,438 | (2,238,130) | (21,044,990) |
| Advisor Class | ||||
| Subscriptions | 30,656,403 | 325,371,899 | 17,052,780 | 171,642,957 |
| Distributions reinvested | 1,267,105 | 13,189,471 | 893,262 | 8,894,245 |
| Redemptions | (8,471,914) | (87,435,830) | (21,603,019) | (210,205,183) |
| Net increase (decrease) | 23,451,594 | 251,125,540 | (3,656,977) | (29,667,981) |
| Class C | ||||
| Subscriptions | 3,022,756 | 32,245,438 | 2,175,839 | 22,026,732 |
| Distributions reinvested | 238,354 | 2,466,682 | 133,945 | 1,329,165 |
| Redemptions | (971,766) | (10,053,331) | (1,175,645) | (11,395,143) |
| Net increase | 2,289,344 | 24,658,789 | 1,134,139 | 11,960,754 |
| Institutional Class | ||||
| Subscriptions | 135,688,924 | 1,443,219,131 | 71,713,499 | 719,221,815 |
| Distributions reinvested | 6,074,719 | 63,149,523 | 3,775,049 | 37,495,088 |
| Redemptions | (37,662,698) | (388,954,563) | (63,205,045) | (610,167,211) |
| Net increase | 104,100,945 | 1,117,414,091 | 12,283,503 | 146,549,692 |
| Institutional 2 Class | ||||
| Subscriptions | 60,126,587 | 639,644,471 | 29,225,493 | 294,573,188 |
| Distributions reinvested | 2,168,433 | 22,588,185 | 913,968 | 9,047,212 |
| Redemptions | (10,901,913) | (114,357,757) | (23,119,777) | (223,607,136) |
| Net increase | 51,393,107 | 547,874,899 | 7,019,684 | 80,013,264 |
| Institutional 3 Class | ||||
| Subscriptions | 30,740,014 | 321,099,734 | 6,666,364 | 66,254,912 |
| Distributions reinvested | 2,112,099 | 21,932,649 | 948,722 | 9,399,363 |
| Redemptions | (10,512,792) | (109,684,243) | (4,728,142) | (45,686,130) |
| Net increase | 22,339,321 | 233,348,140 | 2,886,944 | 29,968,145 |
| Total net increase | 211,240,620 | 2,255,218,897 | 17,429,163 | 217,778,884 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
33 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $9.35 | 0.47 | 1.66 | 2.13 | (0.43) | (0.18) | (0.61) |
| Year Ended 5/31/2020 | $10.19 | 0.40 | (0.85) | (0.45) | (0.31) | (0.08) | (0.39) |
| Year Ended 5/31/2019 | $9.93 | 0.44 | 0.25 | 0.69 | (0.40) | (0.03) | (0.43) |
| Year Ended 5/31/2018 | $10.12 | 0.49 | 0.04 | 0.53 | (0.38) | (0.34) | (0.72) |
| Year Ended 5/31/2017 | $9.69 | 0.38 | 0.52 | 0.90 | (0.34) | (0.13) | (0.47) |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $9.35 | 0.50 | 1.65 | 2.15 | (0.46) | (0.18) | (0.64) |
| Year Ended 5/31/2020 | $10.18 | 0.42 | (0.83) | (0.41) | (0.34) | (0.08) | (0.42) |
| Year Ended 5/31/2019 | $9.92 | 0.47 | 0.24 | 0.71 | (0.42) | (0.03) | (0.45) |
| Year Ended 5/31/2018 | $10.11 | 0.54 | 0.01 | 0.55 | (0.40) | (0.34) | (0.74) |
| Year Ended 5/31/2017 | $9.69 | 0.45 | 0.46 | 0.91 | (0.36) | (0.13) | (0.49) |
| Class C | |||||||
| Year Ended 5/31/2021 | $9.35 | 0.40 | 1.65 | 2.05 | (0.35) | (0.18) | (0.53) |
| Year Ended 5/31/2020 | $10.19 | 0.32 | (0.84) | (0.52) | (0.24) | (0.08) | (0.32) |
| Year Ended 5/31/2019 | $9.93 | 0.37 | 0.24 | 0.61 | (0.32) | (0.03) | (0.35) |
| Year Ended 5/31/2018 | $10.12 | 0.44 | 0.01 | 0.45 | (0.30) | (0.34) | (0.64) |
| Year Ended 5/31/2017 | $9.69 | 0.34 | 0.48 | 0.82 | (0.26) | (0.13) | (0.39) |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $9.35 | 0.50 | 1.65 | 2.15 | (0.46) | (0.18) | (0.64) |
| Year Ended 5/31/2020 | $10.19 | 0.42 | (0.84) | (0.42) | (0.34) | (0.08) | (0.42) |
| Year Ended 5/31/2019 | $9.93 | 0.47 | 0.24 | 0.71 | (0.42) | (0.03) | (0.45) |
| Year Ended 5/31/2018 | $10.12 | 0.53 | 0.02 | 0.55 | (0.40) | (0.34) | (0.74) |
| Year Ended 5/31/2017 | $9.69 | 0.48 | 0.44 | 0.92 | (0.36) | (0.13) | (0.49) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $9.35 | 0.50 | 1.65 | 2.15 | (0.46) | (0.18) | (0.64) |
| Year Ended 5/31/2020 | $10.18 | 0.42 | (0.83) | (0.41) | (0.34) | (0.08) | (0.42) |
| Year Ended 5/31/2019 | $9.92 | 0.47 | 0.25 | 0.72 | (0.43) | (0.03) | (0.46) |
| Year Ended 5/31/2018 | $10.11 | 0.52 | 0.03 | 0.55 | (0.40) | (0.34) | (0.74) |
| Year Ended 5/31/2017 | $9.69 | 0.45 | 0.47 | 0.92 | (0.37) | (0.13) | (0.50) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 34 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $10.87 | 23.28% | 1.01%(c) | 1.00%(c),(d) | 4.56% | 496% | $191,161 |
| Year Ended 5/31/2020 | $9.35 | (4.54%) | 1.04%(c),(e) | 1.01%(c),(e) | 3.97% | 819% | $92,796 |
| Year Ended 5/31/2019 | $10.19 | 7.12% | 1.08%(c) | 1.01%(c) | 4.41% | 528% | $123,926 |
| Year Ended 5/31/2018 | $9.93 | 5.53% | 1.12% | 1.00% | 5.12% | 716% | $70,299 |
| Year Ended 5/31/2017 | $10.12 | 9.50% | 1.10% | 1.00% | 3.80% | 739% | $4,964 |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $10.86 | 23.48% | 0.76%(c) | 0.75%(c),(d) | 4.79% | 496% | $424,803 |
| Year Ended 5/31/2020 | $9.35 | (4.20%) | 0.78%(c),(e) | 0.76%(c),(e) | 4.20% | 819% | $146,447 |
| Year Ended 5/31/2019 | $10.18 | 7.39% | 0.84%(c) | 0.76%(c) | 4.69% | 528% | $196,808 |
| Year Ended 5/31/2018 | $9.92 | 5.79% | 0.86% | 0.75% | 5.52% | 716% | $29,201 |
| Year Ended 5/31/2017 | $10.11 | 9.67% | 0.85% | 0.75% | 4.55% | 739% | $6,157 |
| Class C | |||||||
| Year Ended 5/31/2021 | $10.87 | 22.37% | 1.76%(c) | 1.75%(c),(d) | 3.82% | 496% | $71,915 |
| Year Ended 5/31/2020 | $9.35 | (5.26%) | 1.79%(c),(e) | 1.76%(c),(e) | 3.26% | 819% | $40,482 |
| Year Ended 5/31/2019 | $10.19 | 6.32% | 1.84%(c) | 1.76%(c) | 3.69% | 528% | $32,543 |
| Year Ended 5/31/2018 | $9.93 | 4.74% | 1.85% | 1.75% | 4.44% | 716% | $5,842 |
| Year Ended 5/31/2017 | $10.12 | 8.69% | 1.85% | 1.75% | 3.43% | 739% | $1,975 |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $10.86 | 23.48% | 0.76%(c) | 0.75%(c),(d) | 4.80% | 496% | $2,005,278 |
| Year Ended 5/31/2020 | $9.35 | (4.29%) | 0.78%(c),(e) | 0.76%(c),(e) | 4.23% | 819% | $752,376 |
| Year Ended 5/31/2019 | $10.19 | 7.38% | 0.84%(c) | 0.76%(c) | 4.71% | 528% | $694,646 |
| Year Ended 5/31/2018 | $9.93 | 5.80% | 0.85% | 0.75% | 5.44% | 716% | $64,054 |
| Year Ended 5/31/2017 | $10.12 | 9.78% | 0.86% | 0.75% | 4.92% | 739% | $17,188 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $10.86 | 23.53% | 0.72%(c) | 0.71%(c) | 4.82% | 496% | $794,473 |
| Year Ended 5/31/2020 | $9.35 | (4.15%) | 0.74%(c),(e) | 0.71%(c),(e) | 4.26% | 819% | $203,390 |
| Year Ended 5/31/2019 | $10.18 | 7.45% | 0.77%(c) | 0.70%(c) | 4.70% | 528% | $150,092 |
| Year Ended 5/31/2018 | $9.92 | 5.84% | 0.83% | 0.71% | 5.44% | 716% | $47,960 |
| Year Ended 5/31/2017 | $10.11 | 9.76% | 0.80% | 0.69% | 4.55% | 739% | $49 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
35 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $9.35 | 0.51 | 1.66 | 2.17 | (0.47) | (0.18) | (0.65) |
| Year Ended 5/31/2020 | $10.19 | 0.43 | (0.84) | (0.41) | (0.35) | (0.08) | (0.43) |
| Year Ended 5/31/2019 | $9.93 | 0.47 | 0.25 | 0.72 | (0.43) | (0.03) | (0.46) |
| Year Ended 5/31/2018 | $10.12 | 0.55 | 0.01 | 0.56 | (0.41) | (0.34) | (0.75) |
| Year Ended 5/31/2017(f) | $9.87 | 0.16 | 0.18 | 0.34 | (0.09) | — | (0.09) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense. For the periods indicated below, if interest on collateral expense had been excluded, expenses would have been lower by: |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | Ratios include interfund lending expense which is less than 0.01%. |
| (f) | Institutional 3 Class shares commenced operations on March 1, 2017. Per share data and total return reflect activity from that date. |
| (g) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 36 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $10.87 | 23.71% | 0.67%(c) | 0.66%(c) | 4.92% | 496% | $493,593 |
| Year Ended 5/31/2020 | $9.35 | (4.20%) | 0.69%(c),(e) | 0.66%(c),(e) | 4.36% | 819% | $215,799 |
| Year Ended 5/31/2019 | $10.19 | 7.49% | 0.72%(c) | 0.65%(c) | 4.71% | 528% | $205,730 |
| Year Ended 5/31/2018 | $9.93 | 5.90% | 0.75% | 0.65% | 5.55% | 716% | $189,672 |
| Year Ended 5/31/2017(f) | $10.12 | 3.50% | 0.76%(g) | 0.65%(g) | 6.57%(g) | 739% | $260,713 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
37 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Mortgage Opportunities
Fund (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class and Institutional 3 Class shares are available for purchase through authorized investment
professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
| 38 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the
clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
39 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage exposure to movements in interest
rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may
realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the
underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to manage exposure to fluctuations in interest rates and to manage
convexity risk. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the other
party. Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the broker or the
Fund upon closure, exercise or expiration of the contract.
| 40 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Interest rate swaption contracts
Interest rate swaption contracts
entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into an interest rate swap contract on a future date. Each interest rate swaption contract
will specify if the buyer is entitled to receive the fixed or floating rate if the interest rate is exercised. Changes in the value of a purchased interest rate swaption contracts are reported as unrealized
appreciation or depreciation on options in the Statement of Assets and Liabilities. Gain or loss is recognized in the Statement of Operations when the interest rate swaption contract is closed or expires.
When the Fund writes an interest
rate swaption contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and Liabilities and is subsequently adjusted to
reflect the current fair value of the interest rate swaption contract written. Premiums received from writing interest rate swaption contracts that expire unexercised are recorded by the Fund on the expiration date as
realized gains from options written in the Statement of Operations. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also recorded
as realized gain, or if the premium is less than the amount paid for the closing purchase, as realized loss. These amounts are reflected as net realized gain (loss) on options written in the Statement of
Operations.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
41 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index. These instruments may be used for other purposes in future periods. Credit default swap contracts are transactions in which one party
pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although specified credit events are
contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
| 42 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Interest rate swap contracts
The Fund entered into interest rate
swap transactions which may include inflation rate swap contracts to manage interest rate and market risk exposure to produce incremental earnings. These instruments may be used for other purposes in future periods.
An interest rate swap is an agreement between two parties where there are two flows and payments are made between the two counterparties and the payments are dependent upon changes in an interest rate, inflation rate
or inflation index calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified
dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual for the exchange of cash flows does not begin until a
specified date in the future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest rate.
Interest rate swaps are valued
daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a
gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at May 31, 2021:
| Asset derivatives | ||
|
Risk exposure
category |
Statement
of assets and liabilities location |
Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 20,007,859* |
| Credit risk | Upfront payments on swap contracts | 344,533 |
| Interest rate risk | Investments, at value — Options purchased | 68,134,554 |
| Total | 88,486,946 |
| Liability derivatives | ||
|
Risk exposure
category |
Statement
of assets and liabilities location |
Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 1,164,045* |
| Credit risk | Upfront receipts on swap contracts | 56,848,519 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 878,222* |
| Interest rate risk | Options contracts written, at value | 9,287,967 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 3,285,898* |
| Total | 71,464,651 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
43 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended May 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category |
Futures
contracts ($) |
Options
contracts purchased ($) |
Swap
contracts ($) |
Total
($) |
| Credit risk | — | — | 24,892,141 | 24,892,141 |
| Interest rate risk | 15,592,258 | (14,698,000) | (35) | 894,223 |
| Total | 15,592,258 | (14,698,000) | 24,892,106 | 25,786,364 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2021:
| Derivative instrument |
Average notional
amounts ($) |
| Futures contracts — long | 24,783,300* |
| Futures contracts — short | 265,383,969** |
| Credit default swap contracts — buy protection | 10,000,000** |
| Credit default swap contracts — sell protection | 247,650,000** |
| Derivative instrument |
Average
value ($) |
| Options contracts — purchased | 38,712,788** |
| Options contracts — written | (1,619,933)* |
| Derivative instrument |
Average unrealized
appreciation ($)* |
Average unrealized
depreciation ($)* |
| Interest rate swap contracts | 210,666 | (241,109) |
| * | Based on the ending daily outstanding amounts for the year ended May 31, 2021. |
| ** | Based on the ending quarterly outstanding amounts for the year ended May 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
| 44 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. 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.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage 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.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed
securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
45 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of May 31, 2021:
| Citi ($)(a) | Citi ($)(a) | JPMorgan ($) | Morgan Stanley ($)(a) | Morgan Stanley ($)(a) | Total ($) | |
| Assets | ||||||
| Options purchased puts | 37,348,687 | - | - | 30,785,867 | - | 68,134,554 |
| OTC credit default swap contracts (b) | - | 3,284,315 | 1,136,651 | 15,931,426 | - | 20,352,392 |
| Total assets | 37,348,687 | 3,284,315 | 1,136,651 | 46,717,293 | - | 88,486,946 |
| Liabilities | ||||||
| Centrally cleared interest rate swap contracts (c) | - | - | - | - | 567,471 | 567,471 |
| Options contracts written | 1,708,847 | - | - | 7,579,120 | - | 9,287,967 |
| OTC credit default swap contracts (b) | - | 13,396,606 | 2,530,089 | 42,085,869 | - | 58,012,564 |
| Total liabilities | 1,708,847 | 13,396,606 | 2,530,089 | 49,664,989 | 567,471 | 67,868,002 |
| Total financial and derivative net assets | 35,639,840 | (10,112,291) | (1,393,438) | (2,947,696) | (567,471) | 20,618,944 |
| Total collateral received (pledged) (d) | 35,639,840 | (10,112,291) | (1,393,438) | (2,182,000) | (567,471) | 21,384,640 |
| Net amount (e) | - | - | - | (765,696) | - | (765,696) |
| (a) | Exposure can only be netted across transactions governed under the same master agreement with the same legal entity. |
| (b) | Over-the-Counter (OTC) swap contracts are presented at market value plus periodic payments receivable (payable), which is comprised of unrealized appreciation, unrealized depreciation, upfront payments and upfront receipts. |
| (c) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (d) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (e) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| 46 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid monthly. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.650% to 0.535% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.634% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
|
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|
47 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.10 |
| Advisor Class | 0.10 |
| Class C | 0.10 |
| Institutional Class | 0.10 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $20.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25% and 1.00% of the Fund’s average daily net assets attributable to Class A and Class C shares,
respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $368,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
| 48 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.50 - 1.00(a) | 267,153 |
| Class C | — | 1.00(b) | 4,933 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
|
Fee rate(s) contractual
September 30, 2021 |
|
| Class A | 1.00% |
| Advisor Class | 0.75 |
| Class C | 1.75 |
| Institutional Class | 0.75 |
| Institutional 2 Class | 0.71 |
| Institutional 3 Class | 0.66 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, tax straddles, re-characterization of distributions for investments, swap investments,
principal and/or interest of fixed income securities and investments in partnerships. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets.
Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
49 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
|
Undistributed net
investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| (6,592,835) | 6,592,835 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 129,012,354 | 2,270,000 | 131,282,354 | 64,474,327 | 6,525,050 | 70,999,377 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 30,102,513 | — | — | 108,515,246 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 4,806,119,817 | 152,987,783 | (44,472,537) | 108,515,246 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $17,650,346,723 and $15,830,890,633, respectively, for the year ended May 31, 2021, of which $14,558,538,879
and $15,100,780,184, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| 50 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Lender | 2,383,333 | 0.67 | 6 |
Interest income earned and
interest expense incurred by the Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer 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. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
51 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
use of derivative instruments may lead to
increased volatility within the Fund. Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including
correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk and pricing 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 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 rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting
in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The
Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
LIBOR replacement risk
The elimination of London
Inter-Bank Offered Rate (LIBOR), among other "inter-bank offered" reference rates, may adversely affect the interest rates on, and value of, certain Fund investments for which the value is tied to LIBOR. Alternatives
to LIBOR have been established or are in development in most major currencies including the Secured Overnight Financing Rate (SOFR) that is intended to replace U.S. dollar LIBOR. The U.K. Financial Conduct Authority
and the ICE Benchmark Administration have announced that most LIBOR settings will no longer be published after December 31, 2021 and a majority of U.S. dollar LIBOR settings will cease publication after June 30, 2023.
It is possible that a subset of LIBOR settings will be published after these dates on a “synthetic” basis, but any such publications would be considered non-representative of the underlying market. Markets
are slowly developing in response to these new reference rates. Uncertainty related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition, poses risks
for the Fund. These risks are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices become settled.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. 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. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain;
| 52 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
in these and other circumstances, such risks might
affect companies worldwide. As a result, local, regional or global events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or
other events – or the potential for such events – could have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, 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. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. 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.
Shareholder concentration risk
At May 31, 2021, four unaffiliated
shareholders of record owned 49.0% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated shareholders of
record owned 17.0% of the outstanding shares of the Fund in one or more accounts. Subscription and
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
53 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
redemption activity by concentrated accounts may
have a significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund
losses and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 54 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Mortgage Opportunities Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Mortgage Opportunities Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes,
and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the financial
highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not
received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
55 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and 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
Fund’s Trustees as of the printing of this report, 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, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
| 56 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
57 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 58 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
59 |
TRUSTEES AND OFFICERS (continued)
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
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
Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice
President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
| 60 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
|
Columbia Mortgage Opportunities Fund | Annual Report 2021
|
61 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
| Trustee | Votes for | Votes withheld | Abstentions |
| George S. Batejan | 39,328,043,938 | 454,200,292 | 0 |
| Kathleen Blatz | 39,337,937,974 | 444,306,256 | 0 |
| Pamela G. Carlton | 39,344,288,391 | 437,955,839 | 0 |
| Janet Langford Carrig | 39,329,254,400 | 452,989,830 | 0 |
| J. Kevin Connaughton | 39,252,004,295 | 530,239,934 | 0 |
| Olive M. Darragh | 39,268,887,557 | 513,356,673 | 0 |
| Patricia M. Flynn | 39,330,975,954 | 451,268,276 | 0 |
| Brian J. Gallagher | 39,331,403,614 | 450,840,615 | 0 |
| Douglas A. Hacker | 39,242,844,166 | 539,400,064 | 0 |
| Nancy T. Lukitsh | 39,349,165,585 | 433,078,645 | 0 |
| David M. Moffett | 39,309,904,442 | 472,339,788 | 0 |
| Catherine James Paglia | 39,328,739,370 | 453,504,860 | 0 |
| Anthony M. Santomero | 39,306,518,896 | 475,725,334 | 0 |
| Minor M. Shaw | 39,303,595,918 | 478,648,312 | 0 |
| Natalie A. Trunow | 39,352,416,062 | 429,828,167 | 0 |
| Sandra Yeager | 39,356,131,780 | 426,112,449 | 0 |
| Christopher O. Petersen | 39,337,621,211 | 444,623,019 | 0 |
| 62 | Columbia Mortgage Opportunities Fund | Annual Report 2021 |
Columbia Mortgage Opportunities Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN251_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Commodity
Strategy Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Commodity Strategy Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
You may obtain the current net
asset value (NAV) of Fund shares at no cost by calling 800.345.6611 or by sending an e-mail to serviceinquiries@columbiathreadneedle.com.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Commodity Strategy
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with total return.
Portfolio management
Marc Khalamayzer, CFA
Commodity Strategy Co-Portfolio Manager
Managed Fund since 2019
Matthew Ferrelli, CFA
Commodity Strategy Co-Portfolio Manager
Managed Fund since 2019
Ronald Stahl, CFA
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since May 2021
Gregory Liechty
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since May 2021
John D. Dempsey, CFA
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since May 2021
Returns for Class A are shown with
and without the maximum initial sales charge of 5.75%. Returns for Class C are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share classes are not
subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and fees associated
with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the redemption of
Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee waivers or
expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s Class T shares for the period from July 28, 2011 through June 17, 2012, and of the Fund’s Class A shares for the period from June 18, 2012 through the inception date of such class (in each case, without applicable sales charges and adjusted to reflect the higher class-related operating expenses of such share class, where applicable). Class T shares were offered prior to the Fund’s Class A shares but have since been merged into the Fund’s Class A shares. Share classes with expenses that are higher than Class T and/or Class A shares will have performance that is lower than Class T and/or Class A shares (without sales charges). Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Bloomberg Commodity Index Total
Return is a total return index based on the Bloomberg Commodity Index, which is a broadly diversified index composed of futures contracts on physical commodities that allows investors to track commodity futures
through a single, simple measure.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (July 28, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Commodity Strategy Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or on the redemption of Fund shares.
|
Commodities market exposure (%)
(at May 31, 2021) |
|||
| Commodities contracts(a) | Long | Short | Net |
| Energy | 32.5 | — | 32.5 |
| Agriculture | 31.8 | — | 31.8 |
| Precious Metals | 15.2 | — | 15.2 |
| Industrial Metals | 13.6 | — | 13.6 |
| Livestock | 6.9 | — | 6.9 |
|
Total notional market value of
commodities contracts |
100.0 | — | 100.0 |
(a) Reflects notional market value
of commodities contracts. The notional exposure of a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument and/or changes in value for the instrument. The
notional exposure is a hypothetical underlying quantity upon which payment obligations are computed. Notional exposures provide a gauge for how the Fund may behave given changes in individual markets. Notional amounts
for each commodities contract are shown in the Consolidated Portfolio of Investments. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Consolidated
Portfolio of Investments and Note 2 of the Notes to Consolidated Financial Statements.
Percentages indicated are based
upon net assets. At period end, the Fund held an investment in an Affiliated Money Market Fund, which has been segregated to cover obligations relating to the Fund’s investments in open commodities contracts
which provide exposure to the commodities market. For a description of the Fund’s investment in derivatives, see Investments in derivatives following the Consolidated Portfolio of Investments and Note 2 of the
Notes to Consolidated Financial Statements.
| 4 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At May 31, 2021, approximately
88.82% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
For the 12-month period ending May
31, 2021, the Fund’s Class A shares returned 47.95% excluding sales charges. The Fund outperformed its benchmark, the Bloomberg Commodity Index Total Return, which returned 46.22% over the same period. The Fund
accesses commodities markets via listed futures and options contracts, using these commodities futures and options contracts to position the Fund relative to the benchmark and to provide shareholders with total
return.
Market overview
A broad-based commodities market
recovery that began in the second half of 2020 continued throughout the annual reporting period. Commodity prices rose across nearly all sectors for the one-year time frame. The rally in commodity prices was driven by
an improving global economic outlook, monetary and fiscal stimulus measures taken by the U.S. Federal Reserve and other global policymakers, as well as the rollout of multiple COVID-19 vaccines. Additionally, supply
chain disruptions created by the pandemic and the shuttering of economies resulted in a supply deficit that was unable to catch up to global demand when economies began to reopen, further contributed to an extensive
surge in commodity prices.
Supply chain factors for the
commodities market were also exacerbated during the last four months of the reporting period by a series of unusual events. In February, an unseasonal deep freeze and mass blackout shut down energy and petrochemical
operations across the central U.S.; in March 2021, a large container ship made the Suez Canal impassable, creating a blockage in global shipping; and in May 2021, hackers targeted one of the largest fuel pipeline
operators in the U.S., which pushed gas prices above $3 a gallon for the first time since 2014.
The agriculture sector saw some of
the reporting period’s largest gains within the commodities market. This was largely due to record demand from China, who had been increasing its domestic stockpile of grains and was continuing to rebuild its
pig herds that had been destroyed by an outbreak of swine fever from two years prior. In addition, major corn and soybean producers in South America experienced a pandemic driven labor shortage, which, coupled with
poor weather, led to low yielding crops and prompted a shortage in supply at the exact time when global demand increased.
The Fund’s notable
contributors during the period
| • | Overweights to energy, grains, and livestock relative to the benchmark contributed positively to performance. |
| • | Within energy, outperformance was led by sector positioning in unleaded gas and crude oil. |
| • | In grains, an overweight to the soybean complex, compared to the benchmark, was a large driver of performance |
| • | Within livestock, sector positioning to lean hogs and curve positioning to live cattle aided performance. |
The Fund’s notable
detractors during the period
| • | Industrial metals, due to allocations to copper and aluminum, resulted in a negative total effect for this sector. |
| • | Within softs (here referring to cocoa, coffee, cotton, and sugar), an overweight to sugar and cocoa, as well as an underweight to coffee, compared to the benchmark, were laggards on performance. The Fund has since sold out of its position in cocoa during the reporting period. |
| • | In energy, an overweight to natural gas, relative to the benchmark, was a detractor. This was more than offset by strong performance within the sector, driven by unleaded gas and crude oil. |
Effective May 2021, Ronald Stahl,
Gregory Liechty, and John D. Dempsey were added as named portfolio managers on the Fund alongside the Commodity Strategies sleeve portfolio managers, Marc Khalamayzer and Matthew Ferrelli. The three new portfolio
managers are responsible for managing the Fund’s Cash/Liquidity Strategies sleeve, which was implemented at the end of the reporting period. The Cash/Liquidity Strategies portfolio managers are responsible for
the cash sleeve only and
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
are not providing input on the commodities portion
of the portfolio. Cash will be managed in accordance with the existing prospectus allowances and will focus on highly liquid, short-term securities. There were no changes to the investment process related to the
Commodity Strategies sleeve managed by Marc Khalamayzer and Matthew Ferrelli.
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Commodity investments may be affected by the overall market and industry- and commodity-specific factors, and may be more volatile and less liquid than other investments. Investing in
derivatives is a specialized activity that involves special risks that subject the Fund to significant loss potential, including when used as leverage, and may result in greater fluctuation in Fund
value. There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more
pronounced for longer term securities. A rise in interest rates may result in a price decline of fixed-income instruments held by the Fund, negatively impacting its performance and NAV. Falling rates may result in the Fund investing in lower yielding
debt instruments, lowering the Fund’s income and yield. These risks may be heightened for longer maturity and duration securities. Market or other (e.g., interest rate) environments may adversely affect the
liquidity of Fund investments, negatively impacting their price. Generally, the less liquid the market at the time the Fund sells a holding, the greater the risk of loss or decline of value to the
Fund. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector. See the Fund’s prospectus for
more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
7 |
Consolidated Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Money Market Funds 87.6% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(a),(b) | 373,879,460 | 373,842,072 |
|
Total Money Market Funds
(Cost $373,842,072) |
373,842,072 | |
|
Total Investments in Securities
(Cost: $373,842,072) |
373,842,072 | |
| Other Assets & Liabilities, Net | 52,907,650 | |
| Net Assets | 426,749,722 | |
At May 31, 2021, securities and/or
cash totaling $33,914,560 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description |
Number of
contracts |
Expiration
date |
Trading
currency |
Notional
amount |
Value/Unrealized
appreciation ($) |
Value/Unrealized
depreciation ($) |
| Brent Crude | 99 | 07/2021 | USD | 6,765,660 | 460,275 | — |
| Brent Crude | 7 | 07/2021 | USD | 478,380 | 54,578 | — |
| Brent Crude | 98 | 09/2021 | USD | 6,602,260 | 359,793 | — |
| Brent Crude | 198 | 11/2021 | USD | 13,161,060 | 775,343 | — |
| Brent Crude | 100 | 01/2022 | USD | 6,570,000 | 6,207 | — |
| Coffee | 10 | 07/2021 | USD | 608,813 | 97,968 | — |
| Coffee | 1 | 07/2021 | USD | 60,881 | 13,214 | — |
| Coffee | 47 | 09/2021 | USD | 2,895,788 | 564,977 | — |
| Coffee | 92 | 12/2021 | USD | 5,761,500 | 1,103,179 | — |
| Coffee | 45 | 03/2022 | USD | 2,857,781 | 242,199 | — |
| Copper | 18 | 07/2021 | USD | 2,104,875 | 449,438 | — |
| Copper | 24 | 07/2021 | USD | 2,806,500 | 350,192 | — |
| Copper | 45 | 09/2021 | USD | 5,268,375 | 648,204 | — |
| Copper | 90 | 12/2021 | USD | 10,543,500 | 1,347,500 | — |
| Copper | 45 | 03/2022 | USD | 5,270,625 | — | (36,736) |
| Corn | 150 | 07/2021 | USD | 4,925,625 | 694,192 | — |
| Corn | 58 | 07/2021 | USD | 1,904,575 | 379,240 | — |
| Corn | 207 | 09/2021 | USD | 5,933,138 | 764,789 | — |
| Corn | 437 | 12/2021 | USD | 11,919,175 | 1,079,333 | — |
| Corn | 216 | 03/2022 | USD | 5,964,300 | — | (523,039) |
| Cotton | 11 | 07/2021 | USD | 451,660 | — | (6,945) |
| Cotton | 15 | 07/2021 | USD | 615,900 | — | (19,905) |
| Cotton | 34 | 12/2021 | USD | 1,416,440 | 18,196 | — |
| Cotton | 54 | 12/2021 | USD | 2,249,640 | — | (43,377) |
| Cotton | 29 | 03/2022 | USD | 1,207,995 | — | (23,152) |
| Gas Oil | 14 | 07/2021 | USD | 794,150 | 146,338 | — |
| Gas Oil | 9 | 07/2021 | USD | 510,525 | 24,582 | — |
| Gas Oil | 46 | 09/2021 | USD | 2,619,700 | 107,900 | — |
| Gas Oil | 46 | 11/2021 | USD | 2,617,400 | 193,447 | — |
| Gas Oil | 92 | 01/2022 | USD | 5,200,300 | 203,340 | — |
| Gold 100 oz. | 45 | 08/2021 | USD | 8,573,850 | 494,721 | — |
| Gold 100 oz. | 4 | 08/2021 | USD | 762,120 | 40,405 | — |
| Gold 100 oz. | 172 | 12/2021 | USD | 32,836,520 | 3,041,751 | — |
| Gold 100 oz. | 57 | 02/2022 | USD | 10,892,700 | 406,490 | — |
| Lean Hogs | 149 | 07/2021 | USD | 7,113,260 | 454,166 | — |
| Lean Hogs | 61 | 10/2021 | USD | 2,295,430 | 252,673 | — |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 8 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Long futures contracts (continued) | ||||||
| Description |
Number of
contracts |
Expiration
date |
Trading
currency |
Notional
amount |
Value/Unrealized
appreciation ($) |
Value/Unrealized
depreciation ($) |
| Lean Hogs | 131 | 12/2021 | USD | 4,410,770 | 275,111 | — |
| Lean Hogs | 4 | 12/2021 | USD | 134,680 | — | (151) |
| Lean Hogs | 67 | 02/2022 | USD | 2,280,010 | — | (23,605) |
| Live Cattle | 1 | 08/2021 | USD | 47,440 | 76 | — |
| Live Cattle | 58 | 08/2021 | USD | 2,751,520 | — | (14,014) |
| Live Cattle | 38 | 10/2021 | USD | 1,880,240 | 21,716 | — |
| Live Cattle | 25 | 10/2021 | USD | 1,237,000 | — | (9,686) |
| Live Cattle | 107 | 12/2021 | USD | 5,480,540 | 25,309 | — |
| Live Cattle | 16 | 12/2021 | USD | 819,520 | — | (10,625) |
| Live Cattle | 23 | 02/2022 | USD | 1,207,960 | 3,762 | — |
| Live Cattle | 37 | 02/2022 | USD | 1,943,240 | — | (16,667) |
| Natural Gas | 348 | 06/2021 | USD | 10,391,280 | 396,659 | — |
| Natural Gas | 42 | 06/2021 | USD | 1,254,120 | 86,279 | — |
| Natural Gas | 236 | 08/2021 | USD | 7,084,720 | 436,189 | — |
| Natural Gas | 228 | 10/2021 | USD | 7,022,400 | 452,310 | — |
| Natural Gas | 426 | 12/2021 | USD | 13,968,540 | 263,792 | — |
| Nickel | 1 | 07/2021 | USD | 108,576 | 12,422 | — |
| Nickel | 19 | 09/2021 | USD | 2,065,737 | 211,497 | — |
| Nickel | 19 | 11/2021 | USD | 2,068,502 | 203,271 | — |
| Nickel | 39 | 01/2022 | USD | 4,250,552 | 199,546 | — |
| NY Harbor ULSD Heat Oil | 6 | 06/2021 | USD | 513,652 | 107,535 | — |
| NY Harbor ULSD Heat Oil | 5 | 06/2021 | USD | 428,043 | 32,343 | — |
| NY Harbor ULSD Heat Oil | 25 | 08/2021 | USD | 2,142,945 | 144,876 | — |
| NY Harbor ULSD Heat Oil | 25 | 10/2021 | USD | 2,143,785 | 185,613 | — |
| NY Harbor ULSD Heat Oil | 49 | 12/2021 | USD | 4,195,645 | 154,198 | — |
| Primary Aluminum | 7 | 07/2021 | USD | 432,821 | 67,449 | — |
| Primary Aluminum | 6 | 07/2021 | USD | 370,989 | 33,459 | — |
| Primary Aluminum | 64 | 09/2021 | USD | 3,979,600 | 469,217 | — |
| Primary Aluminum | 63 | 11/2021 | USD | 3,928,050 | 362,940 | — |
| Primary Aluminum | 127 | 01/2022 | USD | 7,928,769 | 209,754 | — |
| RBOB Gasoline | 25 | 06/2021 | USD | 2,243,745 | 127,316 | — |
| RBOB Gasoline | 27 | 08/2021 | USD | 2,388,317 | 175,792 | — |
| RBOB Gasoline | 30 | 10/2021 | USD | 2,451,834 | 234,417 | — |
| RBOB Gasoline | 60 | 12/2021 | USD | 4,797,072 | 211,177 | — |
| Silver | 12 | 07/2021 | USD | 1,680,840 | 118,944 | — |
| Silver | 9 | 07/2021 | USD | 1,260,630 | 58,833 | — |
| Silver | 24 | 09/2021 | USD | 3,365,400 | 319,695 | — |
| Silver | 47 | 12/2021 | USD | 6,599,270 | 606,982 | — |
| Silver | 24 | 03/2022 | USD | 3,374,880 | 75,689 | — |
| Soybean | 75 | 07/2021 | USD | 5,739,375 | 509,968 | — |
| Soybean | 13 | 07/2021 | USD | 994,825 | 89,384 | — |
| Soybean | 144 | 11/2021 | USD | 9,883,800 | 869,454 | — |
| Soybean | 7 | 11/2021 | USD | 480,463 | — | (5,013) |
| Soybean | 136 | 01/2022 | USD | 9,336,400 | 206,943 | — |
| Soybean | 15 | 01/2022 | USD | 1,029,750 | — | (16,324) |
| Soybean Meal | 5 | 07/2021 | USD | 197,750 | — | (23,802) |
| Soybean Meal | 125 | 07/2021 | USD | 4,943,750 | — | (130,130) |
| Soybean Meal | 125 | 12/2021 | USD | 4,918,750 | 163,870 | — |
| Soybean Meal | 8 | 12/2021 | USD | 314,800 | — | (3,047) |
| Soybean Meal | 26 | 01/2022 | USD | 1,018,940 | 12,546 | — |
| Soybean Meal | 107 | 01/2022 | USD | 4,193,330 | — | (127,855) |
| Soybean Oil | 124 | 07/2021 | USD | 4,894,776 | 1,101,649 | — |
| Soybean Oil | 12 | 07/2021 | USD | 473,688 | 169,560 | — |
| Soybean Oil | 218 | 12/2021 | USD | 7,689,732 | 1,407,482 | — |
| Soybean Oil | 223 | 01/2022 | USD | 7,717,584 | 692,288 | — |
| Sugar #11 | 319 | 06/2021 | USD | 6,202,381 | 415,596 | — |
| Sugar #11 | 131 | 09/2021 | USD | 2,551,461 | 274,413 | — |
| Sugar #11 | 390 | 02/2022 | USD | 7,639,632 | 403,517 | — |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
9 |
Consolidated Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Long futures contracts (continued) | ||||||
| Description |
Number of
contracts |
Expiration
date |
Trading
currency |
Notional
amount |
Value/Unrealized
appreciation ($) |
Value/Unrealized
depreciation ($) |
| Wheat | 27 | 07/2021 | USD | 895,725 | 15,468 | — |
| Wheat | 9 | 07/2021 | USD | 275,963 | — | (9,931) |
| Wheat | 12 | 07/2021 | USD | 398,100 | — | (10,517) |
| Wheat | 7 | 07/2021 | USD | 214,638 | — | (12,969) |
| Wheat | 71 | 09/2021 | USD | 2,368,738 | 108,229 | — |
| Wheat | 13 | 09/2021 | USD | 403,325 | 8,885 | — |
| Wheat | 28 | 09/2021 | USD | 868,700 | — | (17,646) |
| Wheat | 142 | 12/2021 | USD | 4,790,725 | 234,287 | — |
| Wheat | 81 | 12/2021 | USD | 2,560,613 | 75,926 | — |
| Wheat | 40 | 03/2022 | USD | 1,285,000 | — | (144,137) |
| Wheat | 71 | 03/2022 | USD | 2,420,213 | — | (201,546) |
| WTI Crude | 154 | 06/2021 | USD | 10,213,280 | 863,733 | — |
| WTI Crude | 124 | 08/2021 | USD | 8,134,400 | 391,370 | — |
| WTI Crude | 125 | 10/2021 | USD | 8,056,250 | 601,755 | — |
| WTI Crude | 255 | 12/2021 | USD | 16,159,350 | 547,629 | — |
| Zinc | 2 | 07/2021 | USD | 152,638 | 11,861 | — |
| Zinc | 1 | 07/2021 | USD | 76,319 | 5,421 | — |
| Zinc | 35 | 09/2021 | USD | 2,681,219 | 231,381 | — |
| Zinc | 35 | 11/2021 | USD | 2,687,125 | 220,737 | — |
| Zinc | 69 | 01/2022 | USD | 5,306,963 | 256,848 | — |
| Total | 30,948,998 | (1,430,819) | ||||
Notes to Consolidated Portfolio of
Investments
| (a) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (b) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 46,931,293 | 936,405,590 | (609,471,696) | (23,115) | 373,842,072 | (21,830) | 364,698 | 373,879,460 | |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 10 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Money Market Funds | 373,842,072 | — | — | 373,842,072 |
| Total Investments in Securities | 373,842,072 | — | — | 373,842,072 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 30,948,998 | — | — | 30,948,998 |
| Liability | ||||
| Futures Contracts | (1,430,819) | — | — | (1,430,819) |
| Total | 403,360,251 | — | — | 403,360,251 |
See the Consolidated Portfolio of
Investments for all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
11 |
Consolidated Statement of Assets and
Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Affiliated issuers (cost $373,842,072) | $373,842,072 |
| Cash | 19,224,261 |
| Margin deposits on: | |
| Futures contracts | 33,914,560 |
| Receivable for: | |
| Capital shares sold | 19,908 |
| Dividends | 3,101 |
| Variation margin for futures contracts | 1,821,947 |
| Prepaid expenses | 12,158 |
| Total assets | 428,838,007 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 17,526 |
| Variation margin for futures contracts | 1,994,044 |
| Management services fees | 7,369 |
| Distribution and/or service fees | 48 |
| Transfer agent fees | 2,296 |
| Compensation of board members | 47,597 |
| Other expenses | 19,405 |
| Total liabilities | 2,088,285 |
| Net assets applicable to outstanding capital stock | $426,749,722 |
| Represented by | |
| Paid in capital | 474,342,594 |
| Total distributable earnings (loss) | (47,592,872) |
| Total - representing net assets applicable to outstanding capital stock | $426,749,722 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 12 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Statement of Assets and
Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $2,739,476 |
| Shares outstanding | 132,426 |
| Net asset value per share | $20.69 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $21.95 |
| Advisor Class | |
| Net assets | $3,537,070 |
| Shares outstanding | 166,720 |
| Net asset value per share | $21.22 |
| Class C | |
| Net assets | $694,684 |
| Shares outstanding | 35,571 |
| Net asset value per share | $19.53 |
| Institutional Class | |
| Net assets | $1,379,722 |
| Shares outstanding | 65,551 |
| Net asset value per share | $21.05 |
| Institutional 2 Class | |
| Net assets | $19,304,646 |
| Shares outstanding | 904,580 |
| Net asset value per share | $21.34 |
| Institutional 3 Class | |
| Net assets | $398,385,880 |
| Shares outstanding | 18,544,918 |
| Net asset value per share | $21.48 |
| Class R | |
| Net assets | $708,244 |
| Shares outstanding | 34,863 |
| Net asset value per share | $20.32 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
13 |
Consolidated Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $364,698 |
| Total income | 364,698 |
| Expenses: | |
| Management services fees | 2,176,511 |
| Distribution and/or service fees | |
| Class A | 4,192 |
| Class C | 1,098 |
| Class R | 2,448 |
| Transfer agent fees | |
| Class A | 2,998 |
| Advisor Class | 20,351 |
| Class C | 200 |
| Institutional Class | 958 |
| Institutional 2 Class | 6,721 |
| Institutional 3 Class | 20,568 |
| Class R | 863 |
| Compensation of board members | 29,897 |
| Custodian fees | 6,359 |
| Printing and postage fees | 15,019 |
| Registration fees | 106,860 |
| Audit fees | 33,700 |
| Legal fees | 11,747 |
| Interest on collateral | 41,791 |
| Compensation of chief compliance officer | 71 |
| Other | 22,322 |
| Total expenses | 2,504,674 |
| Expense reduction | (40) |
| Total net expenses | 2,504,634 |
| Net investment loss | (2,139,936) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — affiliated issuers | (21,830) |
| Futures contracts | 109,028,462 |
| Net realized gain | 109,006,632 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — affiliated issuers | (23,115) |
| Futures contracts | 28,581,473 |
| Net change in unrealized appreciation (depreciation) | 28,558,358 |
| Net realized and unrealized gain | 137,564,990 |
| Net increase in net assets resulting from operations | $135,425,054 |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 14 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Statement of Changes in Net
Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income (loss) | $(2,139,936) | $3,582,318 |
| Net realized gain (loss) | 109,006,632 | (58,743,005) |
| Net change in unrealized appreciation (depreciation) | 28,558,358 | 14,273,966 |
| Net increase (decrease) in net assets resulting from operations | 135,425,054 | (40,886,721) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (1,631) | (15,443) |
| Advisor Class | (5,787) | (270,446) |
| Class C | (39) | (99) |
| Institutional Class | (697) | (4,794) |
| Institutional 2 Class | (21,019) | (650) |
| Institutional 3 Class | (511,960) | (5,013,547) |
| Class R | (426) | (2,847) |
| Total distributions to shareholders | (541,559) | (5,307,826) |
| Increase (decrease) in net assets from capital stock activity | 110,191,082 | (120,578,032) |
| Total increase (decrease) in net assets | 245,074,577 | (166,772,579) |
| Net assets at beginning of year | 181,675,145 | 348,447,724 |
| Net assets at end of year | $426,749,722 | $181,675,145 |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
15 |
Consolidated Statement of Changes in Net
Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares(a) | Dollars ($) | Shares(a) | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 76,049 | 1,382,699 | 11,892 | 192,536 |
| Distributions reinvested | 97 | 1,597 | 876 | 15,058 |
| Redemptions | (35,455) | (597,242) | (27,521) | (416,712) |
| Net increase (decrease) | 40,691 | 787,054 | (14,753) | (209,118) |
| Advisor Class | ||||
| Subscriptions | 145,990 | 2,369,574 | 401,079 | 6,627,044 |
| Distributions reinvested | 344 | 5,787 | 15,401 | 270,431 |
| Redemptions | (1,399,979) | (23,347,200) | (376,042) | (6,070,611) |
| Net increase (decrease) | (1,253,645) | (20,971,839) | 40,438 | 826,864 |
| Class C | ||||
| Subscriptions | 34,072 | 655,194 | 554 | 7,764 |
| Distributions reinvested | 3 | 38 | 6 | 98 |
| Redemptions | (4,199) | (79,609) | (2,694) | (41,207) |
| Net increase (decrease) | 29,876 | 575,623 | (2,134) | (33,345) |
| Institutional Class | ||||
| Subscriptions | 67,819 | 1,234,329 | 17,819 | 301,089 |
| Distributions reinvested | 41 | 692 | 272 | 4,749 |
| Redemptions | (6,974) | (123,212) | (59,044) | (973,738) |
| Net increase (decrease) | 60,886 | 1,111,809 | (40,953) | (667,900) |
| Institutional 2 Class | ||||
| Subscriptions | 946,693 | 15,457,398 | 3,761 | 58,902 |
| Distributions reinvested | 1,241 | 21,017 | 36 | 634 |
| Redemptions | (47,309) | (923,206) | (81,742) | (1,444,601) |
| Net increase (decrease) | 900,625 | 14,555,209 | (77,945) | (1,385,065) |
| Institutional 3 Class | ||||
| Subscriptions | 19,921,707 | 326,614,590 | 25,531,906 | 419,268,730 |
| Distributions reinvested | 30,045 | 511,958 | 282,931 | 5,013,529 |
| Redemptions | (12,417,639) | (213,096,022) | (33,417,948) | (543,291,884) |
| Net increase (decrease) | 7,534,113 | 114,030,526 | (7,603,111) | (119,009,625) |
| Class R | ||||
| Subscriptions | 11,773 | 225,194 | 7,905 | 126,214 |
| Distributions reinvested | 26 | 425 | 168 | 2,840 |
| Redemptions | (7,151) | (122,919) | (13,843) | (228,897) |
| Net increase (decrease) | 4,648 | 102,700 | (5,770) | (99,843) |
| Total net increase (decrease) | 7,317,194 | 110,191,082 | (7,704,228) | (120,578,032) |
| (a) | Share activity has been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 16 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Total
distributions to shareholders |
|
| Class A(c) | ||||||
| Year Ended 5/31/2021 | $13.99 | (0.18) | 6.90 | 6.72 | (0.02) | (0.02) |
| Year Ended 5/31/2020 | $16.67 | 0.12 | (2.64) | (2.52) | (0.16) | (0.16) |
| Year Ended 5/31/2019 | $23.03 | 0.24 | (3.60) | (3.36) | (3.00) | (3.00) |
| Year Ended 5/31/2018 | $20.95 | 0.04 | 2.04 | 2.08 | — | — |
| Year Ended 5/31/2017 | $21.57 | (0.12) | (0.50) | (0.62) | — | — |
| Advisor Class(c) | ||||||
| Year Ended 5/31/2021 | $14.32 | (0.11) | 7.03 | 6.92 | (0.02) | (0.02) |
| Year Ended 5/31/2020 | $17.05 | 0.16 | (2.69) | (2.53) | (0.20) | (0.20) |
| Year Ended 5/31/2019 | $23.49 | 0.28 | (3.64) | (3.36) | (3.08) | (3.08) |
| Year Ended 5/31/2018 | $21.32 | 0.12 | 2.09 | 2.21 | (0.04) | (0.04) |
| Year Ended 5/31/2017 | $21.90 | (0.08) | (0.50) | (0.58) | — | — |
| Class C(c) | ||||||
| Year Ended 5/31/2021 | $13.30 | (0.30) | 6.54 | 6.24 | (0.01) | (0.01) |
| Year Ended 5/31/2020 | $15.84 | (0.00)(f) | (2.54) | (2.54) | (0.00)(f) | (0.00)(f) |
| Year Ended 5/31/2019 | $22.03 | 0.08 | (3.43) | (3.35) | (2.84) | (2.84) |
| Year Ended 5/31/2018 | $20.17 | (0.12) | 1.98 | 1.86 | — | — |
| Year Ended 5/31/2017 | $20.93 | (0.28) | (0.48) | (0.76) | — | — |
| Institutional Class(c) | ||||||
| Year Ended 5/31/2021 | $14.20 | (0.15) | 7.02 | 6.87 | (0.02) | (0.02) |
| Year Ended 5/31/2020 | $16.91 | 0.20 | (2.71) | (2.51) | (0.20) | (0.20) |
| Year Ended 5/31/2019 | $23.32 | 0.28 | (3.61) | (3.33) | (3.08) | (3.08) |
| Year Ended 5/31/2018 | $21.18 | 0.12 | 2.06 | 2.18 | (0.04) | (0.04) |
| Year Ended 5/31/2017 | $21.77 | (0.08) | (0.51) | (0.59) | — | — |
| Institutional 2 Class(c) | ||||||
| Year Ended 5/31/2021 | $14.40 | (0.12) | 7.08 | 6.96 | (0.02) | (0.02) |
| Year Ended 5/31/2020 | $17.14 | 0.24 | (2.78) | (2.54) | (0.20) | (0.20) |
| Year Ended 5/31/2019 | $23.59 | 0.32 | (3.69) | (3.37) | (3.08) | (3.08) |
| Year Ended 5/31/2018 | $21.41 | 0.12 | 2.10 | 2.22 | (0.04) | (0.04) |
| Year Ended 5/31/2017 | $21.98 | (0.04) | (0.53) | (0.57) | — | — |
| Institutional 3 Class(c) | ||||||
| Year Ended 5/31/2021 | $14.48 | (0.11) | 7.14 | 7.03 | (0.03) | (0.03) |
| Year Ended 5/31/2020 | $17.20 | 0.20 | (2.72) | (2.52) | (0.20) | (0.20) |
| Year Ended 5/31/2019 | $23.66 | 0.32 | (3.66) | (3.34) | (3.12) | (3.12) |
| Year Ended 5/31/2018 | $21.46 | 0.16 | 2.08 | 2.24 | (0.04) | (0.04) |
| Year Ended 5/31/2017 | $22.01 | 0.00(f) | (0.55) | (0.55) | — | — |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 18 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A(c) | |||||||
| Year Ended 5/31/2021 | $20.69 | 47.95% | 1.14%(d) | 1.14%(d),(e) | (1.03%) | 0% | $2,739 |
| Year Ended 5/31/2020 | $13.99 | (15.35%) | 1.14% | 1.14%(e) | 0.63% | 0% | $1,283 |
| Year Ended 5/31/2019 | $16.67 | (14.76%) | 1.11% | 1.11%(e) | 1.18% | 0% | $1,775 |
| Year Ended 5/31/2018 | $23.03 | 9.92% | 1.08% | 1.08%(e) | 0.22% | 0% | $2,148 |
| Year Ended 5/31/2017 | $20.95 | (2.78%) | 1.13% | 1.13% | (0.63%) | 0% | $2,035 |
| Advisor Class(c) | |||||||
| Year Ended 5/31/2021 | $21.22 | 48.38% | 0.85%(d) | 0.85%(d),(e) | (0.71%) | 0% | $3,537 |
| Year Ended 5/31/2020 | $14.32 | (15.05%) | 0.89% | 0.89%(e) | 0.86% | 0% | $20,335 |
| Year Ended 5/31/2019 | $17.05 | (14.62%) | 0.86% | 0.86%(e) | 1.44% | 0% | $23,533 |
| Year Ended 5/31/2018 | $23.49 | 10.24% | 0.83% | 0.83%(e) | 0.48% | 0% | $21,601 |
| Year Ended 5/31/2017 | $21.32 | (2.74%) | 0.87% | 0.87% | (0.35%) | 0% | $15,213 |
| Class C(c) | |||||||
| Year Ended 5/31/2021 | $19.53 | 47.13% | 1.87%(d) | 1.87%(d),(e) | (1.78%) | 0% | $695 |
| Year Ended 5/31/2020 | $13.30 | (16.08%) | 1.89% | 1.89%(e) | (0.11%) | 0% | $76 |
| Year Ended 5/31/2019 | $15.84 | (15.53%) | 1.86% | 1.86%(e) | 0.41% | 0% | $124 |
| Year Ended 5/31/2018 | $22.03 | 9.33% | 1.82% | 1.82%(e) | (0.57%) | 0% | $224 |
| Year Ended 5/31/2017 | $20.17 | (3.63%) | 1.87% | 1.87% | (1.36%) | 0% | $335 |
| Institutional Class(c) | |||||||
| Year Ended 5/31/2021 | $21.05 | 48.45% | 0.90%(d) | 0.90%(d),(e) | (0.82%) | 0% | $1,380 |
| Year Ended 5/31/2020 | $14.20 | (15.15%) | 0.86% | 0.86%(e) | 1.07% | 0% | $66 |
| Year Ended 5/31/2019 | $16.91 | (14.51%) | 0.84% | 0.84%(e) | 1.35% | 0% | $771 |
| Year Ended 5/31/2018 | $23.32 | 10.32% | 0.83% | 0.83%(e) | 0.52% | 0% | $4,485 |
| Year Ended 5/31/2017 | $21.18 | (2.76%) | 0.86% | 0.86% | (0.31%) | 0% | $1,166 |
| Institutional 2 Class(c) | |||||||
| Year Ended 5/31/2021 | $21.34 | 48.41% | 0.77%(d) | 0.77%(d) | (0.68%) | 0% | $19,305 |
| Year Ended 5/31/2020 | $14.40 | (14.90%) | 0.76% | 0.76% | 1.32% | 0% | $57 |
| Year Ended 5/31/2019 | $17.14 | (14.64%) | 0.78% | 0.78% | 1.52% | 0% | $1,404 |
| Year Ended 5/31/2018 | $23.59 | 10.43% | 0.75% | 0.75% | 0.56% | 0% | $1,331 |
| Year Ended 5/31/2017 | $21.41 | (2.55%) | 0.78% | 0.78% | (0.25%) | 0% | $756 |
| Institutional 3 Class(c) | |||||||
| Year Ended 5/31/2021 | $21.48 | 48.57% | 0.71%(d) | 0.71%(d) | (0.61%) | 0% | $398,386 |
| Year Ended 5/31/2020 | $14.48 | (14.77%) | 0.70% | 0.70% | 1.20% | 0% | $159,442 |
| Year Ended 5/31/2019 | $17.20 | (14.34%) | 0.70% | 0.70% | 1.56% | 0% | $320,251 |
| Year Ended 5/31/2018 | $23.66 | 10.44% | 0.69% | 0.69% | 0.64% | 0% | $581,920 |
| Year Ended 5/31/2017 | $21.46 | (2.55%) | 0.71% | 0.71% | 0.03% | 0% | $220,847 |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
19 |
Consolidated Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Total
distributions to shareholders |
|
| Class R(c) | ||||||
| Year Ended 5/31/2021 | $13.77 | (0.21) | 6.77 | 6.56 | (0.01) | (0.01) |
| Year Ended 5/31/2020 | $16.40 | 0.04 | (2.55) | (2.51) | (0.12) | (0.12) |
| Year Ended 5/31/2019 | $22.70 | 0.20 | (3.54) | (3.34) | (2.96) | (2.96) |
| Year Ended 5/31/2018 | $20.69 | 0.00(f) | 2.01 | 2.01 | — | — |
| Year Ended 5/31/2017 | $21.35 | (0.20) | (0.46) | (0.66) | — | — |
| Notes to Consolidated Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Per share amounts have been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
| (d) | Ratios include interest on collateral expense. For the period indicated below, if interest on collateral expense had been excluded, expenses would have been lower by: |
| Class | 5/31/2021 |
| Class A | 0.02% |
| Advisor Class | less than 0.01% |
| Class C | 0.05% |
| Institutional Class | 0.02% |
| Institutional 2 Class | 0.02% |
| Institutional 3 Class | 0.01% |
| Class R | 0.01% |
| (e) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (f) | Rounds to zero. |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 20 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Consolidated Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class R(c) | |||||||
| Year Ended 5/31/2021 | $20.32 | 47.81% | 1.38%(d) | 1.38%(d),(e) | (1.27%) | 0% | $708 |
| Year Ended 5/31/2020 | $13.77 | (15.59%) | 1.39% | 1.39%(e) | 0.38% | 0% | $416 |
| Year Ended 5/31/2019 | $16.40 | (15.08%) | 1.36% | 1.36%(e) | 0.97% | 0% | $590 |
| Year Ended 5/31/2018 | $22.70 | 9.86% | 1.34% | 1.34%(e) | 0.07% | 0% | $391 |
| Year Ended 5/31/2017 | $20.69 | (3.18%) | 1.37% | 1.37% | (0.89%) | 0% | $77 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
21 |
Notes to Consolidated Financial
Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Commodity Strategy Fund
(the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The Fund’s Board of Trustees
approved reverse stock splits of the issued and outstanding shares of the Fund (the Reverse Stock Split). The Reverse Stock Split was completed after the close of business on September 11, 2020. The impact of the
Reverse Stock Split was to decrease the number of shares outstanding and increase the net asset value per share for each share class of the Fund by the ratio of 4 to 1, resulting in no effect on the net assets of each
share class or the value of each affected shareholder’s investment. Capital stock share activity reflected in the Consolidated Statement of Changes in Net Assets and per share data in the Consolidated Financial
Highlights have been adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.
Basis for consolidation
CCFS Offshore Fund, Ltd. (the
Subsidiary) is a Cayman Islands exempted company and wholly-owned subsidiary of the Fund. The Subsidiary acts as an investment vehicle in order to effect certain investment strategies consistent with the Fund’s
investment objective and policies as stated in its current prospectus and statement of additional information. In accordance with the Memorandum and Articles of Association of the Subsidiary (the Articles), the Fund
owns the sole issued share of the Subsidiary and retains all rights associated with such share, including the right to receive notice of, attend and vote at general meetings of the Subsidiary, rights in a winding-up
or repayment of capital and the right to participate in the profits or assets of the Subsidiary. The consolidated financial statements (financial statements) include the accounts of the consolidated Fund and the
respective Subsidiary. Subsequent references to the Fund within the Notes to Consolidated Financial Statements collectively refer to the Fund and the Subsidiary. All intercompany transactions and balances have been
eliminated in the consolidation process.
At May 31, 2021, the Subsidiary
financial statement information is as follows:
The financial statements present
the portfolio holdings, financial position and results of operations of the Fund and the Subsidiary on a consolidated basis.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Consolidated Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and
liquidation rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may
have different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
| 22 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Consolidated Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Consolidated Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in
the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
23 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
and the seller of the contract; therefore,
additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin that is
held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at
that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the clearing
broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Consolidated Statement of Operations. The Fund
attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Consolidated Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage exposure to the commodities market.
These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize
a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying
asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Consolidated
| 24 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
Statement of Assets and Liabilities as margin
deposits. Securities deposited as initial margin are designated in the Consolidated Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin
payments are equal to the daily change in the contract value and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income
on its margin deposits. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in
the Consolidated Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Consolidated Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Consolidated Statement of Operations, including realized and unrealized gains (losses). The derivative
instrument schedules following the Consolidated Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at May 31, 2021:
| Asset derivatives | ||
|
Risk exposure
category |
Consolidated statement
of assets and liabilities location |
Fair value ($) |
| Commodity-related investment risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 30,948,998* |
| Liability derivatives | ||
|
Risk exposure
category |
Consolidated statement
of assets and liabilities location |
Fair value ($) |
| Commodity-related investment risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 1,430,819* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Consolidated Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Consolidated Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Consolidated Statement of Operations for the year ended May 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2021:
| Derivative instrument |
Average notional
amounts ($) |
| Futures contracts — long | 417,531,401* |
| Futures contracts — short | 199,853** |
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
25 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
| * | Based on the ending quarterly outstanding amounts for the year ended May 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended May 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Consolidated Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily
basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
| 26 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.63% to 0.49% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.63% of the Fund’s average
daily net assets.
Subadvisory agreement
The Fund’s Board of Trustees
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. As of May 31, 2021, Threadneedle is not providing services to the Fund pursuant to the Subadvisory Agreement.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Consolidated Statement of Operations. Under a Deferred
Compensation Plan (the Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been
invested in shares of certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the
Deferred Plan. All amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current
period as well as any gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Consolidated Statement of
Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Consolidated Statement of Operations, a portion of the Chief Compliance Officer’s total compensation
is allocated to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
27 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.18 |
| Advisor Class | 0.16 |
| Class C | 0.17 |
| Institutional Class | 0.18 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.18 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Consolidated Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total
expenses of the Fund by $40.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $3,000 for Class C shares. This amount is based on the most recent information available as of
March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 21,154 |
| Class C | — | 1.00(b) | — |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
| 28 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
|
Fee rate(s) contractual
September 30, 2021 |
|
| Class A | 1.22% |
| Advisor Class | 0.97 |
| Class C | 1.97 |
| Institutional Class | 0.97 |
| Institutional 2 Class | 0.88 |
| Institutional 3 Class | 0.82 |
| Class R | 1.47 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for trustees’ deferred compensation, capital loss carryforward and investments in commodity subsidiaries. To the extent these differences were permanent,
reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Excess of distributions
over net investment income ($) |
Accumulated
net realized (loss) ($) |
Paid in
capital ($) |
| (28,229,856) | — | 28,229,856 |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Consolidated Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 541,559 | — | 541,559 | 5,307,826 | — | 5,307,826 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
29 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
(depreciation) ($) |
| 133,020,519 | — | (67,271) | (148,908,875) |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
(depreciation) ($) |
| 575,715,019 | 4,568,467 | (153,477,342) | (148,908,875) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at May 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended May 31,
2021, capital loss carryforwards utilized, if any, were as follows:
|
No expiration
short-term ($) |
No expiration
long-term ($) |
Total ($) | Utilized ($) |
| (67,271) | — | (67,271) | — |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
For the year ended May 31, 2021,
there were no purchases or proceeds from the sale of securities other than short-term investment transactions and derivative activity, if any. Only the amount of long-term security purchases and sales activity,
excluding derivatives, impacts the portfolio turnover reported in the Consolidated Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests significantly in
Columbia Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is
included as Dividends - affiliated issuers in the Consolidated Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF
prices its shares with a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions
(sometimes referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| 30 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Consolidated Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a
syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its
borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
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. Exposure to commodities and commodities markets may subject the value of the Fund’s investments to greater volatility than other types of
investments. Commodities investments may also subject the Fund to counterparty risk and liquidity risk. The Fund may 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.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Leverage risk
Leverage occurs when the Fund
increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. The use of leverage may produce volatility and may exaggerate changes in the NAV 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. 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
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
31 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
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.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term 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
| 32 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2021
May 31, 2021
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. By investing in a money market fund, the Fund will be
exposed to the investment risks of the money market fund in direct proportion of such investment. 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.
Shareholder concentration risk
At May 31, 2021, affiliated
shareholders of record owned 88.9% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
33 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Commodity Strategy Fund
Opinion on the Financial
Statements
We have audited the accompanying
consolidated statement of assets and liabilities, including the consolidated portfolio of investments, of Columbia Commodity Strategy Fund and its subsidiary (one of the funds constituting Columbia Funds Series Trust
II, referred to hereafter as the "Fund") as of May 31, 2021, the related consolidated statement of operations for the year ended May 31, 2021, the consolidated statement of changes in net assets for each of the two
years in the period ended May 31, 2021, including the related notes, and the consolidated financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "consolidated
financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the financial highlights for each of the five years in the period ended May 31, 2021 in conformity with
accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial
statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian,
transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 34 | Columbia Commodity Strategy Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and 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
Fund’s Trustees as of the printing of this report, 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, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
| 36 | Columbia Commodity Strategy Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
37 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| 38 | Columbia Commodity Strategy Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
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
Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice
President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
39 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 40 | Columbia Commodity Strategy Fund | Annual Report 2021 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Commodity Strategy Fund | Annual Report 2021
|
41 |
Columbia Commodity Strategy Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN129_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Select
Small Cap Value Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Select Small Cap Value Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Select Small Cap Value
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital appreciation.
Portfolio management
Kari Montanus
Lead Portfolio Manager
Managed Fund since 2014
Jonas Patrikson, CFA
Portfolio Manager
Managed Fund since 2018
Morningstar style boxTM
The Morningstar Style Box is based on a fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows
investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.
© 2021 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Returns for Class A shares are shown
with and without the maximum initial sales charge of 5.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Russell 2000 Value Index, an
unmanaged index, measures the performance of those stocks in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Select Small Cap Value Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 99.1 |
| Money Market Funds | 0.9 |
| Rights | 0.0(a) |
| Total | 100.0 |
| (a) | Rounds to zero. |
Percentages indicated are based upon
total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
Percentages indicated are based
upon total equity investments. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that ended
May 31, 2021, the Fund’s Class A shares returned 74.66% excluding sales charges. The Fund underperformed its benchmark, the Russell 2000 Value Index, which returned 79.38% for the same time period.
Market overview
U.S. equities delivered
substantial gains for the 12 months ended May 31, 2021. Quick and unprecedented measures taken by policymakers and the U.S. Federal Reserve in the wake of the sharp COVID-19-driven market plunge in March 2020 spurred
markets to rally from the start of the period through to the end, marked by some spikes in volatility on headlines around increasing COVID-19 cases and stalled talks on further stimulus. Market participants, however,
were cheered by expectations that the rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. Passage of a fiscal stimulus package, together with the proposal of a $2 trillion
infrastructure bill in late March 2021, provided a further boost to the economic outlook.
While the rally during the first
half of the period was largely driven by outsize gains in faster growing market segments such as mega-cap technology stocks, the second half of the year saw a rotation into more economically-sensitive, value-oriented
market segments. Within the benchmark, performance for the period was led by the consumer discretionary, materials and communication services sectors, while utilities, real estate and health care sectors trailed,
despite posting solid double-digit positive returns.
The Fund’s notable
detractors during the period
| • | Stock selection, particularly within the industrials, consumer discretionary and real estate sectors, was the primary driver of the Fund’s underperformance of its benchmark during the period. |
| • | An out-of-benchmark position in trucking company Knight-Swift Transportation Holding detracted. The stock generated positive absolute returns during the period, however it lagged the broader industrial sector due to concerns about a cyclical peak in the trucking industry and potentially lower margins due to higher equipment costs and wages. |
| • | An out-of-benchmark position in CACI International Inc., an information technology company that provides information solutions and information technology (IT) services to branches of the federal government, detracted. COVID-19-related disruptions, including travel restrictions, delays in government deployment orders and delays in task orders led CACI to reduce its 2021 fiscal year revenue guidance. |
| • | Electric utility company Portland General Electric fell with the broader utilities sector during the period. The company did not raise its dividend and issued more conservative guidance in light of the COVID-19 pandemic. |
| • | QTS Realty Trust Inc., a data center real estate investment trust (REIT), saw its share price struggle during the period. Shares in the company underperformed as management issued conservative guidance and some investors were concerned around leasing volume. |
| • | A lack of exposure to video game retailer GameStop also detracted from relative results. Shares in GameStop skyrocketed during the period, as retail investors from internet forums such as Reddit piled into the stock, causing an unprecedented short squeeze that led to huge losses for some notable hedge funds. The Fund did not own GameStop, as we believe that over the long-term stock prices will track fundamentals. |
| • | The Fund’s cash position detracted from results relative to the benchmark during a period of robust market gains. |
The Fund’s notable
contributors during the period
| • | The Fund’s strong performance during the period was driven by sector allocations, particularly an overweight to the strong-performing materials sector and underweights to the weaker-performing utilities and energy sectors. |
| • | Stock selection, particularly within the financials and information technology sectors also benefited results relative to the benchmark. |
| • | National General Holdings Corp., a specialty personal insurance company, saw its shares rise sharply following an announcement that it would be acquired by Allstate. The deal closed in January 2021. |
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
| • | Penn National Gaming, Inc., a casino and racetrack operator, saw its shares rebound following the COVID-19 pandemic-related sell-off. As more of their casinos and racetracks reopened during the second half of the 2020, its shares soared and the company reported earnings above consensus expectations. Optimism by some investors around their exposure to the growing sports betting industry also fueled the stock. |
| • | Extreme Networks, Inc., a company which provides software-driven networking solutions to a variety of industries, climbed substantially as demand continued to improve and the company moved past COVID-19-related headwinds. |
| • | AXOS Financial, Inc., a banking and financial services company, benefited from a steepening yield curve, an improving economy, the prospect for further stimulus and vaccine optimism. |
| • | O-I Glass, Inc., a leading manufacturer of glass packaging products, saw its share price outperform industry peers. The company benefited during the period from the growing demand for sustainable packaging solutions. |
| • | The Fund’s position in semiconductor company Kulicke & Soffa Industries, Inc. was a notable contributor to performance. The company reported an incredibly strong first quarter of 2021, beating consensus expectations and significantly increasing their growth outlook as a result of increasing demand resulting from key technology trends such as 5G and artificial intelligence. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Foreign investments subject the Fund to risks, including political, economic, market, social and
others within a particular country, as well as to currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. Investments in small-cap companies involve risks and volatility greater than investments in larger, more established companies. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. Investments in a limited number of companies subject the Fund to greater risk of loss. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector. See the Fund’s prospectus for
more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks 99.1% | ||
| Issuer | Shares | Value ($) |
| Communication Services 4.2% | ||
| Media 2.3% | ||
| iHeartMedia, Inc., Class A(a) | 580,000 | 13,461,800 |
| Wireless Telecommunication Services 1.9% | ||
| Telephone and Data Systems, Inc. | 452,104 | 11,628,115 |
| Total Communication Services | 25,089,915 | |
| Consumer Discretionary 11.3% | ||
| Auto Components 1.9% | ||
| Motorcar Parts of America, Inc.(a) | 489,363 | 11,436,413 |
| Hotels, Restaurants & Leisure 5.8% | ||
| Extended Stay America, Inc. | 145,538 | 2,868,554 |
| Penn National Gaming, Inc.(a) | 94,535 | 7,749,034 |
| Six Flags Entertainment Corp.(a) | 204,000 | 9,267,720 |
| Texas Roadhouse, Inc. | 148,470 | 14,952,414 |
| Total | 34,837,722 | |
| Household Durables 1.5% | ||
| KB Home | 196,665 | 9,205,889 |
| Textiles, Apparel & Luxury Goods 2.1% | ||
| Kontoor Brands, Inc. | 195,977 | 12,546,447 |
| Total Consumer Discretionary | 68,026,471 | |
| Consumer Staples 2.3% | ||
| Food Products 2.3% | ||
| Nomad Foods Ltd.(a) | 443,422 | 13,599,753 |
| Total Consumer Staples | 13,599,753 | |
| Energy 3.6% | ||
| Energy Equipment & Services 1.5% | ||
| Patterson-UTI Energy, Inc. | 1,066,372 | 8,925,534 |
| Oil, Gas & Consumable Fuels 2.1% | ||
| Devon Energy Corp. | 299,640 | 7,958,438 |
| Renewable Energy Group, Inc.(a) | 80,000 | 4,885,600 |
| Total | 12,844,038 | |
| Total Energy | 21,769,572 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Financials 27.6% | ||
| Banks 12.7% | ||
| First Hawaiian, Inc. | 388,838 | 10,949,678 |
| OceanFirst Financial Corp. | 450,000 | 9,949,500 |
| Pacific Premier Bancorp, Inc. | 467,191 | 21,476,770 |
| Popular, Inc. | 161,254 | 13,159,939 |
| Stock Yards Bancorp, Inc. | 162,322 | 8,723,184 |
| TCF Financial Corp. | 253,705 | 12,050,988 |
| Total | 76,310,059 | |
| Consumer Finance 1.1% | ||
| PROG Holdings, Inc. | 126,098 | 6,647,886 |
| Insurance 6.7% | ||
| CNO Financial Group, Inc. | 400,308 | 10,632,180 |
| Hanover Insurance Group, Inc. (The) | 99,753 | 13,914,546 |
| Lincoln National Corp. | 224,254 | 15,650,687 |
| Total | 40,197,413 | |
| Mortgage Real Estate Investment Trusts (REITS) 0.8% | ||
| Ladder Capital Corp., Class A | 416,221 | 4,869,786 |
| Thrifts & Mortgage Finance 6.3% | ||
| Axos Financial, Inc.(a) | 461,820 | 21,894,886 |
| Radian Group, Inc. | 671,310 | 15,675,089 |
| Total | 37,569,975 | |
| Total Financials | 165,595,119 | |
| Health Care 7.3% | ||
| Biotechnology 0.5% | ||
| Ligand Pharmaceuticals, Inc.(a) | 24,316 | 2,861,993 |
| Health Care Equipment & Supplies 3.5% | ||
| CONMED Corp. | 80,808 | 11,126,454 |
| LivaNova PLC(a) | 120,000 | 10,024,800 |
| Total | 21,151,254 | |
| Health Care Providers & Services 1.0% | ||
| LHC Group, Inc.(a) | 31,145 | 6,130,893 |
| Life Sciences Tools & Services 2.3% | ||
| Syneos Health, Inc.(a) | 157,418 | 13,837,042 |
| Total Health Care | 43,981,182 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Industrials 14.7% | ||
| Aerospace & Defense 1.4% | ||
| Curtiss-Wright Corp. | 67,696 | 8,483,663 |
| Airlines 1.4% | ||
| Spirit Airlines, Inc.(a) | 235,938 | 8,425,346 |
| Commercial Services & Supplies 1.5% | ||
| Waste Connections, Inc. | 76,511 | 9,291,496 |
| Electrical Equipment 0.9% | ||
| Bloom Energy Corp., Class A(a) | 226,774 | 5,481,128 |
| Machinery 6.1% | ||
| ITT, Inc. | 116,032 | 10,895,405 |
| Kennametal, Inc. | 225,138 | 8,444,926 |
| Rexnord Corp. | 347,458 | 17,362,476 |
| Total | 36,702,807 | |
| Professional Services 1.3% | ||
| CACI International, Inc., Class A(a) | 31,046 | 7,915,488 |
| Road & Rail 2.1% | ||
| Knight-Swift Transportation Holdings, Inc. | 257,999 | 12,314,292 |
| Total Industrials | 88,614,220 | |
| Information Technology 11.7% | ||
| Communications Equipment 5.4% | ||
| Extreme Networks, Inc.(a) | 1,652,538 | 18,905,035 |
| Viavi Solutions, Inc.(a) | 775,628 | 13,596,759 |
| Total | 32,501,794 | |
| IT Services 1.8% | ||
| EPAM Systems, Inc.(a) | 22,306 | 10,653,346 |
| Semiconductors & Semiconductor Equipment 4.5% | ||
| Kulicke & Soffa Industries, Inc. | 299,492 | 15,543,635 |
| MACOM Technology Solutions Holdings, Inc.(a) | 195,828 | 11,593,017 |
| Total | 27,136,652 | |
| Total Information Technology | 70,291,792 | |
| Materials 9.6% | ||
| Chemicals 2.3% | ||
| Minerals Technologies, Inc. | 155,521 | 13,530,327 |
| Construction Materials 3.2% | ||
| Summit Materials, Inc., Class A(a) | 551,276 | 19,195,431 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Containers & Packaging 2.5% | ||
| O-I Glass, Inc.(a) | 815,491 | 15,029,499 |
| Metals & Mining 1.6% | ||
| Allegheny Technologies, Inc.(a) | 400,000 | 9,796,000 |
| Total Materials | 57,551,257 | |
| Real Estate 5.2% | ||
| Equity Real Estate Investment Trusts (REITS) 5.2% | ||
| First Industrial Realty Trust, Inc. | 187,555 | 9,497,785 |
| Gaming and Leisure Properties, Inc. | 184,629 | 8,559,400 |
| Physicians Realty Trust | 374,453 | 6,788,833 |
| QTS Realty Trust Inc., Class A | 102,773 | 6,513,753 |
| Total | 31,359,771 | |
| Total Real Estate | 31,359,771 | |
| Utilities 1.6% | ||
| Electric Utilities 1.6% | ||
| Portland General Electric Co. | 205,233 | 9,838,870 |
| Total Utilities | 9,838,870 | |
|
Total Common Stocks
(Cost $364,823,728) |
595,717,922 | |
| Rights —% | ||
| Industrials —% | ||
| Airlines —% | ||
| American Airlines Escrow(a),(b),(c) | 52,560 | 0 |
| Total Industrials | 0 | |
|
Total Rights
(Cost $—) |
0 | |
| Money Market Funds 0.9% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(d),(e) | 5,501,973 | 5,501,423 |
|
Total Money Market Funds
(Cost $5,501,423) |
5,501,423 | |
|
Total Investments in Securities
(Cost: $370,325,151) |
601,219,345 | |
| Other Assets & Liabilities, Net | (184,512) | |
| Net Assets | 601,034,833 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2021, the total value of these securities amounted to $0, which represents less than 0.01% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (e) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 1,467,863 | 146,458,122 | (142,424,099) | (463) | 5,501,423 | (219) | 6,487 | 5,501,973 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 25,089,915 | — | — | 25,089,915 |
| Consumer Discretionary | 68,026,471 | — | — | 68,026,471 |
| Consumer Staples | 13,599,753 | — | — | 13,599,753 |
| Energy | 21,769,572 | — | — | 21,769,572 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Financials | 165,595,119 | — | — | 165,595,119 |
| Health Care | 43,981,182 | — | — | 43,981,182 |
| Industrials | 88,614,220 | — | — | 88,614,220 |
| Information Technology | 70,291,792 | — | — | 70,291,792 |
| Materials | 57,551,257 | — | — | 57,551,257 |
| Real Estate | 31,359,771 | — | — | 31,359,771 |
| Utilities | 9,838,870 | — | — | 9,838,870 |
| Total Common Stocks | 595,717,922 | — | — | 595,717,922 |
| Rights | ||||
| Industrials | — | — | 0* | 0* |
| Total Rights | — | — | 0* | 0* |
| Money Market Funds | 5,501,423 | — | — | 5,501,423 |
| Total Investments in Securities | 601,219,345 | — | 0* | 601,219,345 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
11 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $364,823,728) | $595,717,922 |
| Affiliated issuers (cost $5,501,423) | 5,501,423 |
| Receivable for: | |
| Capital shares sold | 276,794 |
| Dividends | 351,315 |
| Expense reimbursement due from Investment Manager | 627 |
| Prepaid expenses | 13,334 |
| Total assets | 601,861,415 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 623,316 |
| Management services fees | 14,187 |
| Distribution and/or service fees | 3,030 |
| Transfer agent fees | 43,021 |
| Compensation of board members | 110,651 |
| Other expenses | 32,377 |
| Total liabilities | 826,582 |
| Net assets applicable to outstanding capital stock | $601,034,833 |
| Represented by | |
| Paid in capital | 348,949,018 |
| Total distributable earnings (loss) | 252,085,815 |
| Total - representing net assets applicable to outstanding capital stock | $601,034,833 |
| Class A | |
| Net assets | $420,471,334 |
| Shares outstanding | 18,545,321 |
| Net asset value per share | $22.67 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $24.05 |
| Advisor Class | |
| Net assets | $4,169,477 |
| Shares outstanding | 154,757 |
| Net asset value per share | $26.94 |
| Class C | |
| Net assets | $4,970,799 |
| Shares outstanding | 328,093 |
| Net asset value per share | $15.15 |
| Institutional Class | |
| Net assets | $44,917,914 |
| Shares outstanding | 1,696,877 |
| Net asset value per share | $26.47 |
| Institutional 2 Class | |
| Net assets | $4,265,434 |
| Shares outstanding | 158,647 |
| Net asset value per share | $26.89 |
| Institutional 3 Class | |
| Net assets | $118,635,700 |
| Shares outstanding | 4,252,685 |
| Net asset value per share | $27.90 |
| Class R | |
| Net assets | $3,604,175 |
| Shares outstanding | 172,152 |
| Net asset value per share | $20.94 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $6,146,158 |
| Dividends — affiliated issuers | 6,487 |
| Interfund lending | 472 |
| Foreign taxes withheld | (42,066) |
| Total income | 6,111,051 |
| Expenses: | |
| Management services fees | 3,921,737 |
| Distribution and/or service fees | |
| Class A | 844,983 |
| Class C | 54,170 |
| Class R | 5,276 |
| Transfer agent fees | |
| Class A | 467,424 |
| Advisor Class | 4,459 |
| Class C | 7,613 |
| Institutional Class | 41,033 |
| Institutional 2 Class | 2,151 |
| Institutional 3 Class | 4,406 |
| Class R | 3,741 |
| Compensation of board members | 50,914 |
| Custodian fees | 4,407 |
| Printing and postage fees | 45,596 |
| Registration fees | 116,507 |
| Audit fees | 29,500 |
| Legal fees | 12,903 |
| Compensation of chief compliance officer | 92 |
| Other | 35,818 |
| Total expenses | 5,652,730 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (192,873) |
| Expense reduction | (620) |
| Total net expenses | 5,459,237 |
| Net investment income | 651,814 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 49,158,699 |
| Investments — affiliated issuers | (219) |
| Net realized gain | 49,158,480 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 209,085,051 |
| Investments — affiliated issuers | (463) |
| Net change in unrealized appreciation (depreciation) | 209,084,588 |
| Net realized and unrealized gain | 258,243,068 |
| Net increase in net assets resulting from operations | $258,894,882 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
13 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $651,814 | $480,034 |
| Net realized gain | 49,158,480 | 9,566,280 |
| Net change in unrealized appreciation (depreciation) | 209,084,588 | (64,343,989) |
| Net increase (decrease) in net assets resulting from operations | 258,894,882 | (54,297,675) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (21,126,456) | (463,661) |
| Advisor Class | (173,699) | (10,657) |
| Class C | (498,117) | (2,906) |
| Institutional Class | (1,681,489) | (237,096) |
| Institutional 2 Class | (191,552) | (14,038) |
| Institutional 3 Class | (4,398,847) | (60,535) |
| Class R | (167,149) | (1,201) |
| Total distributions to shareholders | (28,237,309) | (790,094) |
| Increase (decrease) in net assets from capital stock activity | 34,373,396 | (103,090,889) |
| Total increase (decrease) in net assets | 265,030,969 | (158,178,658) |
| Net assets at beginning of year | 336,003,864 | 494,182,522 |
| Net assets at end of year | $601,034,833 | $336,003,864 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 471,521 | 8,993,188 | 633,370 | 8,957,453 |
| Distributions reinvested | 1,185,962 | 20,742,474 | 26,964 | 451,922 |
| Redemptions | (3,442,528) | (59,340,926) | (4,271,587) | (66,026,066) |
| Net decrease | (1,785,045) | (29,605,264) | (3,611,253) | (56,616,691) |
| Advisor Class | ||||
| Subscriptions | 48,244 | 1,118,940 | 67,691 | 1,135,987 |
| Distributions reinvested | 8,222 | 170,687 | 535 | 10,525 |
| Redemptions | (79,828) | (1,643,719) | (63,026) | (1,167,214) |
| Net increase (decrease) | (23,362) | (354,092) | 5,200 | (20,702) |
| Class C | ||||
| Subscriptions | 58,533 | 730,034 | 54,863 | 586,800 |
| Distributions reinvested | 42,398 | 497,329 | 236 | 2,751 |
| Redemptions | (335,886) | (4,168,866) | (323,252) | (3,442,853) |
| Net decrease | (234,955) | (2,941,503) | (268,153) | (2,853,302) |
| Institutional Class | ||||
| Subscriptions | 999,784 | 21,277,103 | 1,324,791 | 21,491,806 |
| Distributions reinvested | 81,792 | 1,667,734 | 5,696 | 110,267 |
| Redemptions | (1,239,027) | (23,092,742) | (3,516,532) | (55,853,882) |
| Net decrease | (157,451) | (147,905) | (2,186,045) | (34,251,809) |
| Institutional 2 Class | ||||
| Subscriptions | 36,445 | 746,946 | 47,730 | 878,179 |
| Distributions reinvested | 9,072 | 187,888 | 703 | 13,809 |
| Redemptions | (61,825) | (1,254,947) | (394,486) | (7,312,580) |
| Net decrease | (16,308) | (320,113) | (346,053) | (6,420,592) |
| Institutional 3 Class | ||||
| Subscriptions | 4,756,029 | 94,602,352 | 20,347 | 345,552 |
| Distributions reinvested | 187,040 | 4,017,627 | 2,977 | 60,520 |
| Redemptions | (1,365,798) | (30,558,812) | (39,506) | (722,814) |
| Net increase (decrease) | 3,577,271 | 68,061,167 | (16,182) | (316,742) |
| Class R | ||||
| Subscriptions | 46,424 | 810,245 | 45,995 | 657,330 |
| Distributions reinvested | 6,832 | 110,259 | 35 | 548 |
| Redemptions | (82,069) | (1,239,398) | (233,968) | (3,268,929) |
| Net decrease | (28,813) | (318,894) | (187,938) | (2,611,051) |
| Total net increase (decrease) | 1,331,337 | 34,373,396 | (6,610,424) | (103,090,889) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $13.83 | 0.01 | 9.98 | 9.99 | (0.01) | (1.14) | (1.15) |
| Year Ended 5/31/2020 | $15.83 | 0.01 | (1.99) | (1.98) | (0.02) | (0.00)(d) | (0.02) |
| Year Ended 5/31/2019 | $18.40 | 0.01 | (1.47) | (1.46) | (0.02) | (1.09) | (1.11) |
| Year Ended 5/31/2018 | $18.85 | 0.08(e) | 1.91 | 1.99 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $17.48 | (0.09) | 2.59 | 2.50 | — | (1.13) | (1.13) |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $16.27 | 0.07 | 11.79 | 11.86 | (0.05) | (1.14) | (1.19) |
| Year Ended 5/31/2020 | $18.62 | 0.06 | (2.34) | (2.28) | (0.07) | (0.00)(d) | (0.07) |
| Year Ended 5/31/2019 | $21.38 | 0.05 | (1.69) | (1.64) | (0.03) | (1.09) | (1.12) |
| Year Ended 5/31/2018 | $21.49 | 0.17(e) | 2.16 | 2.33 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $19.74 | (0.06) | 2.94 | 2.88 | — | (1.13) | (1.13) |
| Class C | |||||||
| Year Ended 5/31/2021 | $9.59 | (0.08) | 6.78 | 6.70 | — | (1.14) | (1.14) |
| Year Ended 5/31/2020 | $11.05 | (0.07) | (1.39) | (1.46) | — | (0.00)(d) | (0.00)(d) |
| Year Ended 5/31/2019 | $13.29 | (0.09) | (1.06) | (1.15) | — | (1.09) | (1.09) |
| Year Ended 5/31/2018 | $14.35 | (0.05)(e) | 1.43 | 1.38 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $13.64 | (0.18) | 2.02 | 1.84 | — | (1.13) | (1.13) |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $16.00 | 0.07 | 11.59 | 11.66 | (0.05) | (1.14) | (1.19) |
| Year Ended 5/31/2020 | $18.31 | 0.06 | (2.30) | (2.24) | (0.07) | (0.00)(d) | (0.07) |
| Year Ended 5/31/2019 | $21.05 | 0.05 | (1.67) | (1.62) | (0.03) | (1.09) | (1.12) |
| Year Ended 5/31/2018 | $21.19 | 0.15(e) | 2.15 | 2.30 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $19.48 | (0.06) | 2.90 | 2.84 | — | (1.13) | (1.13) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $16.24 | 0.08 | 11.77 | 11.85 | (0.06) | (1.14) | (1.20) |
| Year Ended 5/31/2020 | $18.58 | 0.07 | (2.33) | (2.26) | (0.08) | (0.00)(d) | (0.08) |
| Year Ended 5/31/2019 | $21.33 | 0.08 | (1.70) | (1.62) | (0.04) | (1.09) | (1.13) |
| Year Ended 5/31/2018 | $21.43 | 0.17(e) | 2.17 | 2.34 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $19.66 | (0.04) | 2.94 | 2.90 | — | (1.13) | (1.13) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $22.67 | 74.66% | 1.32% | 1.28%(c) | 0.08% | 30% | $420,471 |
| Year Ended 5/31/2020 | $13.83 | (12.52%) | 1.31% | 1.31%(c) | 0.07% | 17% | $281,259 |
| Year Ended 5/31/2019 | $15.83 | (7.80%) | 1.30% | 1.30%(c) | 0.08% | 17% | $379,113 |
| Year Ended 5/31/2018 | $18.40 | 10.88% | 1.29% | 1.29%(c) | 0.42% | 20% | $459,420 |
| Year Ended 5/31/2017 | $18.85 | 14.44% | 1.32% | 1.32%(c) | (0.52%) | 24% | $493,661 |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $26.94 | 75.04% | 1.07% | 1.03%(c) | 0.33% | 30% | $4,169 |
| Year Ended 5/31/2020 | $16.27 | (12.32%) | 1.06% | 1.06%(c) | 0.33% | 17% | $2,898 |
| Year Ended 5/31/2019 | $18.62 | (7.50%) | 1.04% | 1.04%(c) | 0.26% | 17% | $3,219 |
| Year Ended 5/31/2018 | $21.38 | 11.14% | 1.04% | 1.04%(c) | 0.78% | 20% | $5,519 |
| Year Ended 5/31/2017 | $21.49 | 14.72% | 1.07% | 1.07%(c) | (0.28%) | 24% | $4,860 |
| Class C | |||||||
| Year Ended 5/31/2021 | $15.15 | 73.36% | 2.07% | 2.03%(c) | (0.66%) | 30% | $4,971 |
| Year Ended 5/31/2020 | $9.59 | (13.18%) | 2.06% | 2.06%(c) | (0.67%) | 17% | $5,402 |
| Year Ended 5/31/2019 | $11.05 | (8.46%) | 2.04% | 2.04%(c) | (0.68%) | 17% | $9,187 |
| Year Ended 5/31/2018 | $13.29 | 9.98% | 2.04% | 2.04%(c) | (0.34%) | 20% | $30,308 |
| Year Ended 5/31/2017 | $14.35 | 13.64% | 2.07% | 2.07%(c) | (1.27%) | 24% | $35,657 |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $26.47 | 75.06% | 1.07% | 1.02%(c) | 0.33% | 30% | $44,918 |
| Year Ended 5/31/2020 | $16.00 | (12.31%) | 1.06% | 1.06%(c) | 0.32% | 17% | $29,670 |
| Year Ended 5/31/2019 | $18.31 | (7.53%) | 1.04% | 1.04%(c) | 0.25% | 17% | $73,967 |
| Year Ended 5/31/2018 | $21.05 | 11.15% | 1.04% | 1.04%(c) | 0.71% | 20% | $127,825 |
| Year Ended 5/31/2017 | $21.19 | 14.71% | 1.07% | 1.07%(c) | (0.30%) | 24% | $103,000 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $26.89 | 75.16% | 0.99% | 0.96% | 0.39% | 30% | $4,265 |
| Year Ended 5/31/2020 | $16.24 | (12.24%) | 0.98% | 0.98% | 0.36% | 17% | $2,841 |
| Year Ended 5/31/2019 | $18.58 | (7.44%) | 0.97% | 0.97% | 0.40% | 17% | $9,678 |
| Year Ended 5/31/2018 | $21.33 | 11.22% | 0.96% | 0.96% | 0.78% | 20% | $11,770 |
| Year Ended 5/31/2017 | $21.43 | 14.88% | 0.96% | 0.96% | (0.19%) | 24% | $17,775 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
17 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $16.81 | 0.10 | 12.20 | 12.30 | (0.07) | (1.14) | (1.21) |
| Year Ended 5/31/2020 | $19.23 | 0.09 | (2.42) | (2.33) | (0.09) | (0.00)(d) | (0.09) |
| Year Ended 5/31/2019 | $22.03 | 0.10 | (1.77) | (1.67) | (0.04) | (1.09) | (1.13) |
| Year Ended 5/31/2018 | $22.05 | 0.18(e) | 2.24 | 2.42 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $20.20 | (0.14) | 3.12 | 2.98 | — | (1.13) | (1.13) |
| Class R | |||||||
| Year Ended 5/31/2021 | $12.83 | 0.02 | 9.23 | 9.25 | — | (1.14) | (1.14) |
| Year Ended 5/31/2020 | $14.71 | (0.03) | (1.85) | (1.88) | — | (0.00)(d) | (0.00)(d) |
| Year Ended 5/31/2019 | $17.20 | (0.03) | (1.37) | (1.40) | — | (1.09) | (1.09) |
| Year Ended 5/31/2018 | $17.81 | 0.04(e) | 1.79 | 1.83 | — | (2.44) | (2.44) |
| Year Ended 5/31/2017 | $16.62 | (0.13) | 2.45 | 2.32 | — | (1.13) | (1.13) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (d) | Rounds to zero. |
| (e) | Net investment income per share includes special dividends. The per share effect of these dividends amounted to: |
| Year Ended | Class A |
Advisor
Class |
Class C |
Institutional
Class |
Institutional 2
Class |
Institutional 3
Class |
Class R |
| 05/31/2018 | $0.22 | $0.28 | $0.16 | $0.26 | $0.26 | $0.26 | $0.22 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $27.90 | 75.30% | 0.94% | 0.89% | 0.44% | 30% | $118,636 |
| Year Ended 5/31/2020 | $16.81 | (12.20%) | 0.93% | 0.93% | 0.46% | 17% | $11,355 |
| Year Ended 5/31/2019 | $19.23 | (7.41%) | 0.92% | 0.92% | 0.47% | 17% | $13,299 |
| Year Ended 5/31/2018 | $22.03 | 11.27% | 0.91% | 0.91% | 0.79% | 20% | $15,117 |
| Year Ended 5/31/2017 | $22.05 | 14.88% | 0.92% | 0.92% | (0.66%) | 24% | $14,576 |
| Class R | |||||||
| Year Ended 5/31/2021 | $20.94 | 74.76% | 1.26% | 1.22%(c) | 0.12% | 30% | $3,604 |
| Year Ended 5/31/2020 | $12.83 | (12.76%) | 1.56% | 1.56%(c) | (0.19%) | 17% | $2,579 |
| Year Ended 5/31/2019 | $14.71 | (7.97%) | 1.54% | 1.54%(c) | (0.21%) | 17% | $5,720 |
| Year Ended 5/31/2018 | $17.20 | 10.60% | 1.54% | 1.54%(c) | 0.23% | 20% | $9,018 |
| Year Ended 5/31/2017 | $17.81 | 14.09% | 1.57% | 1.57%(c) | (0.77%) | 24% | $11,210 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
19 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Select Small Cap Value
Fund (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many
securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the
Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities
markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably
reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
| 20 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
21 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.87% to 0.75% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.87% of the Fund’s average
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 22 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
For the year ended May 31, 2021,
the Fund engaged in purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers. Those
purchase and sale transactions complied with provisions of Rule 17a-7 under the 1940 Act and were $23,460,320 and $6,301,858, respectively. The sale transactions resulted in a net realized gain of $3,783,277.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.14 |
| Advisor Class | 0.14 |
| Class C | 0.14 |
| Institutional Class | 0.14 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.14 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $620.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
23 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
For Class C shares, of the 1.00% fee, up to 0.75%
can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder
servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $2,153,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced. For Class R shares, the Fund currently pays the distribution fees up to the point where the Distributor’s expenses are fully recovered.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 69,450 |
| Class C | — | 1.00(b) | 101 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. In addition to the contractual agreement, the Investment Manager and certain of its affiliates have voluntarily agreed to waive fees and/or reimburse
Fund expenses (excluding certain fees and expenses described above) so that Fund level expenses (expenses directly attributable to the Fund and not to a specific share class) are waived proportionately across all
| 24 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
share classes. This arrangement may be revised or
discontinued at any time. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and re-characterization of distributions for investments. To the extent these differences were
permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Undistributed net
investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| (124,305) | 124,305 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 369,371 | 27,867,938 | 28,237,309 | 790,094 | — | 790,094 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 497,978 | 20,908,945 | — | 230,788,282 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 370,431,063 | 233,927,875 | (3,139,593) | 230,788,282 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at May 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended May 31,
2021, capital loss carryforwards utilized, if any, were as follows:
|
No expiration
short-term ($) |
No expiration
long-term ($) |
Total ($) | Utilized ($) |
| — | — | — | 496,996 |
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
25 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $139,125,727 and $133,713,738, respectively, for the year ended May 31, 2021. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Lender | 7,700,000 | 0.74 | 3 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank,
| 26 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank,
N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services 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, agreements and
counterparties, including credit products 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.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, affiliated
shareholders of record owned 75.1% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company 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.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 28 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Select Small Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Select Small Cap Value Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes,
and the financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021
and the financial highlights for each of the five years in the period ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian and transfer agent. We believe that our audits
provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
29 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Capital
gain dividend |
| 100.00% | 100.00% | $51,215,727 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 30 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 32 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 34 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
35 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 36 | Columbia Select Small Cap Value Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Select Small Cap Value Fund | Annual Report 2021
|
37 |
Columbia Select Small Cap Value Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN218_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Select
Large Cap Value Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Select Large Cap Value Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Select Large Cap Value
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital appreciation.
Portfolio management
Richard Rosen
Lead Portfolio Manager
Managed Fund since 1997
Richard Taft
Portfolio Manager
Managed Fund since 2016
Morningstar style boxTM
The Morningstar Style Box is based on a fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows
investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.
© 2021 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Returns for Class A shares are shown
with and without the maximum initial sales charge of 5.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Russell 1000 Value Index, an
unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values.
The S&P 500 Index, an unmanaged
index, measures the performance of 500 widely held, large-capitalization U.S. stocks and is frequently used as a general measure of market performance.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Select Large Cap Value Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 96.8 |
| Money Market Funds | 2.8 |
| Preferred Stocks | 0.4 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
Percentages indicated are based
upon total equity investments. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that ended
May 31, 2021, the Fund’s Class A shares returned 59.28% excluding sales charges. The Fund outperformed its benchmark, the Russell 1000 Value Index, which returned 44.38% for the same time period, as well as the
broader equity market, as measured by the S&P 500 Index, which gained 40.32%.
Market overview
U.S. equities delivered
substantial gains for the 12 months ended May 31, 2021. Quick and unprecedented measures taken by policymakers and the U.S. Federal Reserve in the wake of the sharp COVID-19-driven market plunge in March 2020 spurred
markets to rally from the start of the period through to the end, marked by some spikes in volatility on headlines around increasing COVID-19 cases and stalled talks on further stimulus. Market participants, however,
were cheered by expectations that the rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. passage of a fiscal stimulus package, together with the proposal of a $2 trillion
infrastructure bill in late March 2021, provided a further boost to the economic outlook.
While the rally during the first
half of the period was largely driven by outsize gains in faster growing market segments such as mega-cap technology stocks, the second half of the year saw a rotation into more economically-sensitive, value-oriented
market segments. Within the benchmark, performance for the period was led by the financials, material and industrials sectors, while utilities, health care and consumer staples trailed despite posting solid
double-digit positive returns.
The Fund’s most notable
contributors during the period
| • | The Fund’s outperformance of the benchmark during the period was driven primarily by strong, broad-based security selection, especially in the information technology, utilities, consumer discretionary, financials, energy and materials sectors. |
| • | An overweight to materials and an underweight to consumer staples also were meaningful sources of outperformance. Please note that sector variances were a byproduct of the portfolio’s longstanding bottom-up security selection process. |
| • | Copper miner Freeport-McMoRan, Inc. was a top performer as investors reacted to rising copper prices and additionally considered long-term demand drivers including renewable energy, EVs, antimicrobial applications and 5G data centers. |
| • | Multi-channel retailer Qurate Retail, Inc. rose as the company benefitted from e-commerce during the pandemic and investors increasingly focused on its strong competitive position and generation of free cash flow. |
| • | Independent power producer AES was a standout performer among the three utility names the Fund owns, thanks in large part to a second investment-grade rating that helped improve expectations for business stability. |
| • | Specialty glass maker Corning rose after reporting strong results across key business segments and prudently managing post-COVID-19 expectations for its medical glass products. |
| • | Semiconductor equipment maker Applied Materials rose as investors focused on better-than-expected earnings growth and a strong outlook across all market segments. |
The Fund’s most notable
detractors during the period
| • | Security selection within the health care and communication services sectors detracted most from the Fund’s relative performance. |
| • | An underweight to the industrials sector also was a notable detractor. |
| • | Medical supplies maker Baxter International was the top detractor despite experiencing good business as investors focused on expectations for post-COVID-19 hospital destocking to slow top line growth for a few quarters. |
| • | Notable individual detractors also included chicken, beef and pork producer Tyson Foods, which was hurt by COVID-19-related concerns dampening exports. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. Investments in a limited number of companies subject the Fund to greater risk of loss. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector. See the Fund’s prospectus for
more information on these and other risks.
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Columbia Select Large Cap Value Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
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Columbia Select Large Cap Value Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks 96.2% | ||
| Issuer | Shares | Value ($) |
| Communication Services 4.3% | ||
| Diversified Telecommunication Services 4.3% | ||
| Verizon Communications, Inc. | 1,310,760 | 74,044,832 |
| Total Communication Services | 74,044,832 | |
| Consumer Discretionary 6.2% | ||
| Internet & Direct Marketing Retail 2.4% | ||
| Qurate Retail, Inc. | 3,045,016 | 41,503,568 |
| Specialty Retail 3.8% | ||
| Lowe’s Companies, Inc. | 338,728 | 65,994,376 |
| Total Consumer Discretionary | 107,497,944 | |
| Consumer Staples 3.5% | ||
| Tobacco 3.5% | ||
| Philip Morris International, Inc. | 629,744 | 60,726,214 |
| Total Consumer Staples | 60,726,214 | |
| Energy 7.8% | ||
| Energy Equipment & Services 2.1% | ||
| Technip Energies NV, ADR(a) | 489,126 | 7,354,009 |
| TechnipFMC PLC(a) | 3,287,581 | 28,240,321 |
| Total | 35,594,330 | |
| Oil, Gas & Consumable Fuels 5.7% | ||
| Chevron Corp. | 184,328 | 19,131,403 |
| Marathon Petroleum Corp. | 560,753 | 34,654,536 |
| Williams Companies, Inc. (The) | 1,724,367 | 45,419,827 |
| Total | 99,205,766 | |
| Total Energy | 134,800,096 | |
| Financials 20.9% | ||
| Banks 12.7% | ||
| Bank of America Corp. | 1,358,493 | 57,586,518 |
| Citigroup, Inc. | 685,052 | 53,920,443 |
| JPMorgan Chase & Co. | 323,720 | 53,167,773 |
| Wells Fargo & Co. | 1,153,028 | 53,869,468 |
| Total | 218,544,202 | |
| Capital Markets 2.7% | ||
| Morgan Stanley | 520,496 | 47,339,111 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Insurance 5.5% | ||
| American International Group, Inc. | 910,047 | 48,086,883 |
| MetLife, Inc. | 713,146 | 46,611,223 |
| Total | 94,698,106 | |
| Total Financials | 360,581,419 | |
| Health Care 14.3% | ||
| Health Care Equipment & Supplies 2.5% | ||
| Baxter International, Inc. | 534,866 | 43,923,196 |
| Health Care Providers & Services 9.3% | ||
| Centene Corp.(a) | 811,683 | 59,739,869 |
| Cigna Corp. | 201,032 | 52,037,133 |
| Humana, Inc. | 111,545 | 48,823,246 |
| Total | 160,600,248 | |
| Pharmaceuticals 2.5% | ||
| Bristol-Myers Squibb Co. | 650,619 | 42,758,681 |
| Total Health Care | 247,282,125 | |
| Industrials 9.0% | ||
| Aerospace & Defense 2.9% | ||
| Raytheon Technologies Corp. | 555,905 | 49,314,333 |
| Industrial Conglomerates 1.7% | ||
| Honeywell International, Inc. | 130,644 | 30,167,006 |
| Machinery 1.2% | ||
| Caterpillar, Inc. | 83,279 | 20,076,901 |
| Road & Rail 3.2% | ||
| CSX Corp. | 320,960 | 32,134,515 |
| Union Pacific Corp. | 102,325 | 22,995,497 |
| Total | 55,130,012 | |
| Total Industrials | 154,688,252 | |
| Information Technology 13.4% | ||
| Communications Equipment 3.6% | ||
| Cisco Systems, Inc. | 1,194,049 | 63,165,192 |
| Electronic Equipment, Instruments & Components 2.2% | ||
| Corning, Inc. | 856,735 | 37,379,348 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Semiconductors & Semiconductor Equipment 5.2% | ||
| Applied Materials, Inc. | 302,465 | 41,779,491 |
| QUALCOMM, Inc. | 358,522 | 48,235,550 |
| Total | 90,015,041 | |
| Software 2.4% | ||
| Teradata Corp.(a) | 867,045 | 41,505,444 |
| Total Information Technology | 232,065,025 | |
| Materials 10.0% | ||
| Chemicals 3.2% | ||
| FMC Corp. | 479,488 | 55,951,455 |
| Metals & Mining 6.8% | ||
| Barrick Gold Corp. | 2,738,062 | 65,932,533 |
| Freeport-McMoRan, Inc. | 1,203,442 | 51,411,042 |
| Total | 117,343,575 | |
| Total Materials | 173,295,030 | |
| Utilities 6.8% | ||
| Electric Utilities 4.9% | ||
| FirstEnergy Corp. | 1,658,188 | 62,861,907 |
| NextEra Energy, Inc. | 299,804 | 21,951,649 |
| Total | 84,813,556 | |
| Independent Power and Renewable Electricity Producers 1.9% | ||
| AES Corp. (The) | 1,301,482 | 33,070,658 |
| Total Utilities | 117,884,214 | |
|
Total Common Stocks
(Cost $972,977,589) |
1,662,865,151 | |
| Preferred Stocks 0.4% | |||
| Issuer | Shares | Value ($) | |
| Consumer Discretionary 0.4% | |||
| Internet & Direct Marketing Retail 0.4% | |||
| Qurate Retail, Inc. | 8.000% | 59,180 | 6,248,225 |
| Total Consumer Discretionary | 6,248,225 | ||
|
Total Preferred Stocks
(Cost $11,699,817) |
6,248,225 | ||
| Money Market Funds 2.8% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(b),(c) | 48,631,172 | 48,626,308 |
|
Total Money Market Funds
(Cost $48,626,308) |
48,626,308 | |
|
Total Investments in Securities
(Cost: $1,033,303,714) |
1,717,739,684 | |
| Other Assets & Liabilities, Net | 10,718,030 | |
| Net Assets | 1,728,457,714 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 34,560,903 | 457,943,916 | (443,867,373) | (11,138) | 48,626,308 | 7,863 | 32,906 | 48,631,172 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
The Fund’s assets assigned to the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The Fund’s assets assigned to the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
11 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $984,677,406) | $1,669,113,376 |
| Affiliated issuers (cost $48,626,308) | 48,626,308 |
| Receivable for: | |
| Capital shares sold | 9,003,912 |
| Dividends | 3,173,431 |
| Foreign tax reclaims | 76,666 |
| Expense reimbursement due from Investment Manager | 13,924 |
| Prepaid expenses | 19,664 |
| Total assets | 1,730,027,281 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 1,242,030 |
| Management services fees | 32,456 |
| Distribution and/or service fees | 3,314 |
| Transfer agent fees | 165,748 |
| Compensation of board members | 86,294 |
| Other expenses | 39,725 |
| Total liabilities | 1,569,567 |
| Net assets applicable to outstanding capital stock | $1,728,457,714 |
| Represented by | |
| Paid in capital | 1,011,447,950 |
| Total distributable earnings (loss) | 717,009,764 |
| Total - representing net assets applicable to outstanding capital stock | $1,728,457,714 |
| Class A | |
| Net assets | $275,300,579 |
| Shares outstanding | 8,644,999 |
| Net asset value per share | $31.85 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $33.79 |
| Advisor Class | |
| Net assets | $202,134,048 |
| Shares outstanding | 5,975,661 |
| Net asset value per share | $33.83 |
| Class C | |
| Net assets | $41,235,703 |
| Shares outstanding | 1,437,594 |
| Net asset value per share | $28.68 |
| Institutional Class | |
| Net assets | $917,729,428 |
| Shares outstanding | 27,550,713 |
| Net asset value per share | $33.31 |
| Institutional 2 Class | |
| Net assets | $134,430,186 |
| Shares outstanding | 4,034,464 |
| Net asset value per share | $33.32 |
| Institutional 3 Class | |
| Net assets | $132,235,186 |
| Shares outstanding | 3,896,377 |
| Net asset value per share | $33.94 |
| Class R | |
| Net assets | $25,392,584 |
| Shares outstanding | 812,907 |
| Net asset value per share | $31.24 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $35,266,664 |
| Dividends — affiliated issuers | 32,906 |
| Interfund lending | 317 |
| Non-cash dividends - unaffiliated issuers | 7,557,009 |
| Foreign taxes withheld | (186,484) |
| Total income | 42,670,412 |
| Expenses: | |
| Management services fees | 8,563,579 |
| Distribution and/or service fees | |
| Class A | 533,102 |
| Class C | 330,834 |
| Class R | 77,311 |
| Transfer agent fees | |
| Class A | 256,585 |
| Advisor Class | 190,252 |
| Class C | 39,842 |
| Institutional Class | 701,409 |
| Institutional 2 Class | 40,014 |
| Institutional 3 Class | 7,840 |
| Class R | 20,657 |
| Compensation of board members | 51,708 |
| Custodian fees | 7,660 |
| Printing and postage fees | 57,350 |
| Registration fees | 163,548 |
| Audit fees | 29,500 |
| Legal fees | 19,569 |
| Compensation of chief compliance officer | 229 |
| Other | 54,769 |
| Total expenses | 11,145,758 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (3,910,918) |
| Expense reduction | (500) |
| Total net expenses | 7,234,340 |
| Net investment income | 35,436,072 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 84,610,378 |
| Investments — affiliated issuers | 7,863 |
| Net realized gain | 84,618,241 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 447,165,290 |
| Investments — affiliated issuers | (11,138) |
| Net change in unrealized appreciation (depreciation) | 447,154,152 |
| Net realized and unrealized gain | 531,772,393 |
| Net increase in net assets resulting from operations | $567,208,465 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
13 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $35,436,072 | $19,705,294 |
| Net realized gain | 84,618,241 | 20,315,750 |
| Net change in unrealized appreciation (depreciation) | 447,154,152 | (41,491,614) |
| Net increase (decrease) in net assets resulting from operations | 567,208,465 | (1,470,570) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (14,930,047) | (16,550,413) |
| Advisor Class | (10,679,245) | (10,360,247) |
| Class C | (2,288,161) | (3,071,749) |
| Institutional Class | (39,856,183) | (30,851,463) |
| Institutional 2 Class | (3,975,285) | (2,666,230) |
| Institutional 3 Class | (11,460,762) | (11,443,546) |
| Class R | (1,196,737) | (1,479,732) |
| Total distributions to shareholders | (84,386,420) | (76,423,380) |
| Increase (decrease) in net assets from capital stock activity | 317,486,629 | (52,623,188) |
| Total increase (decrease) in net assets | 800,308,674 | (130,517,138) |
| Net assets at beginning of year | 928,149,040 | 1,058,666,178 |
| Net assets at end of year | $1,728,457,714 | $928,149,040 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 2,106,223 | 56,731,499 | 1,959,836 | 45,581,965 |
| Distributions reinvested | 414,449 | 10,609,889 | 497,925 | 12,463,063 |
| Redemptions | (2,607,597) | (65,400,167) | (3,111,050) | (70,289,976) |
| Net increase (decrease) | (86,925) | 1,941,221 | (653,289) | (12,244,948) |
| Advisor Class | ||||
| Subscriptions | 1,741,158 | 49,897,728 | 2,153,433 | 50,793,146 |
| Distributions reinvested | 372,084 | 10,105,806 | 369,547 | 9,770,827 |
| Redemptions | (2,029,831) | (56,513,441) | (2,704,779) | (67,470,506) |
| Net increase (decrease) | 83,411 | 3,490,093 | (181,799) | (6,906,533) |
| Class C | ||||
| Subscriptions | 457,203 | 11,536,180 | 222,492 | 4,968,379 |
| Distributions reinvested | 82,145 | 1,900,024 | 95,353 | 2,174,056 |
| Redemptions | (781,516) | (17,999,583) | (934,752) | (19,768,784) |
| Net decrease | (242,168) | (4,563,379) | (616,907) | (12,626,349) |
| Institutional Class | ||||
| Subscriptions | 12,571,255 | 367,027,692 | 9,258,812 | 212,203,673 |
| Distributions reinvested | 1,288,126 | 34,444,485 | 997,522 | 25,995,417 |
| Redemptions | (6,007,565) | (165,027,420) | (8,250,952) | (193,323,932) |
| Net increase | 7,851,816 | 236,444,757 | 2,005,382 | 44,875,158 |
| Institutional 2 Class | ||||
| Subscriptions | 3,798,665 | 109,241,839 | 681,033 | 16,632,470 |
| Distributions reinvested | 148,440 | 3,969,280 | 102,094 | 2,660,579 |
| Redemptions | (1,194,629) | (35,086,460) | (1,141,001) | (29,822,905) |
| Net increase (decrease) | 2,752,476 | 78,124,659 | (357,874) | (10,529,856) |
| Institutional 3 Class | ||||
| Subscriptions | 3,274,292 | 87,432,085 | 1,017,576 | 25,599,923 |
| Distributions reinvested | 373,887 | 10,184,688 | 430,471 | 11,407,467 |
| Redemptions | (3,603,258) | (98,493,776) | (3,695,529) | (84,315,468) |
| Net increase (decrease) | 44,921 | (877,003) | (2,247,482) | (47,308,078) |
| Class R | ||||
| Subscriptions | 333,567 | 9,325,511 | 159,374 | 3,685,720 |
| Distributions reinvested | 41,920 | 1,053,451 | 40,263 | 991,267 |
| Redemptions | (298,930) | (7,452,681) | (543,225) | (12,559,569) |
| Net increase (decrease) | 76,557 | 2,926,281 | (343,588) | (7,882,582) |
| Total net increase (decrease) | 10,480,088 | 317,486,629 | (2,395,557) | (52,623,188) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $21.50 | 0.71(c) | 11.57 | 12.28 | (0.60) | (1.33) | (1.93) |
| Year Ended 5/31/2020 | $23.28 | 0.41 | (0.38) | 0.03 | (0.46) | (1.35) | (1.81) |
| Year Ended 5/31/2019 | $25.66 | 0.41 | (1.73) | (1.32) | (0.36) | (0.70) | (1.06) |
| Year Ended 5/31/2018 | $23.93 | 0.27 | 2.71 | 2.98 | (0.24) | (1.01) | (1.25) |
| Year Ended 5/31/2017 | $21.43 | 0.24 | 4.17 | 4.41 | (0.26) | (1.65) | (1.91) |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $22.74 | 0.82(c) | 12.25 | 13.07 | (0.65) | (1.33) | (1.98) |
| Year Ended 5/31/2020 | $24.52 | 0.49 | (0.40) | 0.09 | (0.52) | (1.35) | (1.87) |
| Year Ended 5/31/2019 | $26.98 | 0.50 | (1.83) | (1.33) | (0.43) | (0.70) | (1.13) |
| Year Ended 5/31/2018 | $25.10 | 0.36 | 2.83 | 3.19 | (0.30) | (1.01) | (1.31) |
| Year Ended 5/31/2017 | $22.38 | 0.32 | 4.36 | 4.68 | (0.31) | (1.65) | (1.96) |
| Class C | |||||||
| Year Ended 5/31/2021 | $19.52 | 0.46(c) | 10.45 | 10.91 | (0.42) | (1.33) | (1.75) |
| Year Ended 5/31/2020 | $21.26 | 0.21 | (0.34) | (0.13) | (0.26) | (1.35) | (1.61) |
| Year Ended 5/31/2019 | $23.49 | 0.20 | (1.57) | (1.37) | (0.16) | (0.70) | (0.86) |
| Year Ended 5/31/2018 | $22.00 | 0.07 | 2.48 | 2.55 | (0.05) | (1.01) | (1.06) |
| Year Ended 5/31/2017 | $19.83 | 0.06 | 3.86 | 3.92 | (0.10) | (1.65) | (1.75) |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $22.41 | 0.84(c) | 12.04 | 12.88 | (0.65) | (1.33) | (1.98) |
| Year Ended 5/31/2020 | $24.19 | 0.49 | (0.40) | 0.09 | (0.52) | (1.35) | (1.87) |
| Year Ended 5/31/2019 | $26.63 | 0.49 | (1.80) | (1.31) | (0.43) | (0.70) | (1.13) |
| Year Ended 5/31/2018 | $24.79 | 0.36 | 2.79 | 3.15 | (0.30) | (1.01) | (1.31) |
| Year Ended 5/31/2017 | $22.13 | 0.32 | 4.30 | 4.62 | (0.31) | (1.65) | (1.96) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $22.42 | 0.91(c) | 11.99 | 12.90 | (0.67) | (1.33) | (2.00) |
| Year Ended 5/31/2020 | $24.20 | 0.50 | (0.40) | 0.10 | (0.53) | (1.35) | (1.88) |
| Year Ended 5/31/2019 | $26.64 | 0.50 | (1.79) | (1.29) | (0.45) | (0.70) | (1.15) |
| Year Ended 5/31/2018 | $24.81 | 0.39 | 2.77 | 3.16 | (0.32) | (1.01) | (1.33) |
| Year Ended 5/31/2017 | $22.14 | 0.33 | 4.32 | 4.65 | (0.33) | (1.65) | (1.98) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $31.85 | 59.28% | 1.12% | 0.79%(d) | 2.74% | 29% | $275,301 |
| Year Ended 5/31/2020 | $21.50 | (0.98%) | 1.14%(e) | 0.80%(d),(e) | 1.70% | 18% | $187,746 |
| Year Ended 5/31/2019 | $23.28 | (5.09%) | 1.13% | 0.80%(d) | 1.64% | 21% | $218,458 |
| Year Ended 5/31/2018 | $25.66 | 12.39% | 1.15% | 1.03%(d) | 1.07% | 9% | $225,532 |
| Year Ended 5/31/2017 | $23.93 | 20.87% | 1.19% | 1.16%(d) | 1.05% | 8% | $204,824 |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $33.83 | 59.64% | 0.87% | 0.54%(d) | 2.99% | 29% | $202,134 |
| Year Ended 5/31/2020 | $22.74 | (0.70%) | 0.89%(e) | 0.55%(d),(e) | 1.96% | 18% | $133,966 |
| Year Ended 5/31/2019 | $24.52 | (4.87%) | 0.88% | 0.55%(d) | 1.89% | 21% | $148,935 |
| Year Ended 5/31/2018 | $26.98 | 12.67% | 0.90% | 0.77%(d) | 1.35% | 9% | $154,976 |
| Year Ended 5/31/2017 | $25.10 | 21.23% | 0.94% | 0.91%(d) | 1.33% | 8% | $40,794 |
| Class C | |||||||
| Year Ended 5/31/2021 | $28.68 | 58.03% | 1.87% | 1.54%(d) | 1.97% | 29% | $41,236 |
| Year Ended 5/31/2020 | $19.52 | (1.68%) | 1.89%(e) | 1.55%(d),(e) | 0.94% | 18% | $32,781 |
| Year Ended 5/31/2019 | $21.26 | (5.80%) | 1.88% | 1.55%(d) | 0.87% | 21% | $48,824 |
| Year Ended 5/31/2018 | $23.49 | 11.53% | 1.90% | 1.78%(d) | 0.32% | 9% | $70,325 |
| Year Ended 5/31/2017 | $22.00 | 20.02% | 1.94% | 1.91%(d) | 0.30% | 8% | $65,295 |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $33.31 | 59.67% | 0.87% | 0.54%(d) | 3.06% | 29% | $917,729 |
| Year Ended 5/31/2020 | $22.41 | (0.71%) | 0.89%(e) | 0.55%(d),(e) | 1.97% | 18% | $441,521 |
| Year Ended 5/31/2019 | $24.19 | (4.86%) | 0.88% | 0.55%(d) | 1.89% | 21% | $428,080 |
| Year Ended 5/31/2018 | $26.63 | 12.66% | 0.90% | 0.77%(d) | 1.35% | 9% | $397,901 |
| Year Ended 5/31/2017 | $24.79 | 21.19% | 0.94% | 0.91%(d) | 1.33% | 8% | $294,914 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $33.32 | 59.74% | 0.81% | 0.48% | 3.23% | 29% | $134,430 |
| Year Ended 5/31/2020 | $22.42 | (0.66%) | 0.82%(e) | 0.50%(e) | 1.98% | 18% | $28,742 |
| Year Ended 5/31/2019 | $24.20 | (4.80%) | 0.82% | 0.51% | 1.92% | 21% | $39,688 |
| Year Ended 5/31/2018 | $26.64 | 12.69% | 0.84% | 0.69% | 1.48% | 9% | $54,500 |
| Year Ended 5/31/2017 | $24.81 | 21.33% | 0.85% | 0.83% | 1.39% | 8% | $23,215 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
17 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $22.81 | 0.88(c) | 12.26 | 13.14 | (0.68) | (1.33) | (2.01) |
| Year Ended 5/31/2020 | $24.59 | 0.52 | (0.40) | 0.12 | (0.55) | (1.35) | (1.90) |
| Year Ended 5/31/2019 | $27.05 | 0.53 | (1.83) | (1.30) | (0.46) | (0.70) | (1.16) |
| Year Ended 5/31/2018 | $25.16 | 0.39 | 2.84 | 3.23 | (0.33) | (1.01) | (1.34) |
| Year Ended 5/31/2017 | $22.43 | 0.50 | 4.22 | 4.72 | (0.34) | (1.65) | (1.99) |
| Class R | |||||||
| Year Ended 5/31/2021 | $21.12 | 0.67(c) | 11.33 | 12.00 | (0.55) | (1.33) | (1.88) |
| Year Ended 5/31/2020 | $22.90 | 0.34 | (0.38) | (0.04) | (0.39) | (1.35) | (1.74) |
| Year Ended 5/31/2019 | $25.25 | 0.34 | (1.69) | (1.35) | (0.30) | (0.70) | (1.00) |
| Year Ended 5/31/2018 | $23.57 | 0.20 | 2.67 | 2.87 | (0.18) | (1.01) | (1.19) |
| Year Ended 5/31/2017 | $21.13 | 0.18 | 4.12 | 4.30 | (0.21) | (1.65) | (1.86) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Net investment income per share includes special dividends. The per share effect of these dividends amounted to: |
| Year Ended | Class A |
Advisor
Class |
Class C |
Institutional
Class |
Institutional 2
Class |
Institutional 3
Class |
Class R |
| 05/31/2021 | $0.19 | $0.21 | $0.17 | $0.19 | $0.17 | $0.25 | $0.19 |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $33.94 | 59.79% | 0.76% | 0.43% | 3.22% | 29% | $132,235 |
| Year Ended 5/31/2020 | $22.81 | (0.60%) | 0.77%(e) | 0.45%(e) | 2.06% | 18% | $87,839 |
| Year Ended 5/31/2019 | $24.59 | (4.76%) | 0.77% | 0.46% | 1.98% | 21% | $149,956 |
| Year Ended 5/31/2018 | $27.05 | 12.80% | 0.79% | 0.66% | 1.44% | 9% | $145,244 |
| Year Ended 5/31/2017 | $25.16 | 21.36% | 0.80% | 0.77% | 2.01% | 8% | $121,439 |
| Class R | |||||||
| Year Ended 5/31/2021 | $31.24 | 58.97% | 1.32% | 0.99%(d) | 2.62% | 29% | $25,393 |
| Year Ended 5/31/2020 | $21.12 | (1.24%) | 1.39%(e) | 1.05%(d),(e) | 1.43% | 18% | $15,554 |
| Year Ended 5/31/2019 | $22.90 | (5.32%) | 1.38% | 1.05%(d) | 1.39% | 21% | $24,725 |
| Year Ended 5/31/2018 | $25.25 | 12.10% | 1.40% | 1.28%(d) | 0.82% | 9% | $24,222 |
| Year Ended 5/31/2017 | $23.57 | 20.61% | 1.44% | 1.41%(d) | 0.80% | 8% | $23,132 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
19 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Select Large Cap Value
Fund (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many
securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the
Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities
markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably
reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
| 20 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
Non-cash dividends received in the
form of stock are recorded as dividend income at fair value.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
21 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.72% of the Fund’s average
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 22 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
For the year ended May 31, 2021,
the Fund engaged in purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers. Those
purchase and sale transactions complied with provisions of Rule 17a-7 under the 1940 Act and were $13,924,324 and $55,937,852, respectively. The sale transactions resulted in a net realized gain of $1,513,083.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.12 |
| Advisor Class | 0.12 |
| Class C | 0.12 |
| Institutional Class | 0.12 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.12 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $500.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
23 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
For Class C shares, of the 1.00% fee, up to 0.75%
can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder
servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $2,732,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced. For Class R shares, the Fund currently pays the distribution fees up to the point where the Distributor’s expenses are fully recovered.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 206,095 |
| Class C | — | 1.00(b) | — |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. In addition to the contractual agreement, the Investment Manager and certain of its affiliates have voluntarily agreed to waive fees and/or reimburse
Fund expenses (excluding certain fees and expenses described above) so that Fund level expenses (expenses directly attributable to the Fund and not to a specific share class) are waived proportionately across all
| 24 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
share classes. This arrangement may be revised or
discontinued at any time. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and corporate actions. To the extent these differences were permanent, reclassifications were
made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The Fund did not have any permanent
differences; therefore, no reclassifications were made.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 27,508,500 | 56,877,920 | 84,386,420 | 20,672,706 | 55,750,674 | 76,423,380 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 19,574,699 | 35,035,791 | — | 662,483,752 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 1,055,255,932 | 683,092,643 | (20,608,891) | 662,483,752 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $562,771,584 and $330,379,286, respectively, for the year ended May 31, 2021. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
25 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
share of the expenses of the Affiliated MMF. The
Affiliated MMF prices its shares with a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily
suspend redemptions (sometimes referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Lender | 1,640,000 | 0.67 | 10 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services 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, agreements and
counterparties, including credit products that, under certain circumstances, may lead to losses (e.g., subprime loans). Companies in the financial services sector are subject to extensive
| 26 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
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.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, four unaffiliated
shareholders of record owned 56.0% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Subscription and redemption
activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid
positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for
non-redeeming Fund shareholders.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 28 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Select Large Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Select Large Cap Value Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes,
and the financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021
and the financial highlights for each of the five years in the period ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian and transfer agent. We believe that our audits
provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
29 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Capital
gain dividend |
| 100.00% | 89.65% | $89,020,881 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 30 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 32 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 34 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
35 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 36 | Columbia Select Large Cap Value Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Select Large Cap Value Fund | Annual Report 2021
|
37 |
Columbia Select Large Cap Value Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN216_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Quality
Income Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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49 |
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57 |
If you elect to receive the
shareholder report for Columbia Quality Income Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder reports
from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Quality Income Fund | Annual
Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with current income as its primary objective and, as its secondary objective, preservation of capital.
Portfolio management
Jason Callan
Co-Portfolio Manager
Managed Fund since 2009
Tom Heuer, CFA
Co-Portfolio Manager
Managed Fund since 2010
Ryan Osborn, CFA
Co-Portfolio Manager
Managed Fund since 2019
Returns for Class A shares are shown
with and without the maximum initial sales charge of 3.00%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. Since the Fund launched more than one share class at its inception, Class A shares were used. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Bloomberg Barclays U.S.
Mortgage-Backed Securities Index is composed of all mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
The “Bloomberg Barclays”
indices will be re-branded as the “Bloomberg” indices effective August 24, 2021.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Quality Income Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Quality Income Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions
or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Asset-Backed Securities — Non-Agency | 9.9 |
| Commercial Mortgage-Backed Securities - Agency | 2.6 |
| Commercial Mortgage-Backed Securities - Non-Agency | 8.6 |
| Money Market Funds | 2.7 |
| Options Purchased Puts | 1.5 |
| Residential Mortgage-Backed Securities - Agency | 55.9 |
| Residential Mortgage-Backed Securities - Non-Agency | 18.8 |
| Total | 100.0 |
Percentages indicated are based
upon total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| Quality breakdown (%) (at May 31, 2021) | |
| AAA rating | 61.9 |
| AA rating | 5.6 |
| A rating | 3.3 |
| BBB rating | 12.3 |
| BB rating | 3.8 |
| B rating | 2.6 |
| CCC rating | 0.1 |
| Not rated | 10.4 |
| Total | 100.0 |
Percentages indicated are based
upon total fixed income investments.
Bond ratings apply to the underlying
holdings of the Fund and not the Fund itself and are divided into categories ranging from highest to lowest credit quality, determined by using the middle rating of Moody’s, S&P and Fitch, after dropping the
highest and lowest available ratings. When ratings are available from only two rating agencies, the lower rating is used. When a rating is available from only one rating agency, that rating is used. If a security is
not rated but has a rating by Kroll and/or DBRS, the same methodology is applied to those bonds that would otherwise be not rated. When a bond is not rated by any rating agency, it is designated as “Not
rated.” Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. The ratings assigned by credit rating agencies are but one
of the considerations that the Investment Manager and/or Fund’s subadviser incorporates into its credit analysis process, along with such other issuer-specific factors as cash flows, capital structure and
leverage ratios, ability to de-leverage (repay) through free cash flow, quality of management, market positioning and access to capital, as well as such security-specific factors as the terms of the security (e.g.,
interest rate and time to maturity) and the amount and type of any collateral.
| 4 | Columbia Quality Income Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended May 31, 2021, the Fund’s Class A shares returned 7.36% excluding sales charges. The Fund’s benchmark, the Bloomberg Barclays U.S. Mortgage-Backed Securities Index, returned -0.47% for the same
period.
Market overview
The period saw risk sentiment
continue to be supported by the extraordinary monetary and fiscal policy support that was initiated in March of 2020 as the COVID-19 pandemic led to widespread economic shutdowns. The Federal Reserve (Fed) maintained
short-term interest rates at zero while engaging in broad-based bond purchases even as $1.9 trillion in stimulus under the CARES Act rolled out.
Credit sentiment wavered in
September as an additional economic relief package stalled in the Senate and there was speculation around the potential for a disputed outcome to the November presidential election. November’s election results
helped reduce uncertainty, while the emergency use authorization of a pair of COVID-19 vaccines in December raised the prospect of a return to economic normalcy in the months that followed. Finalization of a $900
billion relief package as 2020 concluded further boosted sentiment.
Treasury yields began to move off
historic lows in October of 2020 and continued to drift higher through the first quarter of 2021. The 10-year Treasury yield ended May of 2021 at 1.58%, 93 basis points higher than its starting point of 0.65% 12
months earlier.
The Fund’s most notable
contributors
| • | The Fund’s allocation to more credit-sensitive, non-government guaranteed sectors of the securitized market offering higher yields than agency mortgage-backed securities (MBS) added notably to performance as these areas rebounded sharply from distressed levels on the back of strong policy support. |
| ○ | In this vein, exposure to non-agency residential MBS led positive contributions as housing fundamentals were boosted by the Fed’s actions to keep borrowing costs low. |
| ○ | Smaller allocations to commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) and collateralized loan obligations also added to performance as stimulus efforts supported consumer fundamentals. |
| ○ | Within CMBS, positioning in the single-asset/single-borrower segment characterized by “trophy” properties in prime markets proved additive, while unsecured consumer loans were among the best performing holdings within ABS. |
| • | The Fund’s exposure to agency MBS passthroughs contributed positively to performance versus the benchmark. |
| ○ | In terms of selection, an emphasis on current, lower coupon mortgage pools that have been a focus of the Fed’s bond purchase program added to relative return. |
| • | The Fund’s positioning over the period with respect to overall portfolio duration and corresponding interest rate sensitivity added to performance relative to the benchmark. Specifically, the Fund maintained a below-benchmark duration stance as Treasury yields rose in the first quarter of 2021. |
The Fund’s most notable
detractors
| • | There were no material detractors relative to the benchmark over the 12-month period. |
Derivative usage
The Fund used three types of
derivative securities investments during the period to control risks. The Fund invested in Treasury futures contracts and options on interest rate swaps to manage interest rate risk and protect against market
volatility. In addition, the Fund utilized credit default swap options in order to manage credit risk. The Fund’s use of derivatives had a positive impact on results overall.
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The U.S. government may be unable or unwilling to honor its financial obligations. 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. Mortgage- and asset-backed securities are affected by interest rates, financial health of issuers/originators,
|
Columbia Quality Income Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
creditworthiness of entities providing credit
enhancements and the value of underlying assets. Fixed-income securities present issuer default risk. A rise in interest rates may result in a price decline of fixed-income instruments held by the Fund, negatively impacting its performance and NAV. Falling rates may result in the Fund investing
in lower yielding debt instruments, lowering the Fund’s income and yield. These risks may be heightened for longer maturity and duration securities. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. Prepayment and extension risk exists because a loan, bond or other investment may be called, prepaid or redeemed before maturity and similar yielding investments may not be available
for purchase. Investing in derivatives is a specialized activity that involves special risks that subject the Fund to significant loss potential, including when used as leverage, and may result in greater
fluctuation in fund value.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Quality Income Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
|
Columbia Quality Income Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Residential Mortgage-Backed Securities - Agency (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
|
03/01/2042-
11/01/2046 |
3.500% | 51,325,672 | 55,527,034 | |
|
11/01/2043-
01/01/2050 |
3.000% | 47,263,541 | 49,862,247 | |
| 02/01/2051 | 2.500% | 29,351,156 | 30,629,463 | |
| Federal Home Loan Mortgage Corp.(b),(h) | ||||
| CMO Series 264 Class S1 | ||||
|
-1.0 x 1-month USD LIBOR + 5.950%
Cap 5.950% 07/15/2042 |
5.849% | 5,654,587 | 1,096,752 | |
| CMO Series 318 Class S1 | ||||
|
-1.0 x 1-month USD LIBOR + 5.950%
Cap 5.950% 11/15/2043 |
5.849% | 7,576,976 | 1,540,338 | |
| CMO Series 3913 Class SW | ||||
|
-1.0 x 1-month USD LIBOR + 6.600%
Cap 6.600% 09/15/2040 |
6.499% | 322,803 | 11,294 | |
| CMO Series 4174 Class SB | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 05/15/2039 |
6.099% | 2,475,976 | 68,000 | |
| CMO Series 4183 Class AS | ||||
|
-1.0 x 1-month USD LIBOR + 6.150%
Cap 6.150% 04/15/2039 |
6.049% | 1,381,520 | 63,039 | |
| CMO Series 4223 Class DS | ||||
|
-1.0 x 1-month USD LIBOR + 6.100%
Cap 6.100% 12/15/2038 |
5.999% | 34,833 | 110 | |
| CMO Series 4286 Class NS | ||||
|
-1.0 x 1-month USD LIBOR + 5.900%
Cap 5.900% 12/15/2043 |
5.799% | 3,129,177 | 645,451 | |
| CMO Series 4594 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 5.950%
Cap 5.950% 06/15/2046 |
5.849% | 6,511,940 | 1,363,307 | |
| CMO Series 4935 Class JS | ||||
|
-1.0 x 1-month USD LIBOR + 6.050%
Cap 6.050% 12/25/2049 |
5.958% | 11,311,160 | 2,460,173 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
13 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Residential Mortgage-Backed Securities - Agency (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| CMO Series 2021-9 Class DI | ||||
| 01/20/2051 | 2.500% | 24,238,892 | 3,565,425 | |
| CMO Series 2021-9 Class MI | ||||
| 01/20/2051 | 2.500% | 29,620,021 | 3,971,162 | |
| Government National Mortgage Association(b),(h) | ||||
| CMO Series 2014-131 Class BS | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 09/16/2044 |
6.099% | 12,027,827 | 2,855,710 | |
| CMO Series 2017-170 Class QS | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 11/20/2047 |
6.101% | 10,980,657 | 2,684,238 | |
| CMO Series 2018-1 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 01/20/2048 |
6.101% | 14,151,381 | 2,662,134 | |
| CMO Series 2018-105 Class SA | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 08/20/2048 |
6.101% | 10,997,689 | 1,913,937 | |
| CMO Series 2018-139 Class KS | ||||
|
-1.0 x 1-month USD LIBOR + 6.150%
Cap 6.150% 10/20/2048 |
6.051% | 6,307,240 | 1,477,699 | |
| CMO Series 2018-155 Class LS | ||||
|
-1.0 x 1-month USD LIBOR + 6.150%
Cap 6.150% 11/20/2048 |
6.051% | 14,333,736 | 2,421,131 | |
| CMO Series 2018-21 Class WS | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 02/20/2048 |
6.101% | 11,789,141 | 2,659,516 | |
| CMO Series 2018-40 Class SC | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 03/20/2048 |
6.101% | 7,935,845 | 1,692,788 | |
| CMO Series 2018-63 Class HS | ||||
|
-1.0 x 1-month USD LIBOR + 6.200%
Cap 6.200% 04/20/2048 |
6.101% | 8,134,670 | 1,755,307 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
15 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Options Purchased Puts 1.7% | ||||
| Value ($) | ||||
| (Cost $13,368,350) | 37,895,547 | |||
| Money Market Funds 3.2% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(j),(k) | 72,275,337 | 72,268,110 |
|
Total Money Market Funds
(Cost $72,268,110) |
72,268,110 | |
|
Total Investments in Securities
(Cost: $2,589,312,409) |
2,645,235,499 | |
| Other Assets & Liabilities, Net | (371,686,482) | |
| Net Assets | 2,273,549,017 | |
At May 31, 2021,
securities and/or cash totaling $21,087,374 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
17 |
Investments in derivatives
| Long futures contracts | ||||||
| Description |
Number of
contracts |
Expiration
date |
Trading
currency |
Notional
amount |
Value/Unrealized
appreciation ($) |
Value/Unrealized
depreciation ($) |
| U.S. Treasury 10-Year Note | 5,611 | 09/2021 | USD | 740,301,313 | 2,140,776 | — |
| U.S. Treasury 5-Year Note | 594 | 09/2021 | USD | 73,567,828 | 139,282 | — |
| Total | 2,280,058 | — | ||||
| Short futures contracts | ||||||
| Description |
Number of
contracts |
Expiration
date |
Trading
currency |
Notional
amount |
Value/Unrealized
appreciation ($) |
Value/Unrealized
depreciation ($) |
| U.S. Long Bond | (19) | 09/2021 | USD | (2,974,094) | — | (16,370) |
| Put option contracts purchased | ||||||||
| Description | Counterparty |
Trading
currency |
Notional
amount |
Number of
contracts |
Exercise
price/Rate |
Expiration
date |
Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 100,000,000 | 100,000,000 | 1.00 | 09/30/2021 | 1,740,000 | 6,151,690 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 250,000,000 | 250,000,000 | 1.25 | 11/16/2021 | 3,500,000 | 11,067,475 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 120,000,000 | 120,000,000 | 1.25 | 12/03/2021 | 1,860,000 | 5,507,580 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 290,000,000 | 290,000,000 | 1.25 | 01/05/2022 | 4,959,000 | 14,067,813 |
| 5-Year OTC interest rate swap with Morgan Stanley to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 124,700,000 | 124,700,000 | 1.50 | 05/20/2022 | 1,309,350 | 1,100,989 |
| Total | 13,368,350 | 37,895,547 | ||||||
| Cleared interest rate swap contracts | |||||||||||
| Fund receives | Fund pays |
Payment
frequency |
Counterparty |
Maturity
date |
Notional
currency |
Notional
amount |
Value
($) |
Upfront
payments ($) |
Upfront
receipts ($) |
Unrealized
appreciation ($) |
Unrealized
depreciation ($) |
| 3-Month USD LIBOR | Fixed rate of 1.635% | Receives Quarterly, Pays SemiAnnually | Morgan Stanley | 03/18/2031 | USD | 113,000,000 | (1,073,367) | — | — | — | (1,073,367) |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Credit default swap contracts - sell protection | |||||||||||||
|
Reference
entity |
Counterparty |
Maturity
date |
Receive
fixed rate (%) |
Payment
frequency |
Implied
credit spread (%)* |
Notional
currency |
Notional
amount |
Value
($) |
Periodic
payments receivable (payable) ($) |
Upfront
payments ($) |
Upfront
receipts ($) |
Unrealized
appreciation ($) |
Unrealized
depreciation ($) |
| Markit CMBX North America Index, Series 10 BBB- | Citi | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 10,000,000 | (1,125,000) | 3,333 | — | (1,914,481) | 792,814 | — |
| Markit CMBX North America Index, Series 10 BBB- | Citi | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 10,000,000 | (1,125,000) | 3,333 | — | (1,248,720) | 127,053 | — |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 10,000,000 | (1,125,000) | 3,334 | — | (1,765,326) | 643,660 | — |
| Markit CMBX North America Index, Series 11 BBB- | JPMorgan | 11/18/2054 | 3.000 | Monthly | 3.997 | USD | 2,400,000 | (131,250) | 800 | — | (367,086) | 236,636 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 20,000,000 | (2,250,000) | 6,667 | — | (3,861,406) | 1,618,073 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 5,000,000 | (562,500) | 1,667 | — | (1,159,450) | 598,617 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 10,000,000 | (1,125,000) | 3,333 | — | (1,624,617) | 502,950 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.443 | USD | 5,000,000 | (562,500) | 1,667 | — | (840,605) | 279,772 | — |
| Markit CMBX North America Index, Series 11 BBB- | Morgan Stanley | 11/18/2054 | 3.000 | Monthly | 3.997 | USD | 16,000,000 | (875,000) | 5,333 | — | (3,154,190) | 2,284,523 | — |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 12.867 | USD | 5,000,000 | (1,002,344) | 1,667 | — | (284,960) | — | (715,717) |
| Total | (9,883,594) | 31,134 | — | (16,220,841) | 7,084,098 | (715,717) | |||||||
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
| Reference index and values for swap contracts as of period end | ||
| Reference index | Reference rate | |
| 3-Month USD LIBOR | London Interbank Offered Rate | 0.131% |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At May 31, 2021, the total value of these securities amounted to $973,774,189, which represents 42.83% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of May 31, 2021. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2021, the total value of these securities amounted to $67,982,292, which represents 2.99% of total net assets. |
| (d) | Security represents a pool of loans that generate cash payments generally over fixed periods of time. Such securities entitle the security holders to receive distributions (i.e. principal and interest, net of fees and expenses) that are tied to the payments made by the borrower on the underlying loans. Due to the structure of the security the cash payments received are not known until the time of payment. The interest rate shown is the stated coupon rate as of May 31, 2021 and is not reflective of the cash flow payments. |
| (e) | Valuation based on significant unobservable inputs. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
19 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of Investments (continued)
| (f) | Represents a security purchased on a when-issued basis. |
| (g) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of May 31, 2021. |
| (h) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (i) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (j) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (k) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 100,579,498 | 983,152,649 | (1,011,465,026) | 989 | 72,268,110 | (14,893) | 81,112 | 72,275,337 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| STRIPS | Separate Trading of Registered Interest and Principal Securities |
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Columbia Quality Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 244,734,689 | 17,708,314 | 262,443,003 |
| Commercial Mortgage-Backed Securities - Agency | — | 69,252,289 | — | 69,252,289 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 227,009,664 | — | 227,009,664 |
| Residential Mortgage-Backed Securities - Agency | — | 1,479,022,617 | — | 1,479,022,617 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 425,725,910 | 71,618,359 | 497,344,269 |
| Options Purchased Puts | — | 37,895,547 | — | 37,895,547 |
| Money Market Funds | 72,268,110 | — | — | 72,268,110 |
| Total Investments in Securities | 72,268,110 | 2,483,640,716 | 89,326,673 | 2,645,235,499 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 2,280,058 | — | — | 2,280,058 |
| Swap Contracts | — | 7,084,098 | — | 7,084,098 |
| Liability | ||||
| Futures Contracts | (16,370) | — | — | (16,370) |
| Options Contracts Written | — | (2,463,065) | — | (2,463,065) |
| Swap Contracts | — | (1,789,084) | — | (1,789,084) |
| Total | 74,531,798 | 2,486,472,665 | 89,326,673 | 2,650,331,136 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The following table is a
reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
|
Balance
as of 05/31/2020 ($) |
Increase
(decrease) in accrued discounts/ premiums ($) |
Realized
gain (loss) ($) |
Change
in unrealized appreciation (depreciation)(a) ($) |
Purchases
($) |
Sales
($) |
Transfers
into Level 3 ($) |
Transfers
out of Level 3 ($) |
Balance
as of 05/31/2021 ($) |
|
| Asset-Backed Securities — Non-Agency | 1,590,758 | (2,788,139) | — | 1,304,590 | 19,207,931 | (1,606,826) | — | — | 17,708,314 |
| Residential Mortgage-Backed Securities — Non-Agency | 29,510,702 | (1,216) | 3 | 67,281 | 77,683,967 | (6,131,676) | — | (29,510,702) | 71,618,359 |
| Total | 31,101,460 | (2,789,355) | 3 | 1,371,871 | 96,891,898 | (7,738,502) | — | (29,510,702) | 89,326,673 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at May 31, 2021 was $1,412,377, which is comprised of Asset-Backed Securities — Non-Agency of $1,345,096 and Residential Mortgage-Backed Securities —
Non-Agency of $67,281.
The Fund’s assets assigned to
the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage-backed securities and asset-backed securities classified as Level 3 are
valued using the market approach and utilize single market quotations from broker dealers which may have included, but not limited to, the distressed nature of the security and observable transactions for similar
assets in the market. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
Financial assets were transferred
from Level 3 to Level 2 as observable market inputs were utilized and management determined that there was sufficient, reliable and observable market data to value these assets as of period end.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
21 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,503,675,949) | $2,535,071,842 |
| Affiliated issuers (cost $72,268,110) | 72,268,110 |
| Options purchased (cost $13,368,350) | 37,895,547 |
| Cash | 222,900 |
| Cash collateral held at broker for: | |
| Swap contracts | 3,775,000 |
| TBA | 45,000 |
| Margin deposits on: | |
| Swap contracts | 5,786,882 |
| Unrealized appreciation on swap contracts | 7,084,098 |
| Receivable for: | |
| Investments sold | 390,619 |
| Capital shares sold | 6,367,101 |
| Dividends | 4,122 |
| Interest | 6,316,194 |
| Variation margin for futures contracts | 913,844 |
| Prepaid expenses | 25,593 |
| Total assets | 2,676,166,852 |
| Liabilities | |
| Option contracts written, at value (premiums received $2,906,875) | 2,463,065 |
| Unrealized depreciation on swap contracts | 715,717 |
| Upfront receipts on swap contracts | 16,220,841 |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 376,391,566 |
| Capital shares purchased | 1,799,777 |
| Distributions to shareholders | 4,433,484 |
| Variation margin for futures contracts | 6,531 |
| Variation margin for swap contracts | 182,967 |
| Management services fees | 30,136 |
| Distribution and/or service fees | 3,494 |
| Transfer agent fees | 126,351 |
| Compensation of board members | 196,262 |
| Other expenses | 47,644 |
| Total liabilities | 402,617,835 |
| Net assets applicable to outstanding capital stock | $2,273,549,017 |
| Represented by | |
| Paid in capital | 2,234,084,059 |
| Total distributable earnings (loss) | 39,464,958 |
| Total - representing net assets applicable to outstanding capital stock | $2,273,549,017 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia Quality Income Fund | Annual Report 2021 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $429,196,430 |
| Shares outstanding | 18,778,673 |
| Net asset value per share | $22.86 |
| Maximum sales charge | 3.00% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $23.57 |
| Advisor Class | |
| Net assets | $62,560,382 |
| Shares outstanding | 2,739,085 |
| Net asset value per share | $22.84 |
| Class C | |
| Net assets | $17,853,988 |
| Shares outstanding | 779,815 |
| Net asset value per share | $22.90 |
| Institutional Class | |
| Net assets | $519,576,873 |
| Shares outstanding | 22,749,761 |
| Net asset value per share | $22.84 |
| Institutional 2 Class | |
| Net assets | $41,072,607 |
| Shares outstanding | 1,798,072 |
| Net asset value per share | $22.84 |
| Institutional 3 Class | |
| Net assets | $1,197,806,827 |
| Shares outstanding | 52,654,107 |
| Net asset value per share | $22.75 |
| Class R | |
| Net assets | $5,481,910 |
| Shares outstanding | 240,057 |
| Net asset value per share | $22.84 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
23 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $81,112 |
| Interest | 68,298,826 |
| Total income | 68,379,938 |
| Expenses: | |
| Management services fees | 9,340,388 |
| Distribution and/or service fees | |
| Class A | 1,079,176 |
| Class C | 205,759 |
| Class R | 17,504 |
| Transfer agent fees | |
| Class A | 617,363 |
| Advisor Class | 107,034 |
| Class C | 29,470 |
| Institutional Class | 715,736 |
| Institutional 2 Class | 17,112 |
| Institutional 3 Class | 54,359 |
| Class R | 4,986 |
| Compensation of board members | 96,655 |
| Custodian fees | 32,783 |
| Printing and postage fees | 59,022 |
| Registration fees | 130,645 |
| Audit fees | 49,500 |
| Legal fees | 25,932 |
| Interest on collateral | 12,533 |
| Compensation of chief compliance officer | 367 |
| Other | 86,533 |
| Total expenses | 12,682,857 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (97,217) |
| Fees waived by transfer agent | |
| Institutional 2 Class | (2,454) |
| Expense reduction | (3,853) |
| Total net expenses | 12,579,333 |
| Net investment income | 55,800,605 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 114,195 |
| Investments — affiliated issuers | (14,893) |
| Futures contracts | (4,305,277) |
| Options purchased | (5,165,500) |
| Swap contracts | 7,672,368 |
| Net realized loss | (1,699,107) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 48,966,283 |
| Investments — affiliated issuers | 989 |
| Futures contracts | 1,916,259 |
| Options purchased | 27,352,563 |
| Options contracts written | 443,810 |
| Swap contracts | 3,158,279 |
| Net change in unrealized appreciation (depreciation) | 81,838,183 |
| Net realized and unrealized gain | 80,139,076 |
| Net increase in net assets resulting from operations | $135,939,681 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Columbia Quality Income Fund | Annual Report 2021 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $55,800,605 | $54,959,974 |
| Net realized gain (loss) | (1,699,107) | 37,142,003 |
| Net change in unrealized appreciation (depreciation) | 81,838,183 | (31,142,662) |
| Net increase in net assets resulting from operations | 135,939,681 | 60,959,315 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (18,081,025) | (10,743,259) |
| Advisor Class | (3,171,493) | (2,723,593) |
| Class C | (717,869) | (365,541) |
| Institutional Class | (21,900,714) | (15,728,948) |
| Institutional 2 Class | (1,255,822) | (994,596) |
| Institutional 3 Class | (37,976,478) | (20,779,403) |
| Class R | (130,489) | (44,601) |
| Total distributions to shareholders | (83,233,890) | (51,379,941) |
| Increase (decrease) in net assets from capital stock activity | 392,989,884 | (83,713,914) |
| Total increase (decrease) in net assets | 445,695,675 | (74,134,540) |
| Net assets at beginning of year | 1,827,853,342 | 1,901,987,882 |
| Net assets at end of year | $2,273,549,017 | $1,827,853,342 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
25 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares(a) | Dollars ($) | Shares(a) | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 3,903,794 | 88,795,239 | 3,960,388 | 88,079,072 |
| Distributions reinvested | 609,815 | 13,861,629 | 349,551 | 7,771,342 |
| Redemptions | (4,700,240) | (107,063,384) | (5,877,968) | (130,338,689) |
| Net decrease | (186,631) | (4,406,516) | (1,568,029) | (34,488,275) |
| Advisor Class | ||||
| Subscriptions | 1,403,471 | 31,920,710 | 3,699,608 | 81,860,036 |
| Distributions reinvested | 131,912 | 2,995,918 | 98,135 | 2,178,983 |
| Redemptions | (3,291,324) | (74,726,592) | (3,408,391) | (75,547,739) |
| Net increase (decrease) | (1,755,941) | (39,809,964) | 389,352 | 8,491,280 |
| Class C | ||||
| Subscriptions | 226,003 | 5,150,971 | 244,339 | 5,420,580 |
| Distributions reinvested | 30,978 | 704,845 | 15,633 | 348,001 |
| Redemptions | (441,693) | (10,085,777) | (325,038) | (7,231,271) |
| Net decrease | (184,712) | (4,229,961) | (65,066) | (1,462,690) |
| Institutional Class | ||||
| Subscriptions | 6,670,209 | 152,108,757 | 8,115,399 | 180,116,655 |
| Distributions reinvested | 735,037 | 16,698,614 | 543,263 | 12,070,688 |
| Redemptions | (8,184,795) | (186,157,261) | (12,436,116) | (276,224,649) |
| Net decrease | (779,549) | (17,349,890) | (3,777,454) | (84,037,306) |
| Institutional 2 Class | ||||
| Subscriptions | 1,331,138 | 30,417,198 | 569,679 | 12,688,994 |
| Distributions reinvested | 55,151 | 1,253,506 | 44,637 | 992,064 |
| Redemptions | (975,709) | (22,203,357) | (928,524) | (20,672,675) |
| Net increase (decrease) | 410,580 | 9,467,347 | (314,208) | (6,991,617) |
| Institutional 3 Class | ||||
| Subscriptions | 23,896,804 | 542,978,006 | 14,812,735 | 326,731,526 |
| Distributions reinvested | 1,551,666 | 35,133,510 | 897,869 | 19,880,834 |
| Redemptions | (5,824,082) | (131,489,259) | (14,165,666) | (313,100,622) |
| Net increase | 19,624,388 | 446,622,257 | 1,544,938 | 33,511,738 |
| Class R | ||||
| Subscriptions | 170,026 | 3,886,514 | 80,702 | 1,799,356 |
| Distributions reinvested | 5,689 | 129,272 | 2,000 | 44,383 |
| Redemptions | (57,871) | (1,319,175) | (26,338) | (580,783) |
| Net increase | 117,844 | 2,696,611 | 56,364 | 1,262,956 |
| Total net increase (decrease) | 17,245,979 | 392,989,884 | (3,734,103) | (83,713,914) |
| (a) | Share activity has been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | Columbia Quality Income Fund | Annual Report 2021 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A(c) | |||||||
| Year Ended 5/31/2021 | $22.20 | 0.61 | 1.00 | 1.61 | (0.68) | (0.27) | (0.95) |
| Year Ended 5/31/2020 | $22.10 | 0.56 | 0.06 | 0.62 | (0.52) | — | (0.52) |
| Year Ended 5/31/2019 | $21.35 | 0.64 | 0.63 | 1.27 | (0.52) | — | (0.52) |
| Year Ended 5/31/2018 | $21.94 | 0.56 | (0.55) | 0.01 | (0.60) | — | (0.60) |
| Year Ended 5/31/2017 | $21.91 | 0.52 | 0.07 | 0.59 | (0.44) | (0.12) | (0.56) |
| Advisor Class(c) | |||||||
| Year Ended 5/31/2021 | $22.19 | 0.67 | 0.99 | 1.66 | (0.74) | (0.27) | (1.01) |
| Year Ended 5/31/2020 | $22.09 | 0.64 | 0.06 | 0.70 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019 | $21.34 | 0.68 | 0.67 | 1.35 | (0.60) | — | (0.60) |
| Year Ended 5/31/2018 | $21.92 | 0.60 | (0.50) | 0.10 | (0.68) | — | (0.68) |
| Year Ended 5/31/2017 | $21.90 | 0.56 | 0.06 | 0.62 | (0.48) | (0.12) | (0.60) |
| Class C(c) | |||||||
| Year Ended 5/31/2021 | $22.24 | 0.44 | 1.00 | 1.44 | (0.51) | (0.27) | (0.78) |
| Year Ended 5/31/2020 | $22.14 | 0.40 | 0.06 | 0.46 | (0.36) | — | (0.36) |
| Year Ended 5/31/2019 | $21.39 | 0.48 | 0.63 | 1.11 | (0.36) | — | (0.36) |
| Year Ended 5/31/2018 | $21.97 | 0.40 | (0.54) | (0.14) | (0.44) | — | (0.44) |
| Year Ended 5/31/2017 | $21.95 | 0.36 | 0.06 | 0.42 | (0.28) | (0.12) | (0.40) |
| Institutional Class(c) | |||||||
| Year Ended 5/31/2021 | $22.19 | 0.66 | 1.00 | 1.66 | (0.74) | (0.27) | (1.01) |
| Year Ended 5/31/2020 | $22.09 | 0.64 | 0.06 | 0.70 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019 | $21.34 | 0.68 | 0.67 | 1.35 | (0.60) | — | (0.60) |
| Year Ended 5/31/2018 | $21.92 | 0.60 | (0.50) | 0.10 | (0.68) | — | (0.68) |
| Year Ended 5/31/2017 | $21.89 | 0.56 | 0.07 | 0.63 | (0.48) | (0.12) | (0.60) |
| Institutional 2 Class(c) | |||||||
| Year Ended 5/31/2021 | $22.19 | 0.68 | 1.00 | 1.68 | (0.76) | (0.27) | (1.03) |
| Year Ended 5/31/2020 | $22.09 | 0.64 | 0.06 | 0.70 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019 | $21.35 | 0.72 | 0.62 | 1.34 | (0.60) | — | (0.60) |
| Year Ended 5/31/2018 | $21.93 | 0.64 | (0.54) | 0.10 | (0.68) | — | (0.68) |
| Year Ended 5/31/2017 | $21.90 | 0.60 | 0.07 | 0.67 | (0.52) | (0.12) | (0.64) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 28 | Columbia Quality Income Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A(c) | |||||||
| Year Ended 5/31/2021 | $22.86 | 7.36% | 0.91%(d) | 0.90%(d),(e) | 2.69% | 319% | $429,196 |
| Year Ended 5/31/2020 | $22.20 | 2.81% | 0.92%(d) | 0.90%(d),(e) | 2.61% | 326% | $421,105 |
| Year Ended 5/31/2019 | $22.10 | 6.12% | 0.93%(d) | 0.92%(d),(e) | 2.96% | 302% | $453,821 |
| Year Ended 5/31/2018 | $21.35 | 0.22% | 0.93% | 0.91%(e) | 2.58% | 311% | $494,616 |
| Year Ended 5/31/2017 | $21.94 | 2.56% | 0.91%(f) | 0.88%(e),(f) | 2.32% | 338% | $559,807 |
| Advisor Class(c) | |||||||
| Year Ended 5/31/2021 | $22.84 | 7.53% | 0.66%(d) | 0.65%(d),(e) | 2.94% | 319% | $62,560 |
| Year Ended 5/31/2020 | $22.19 | 3.25% | 0.67%(d) | 0.65%(d),(e) | 2.87% | 326% | $99,749 |
| Year Ended 5/31/2019 | $22.09 | 6.21% | 0.68%(d) | 0.67%(d),(e) | 3.22% | 302% | $90,690 |
| Year Ended 5/31/2018 | $21.34 | 0.48% | 0.67% | 0.67%(e) | 2.83% | 311% | $85,695 |
| Year Ended 5/31/2017 | $21.92 | 3.01% | 0.66%(f) | 0.63%(e),(f) | 2.64% | 338% | $80,482 |
| Class C(c) | |||||||
| Year Ended 5/31/2021 | $22.90 | 6.54% | 1.66%(d) | 1.65%(d),(e) | 1.94% | 319% | $17,854 |
| Year Ended 5/31/2020 | $22.24 | 2.23% | 1.67%(d) | 1.66%(d),(e) | 1.86% | 326% | $21,452 |
| Year Ended 5/31/2019 | $22.14 | 5.14% | 1.68%(d) | 1.67%(d),(e) | 2.20% | 302% | $22,792 |
| Year Ended 5/31/2018 | $21.39 | (0.53%) | 1.67% | 1.66%(e) | 1.84% | 311% | $29,850 |
| Year Ended 5/31/2017 | $21.97 | 1.80% | 1.66%(f) | 1.63%(e),(f) | 1.58% | 338% | $45,314 |
| Institutional Class(c) | |||||||
| Year Ended 5/31/2021 | $22.84 | 7.53% | 0.66%(d) | 0.65%(d),(e) | 2.93% | 319% | $519,577 |
| Year Ended 5/31/2020 | $22.19 | 3.25% | 0.67%(d) | 0.65%(d),(e) | 2.86% | 326% | $522,050 |
| Year Ended 5/31/2019 | $22.09 | 6.41% | 0.68%(d) | 0.67%(d),(e) | 3.23% | 302% | $603,089 |
| Year Ended 5/31/2018 | $21.34 | 0.29% | 0.67% | 0.66%(e) | 2.83% | 311% | $534,970 |
| Year Ended 5/31/2017 | $21.92 | 3.01% | 0.66%(f) | 0.63%(e),(f) | 2.60% | 338% | $619,001 |
| Institutional 2 Class(c) | |||||||
| Year Ended 5/31/2021 | $22.84 | 7.62% | 0.57%(d) | 0.56%(d) | 2.99% | 319% | $41,073 |
| Year Ended 5/31/2020 | $22.19 | 3.35% | 0.58%(d) | 0.56%(d) | 2.96% | 326% | $30,795 |
| Year Ended 5/31/2019 | $22.09 | 6.32% | 0.58%(d) | 0.56%(d) | 3.34% | 302% | $37,589 |
| Year Ended 5/31/2018 | $21.35 | 0.58% | 0.57% | 0.57% | 2.91% | 311% | $34,203 |
| Year Ended 5/31/2017 | $21.93 | 2.90% | 0.55%(f) | 0.54%(f) | 2.70% | 338% | $25,782 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
29 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class(c) | |||||||
| Year Ended 5/31/2021 | $22.10 | 0.69 | 0.99 | 1.68 | (0.76) | (0.27) | (1.03) |
| Year Ended 5/31/2020 | $22.00 | 0.68 | 0.06 | 0.74 | (0.64) | — | (0.64) |
| Year Ended 5/31/2019 | $21.25 | 0.72 | 0.63 | 1.35 | (0.60) | — | (0.60) |
| Year Ended 5/31/2018 | $21.83 | 0.64 | (0.54) | 0.10 | (0.68) | — | (0.68) |
| Year Ended 5/31/2017 | $21.79 | 0.68 | 0.00(g) | 0.68 | (0.52) | (0.12) | (0.64) |
| Class R(c) | |||||||
| Year Ended 5/31/2021 | $22.18 | 0.54 | 1.01 | 1.55 | (0.62) | (0.27) | (0.89) |
| Year Ended 5/31/2020 | $22.08 | 0.52 | 0.06 | 0.58 | (0.48) | — | (0.48) |
| Year Ended 5/31/2019 | $21.33 | 0.60 | 0.63 | 1.23 | (0.48) | — | (0.48) |
| Year Ended 5/31/2018 | $21.92 | 0.52 | (0.55) | (0.03) | (0.56) | — | (0.56) |
| Year Ended 5/31/2017 | $21.89 | 0.56 | (0.05)(h) | 0.51 | (0.36) | (0.12) | (0.48) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Per share amounts have been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
| (d) | Ratios include interest on collateral expense. For the periods indicated below, if interest on collateral expense had been excluded, expenses would have been lower by: |
| (e) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (f) | Expenses have been reduced due to a reimbursement of expenses overbilled by a third party. If the reimbursement had been excluded, the expense ratios would have been higher by the percentages shown for each class in the table below. All fee waivers and expense reimbursements by the Investment Manager and its affiliates were applied before giving effect to this third party reimbursement. |
| Year Ended | Class A |
Advisor
Class |
Class C |
Institutional
Class |
Institutional 2
Class |
Institutional 3
Class |
Class R |
| 05/31/2017 | 0.02% | 0.02% | 0.02% | 0.02% | 0.02% | 0.01% | 0.01% |
| (g) | Rounds to zero. |
| (h) | Calculation of the net gain (loss) per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized gain (loss) presented in the Statement of Operations due to the timing of subscriptions and redemptions of Fund shares in relation to fluctuations in the market value of the portfolio. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 30 | Columbia Quality Income Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class(c) | |||||||
| Year Ended 5/31/2021 | $22.75 | 7.64% | 0.52%(d) | 0.52%(d) | 3.05% | 319% | $1,197,807 |
| Year Ended 5/31/2020 | $22.10 | 3.40% | 0.53%(d) | 0.51%(d) | 3.01% | 326% | $729,991 |
| Year Ended 5/31/2019 | $22.00 | 6.58% | 0.52%(d) | 0.51%(d) | 3.37% | 302% | $692,552 |
| Year Ended 5/31/2018 | $21.25 | 0.43% | 0.52% | 0.52% | 2.98% | 311% | $765,037 |
| Year Ended 5/31/2017 | $21.83 | 3.16% | 0.51%(f) | 0.51%(f) | 3.13% | 338% | $784,343 |
| Class R(c) | |||||||
| Year Ended 5/31/2021 | $22.84 | 7.00% | 1.16%(d) | 1.15%(d),(e) | 2.40% | 319% | $5,482 |
| Year Ended 5/31/2020 | $22.18 | 2.74% | 1.17%(d) | 1.15%(d),(e) | 2.36% | 326% | $2,711 |
| Year Ended 5/31/2019 | $22.08 | 5.87% | 1.19%(d) | 1.17%(d),(e) | 2.76% | 302% | $1,454 |
| Year Ended 5/31/2018 | $21.33 | (0.21%) | 1.17% | 1.16%(e) | 2.34% | 311% | $735 |
| Year Ended 5/31/2017 | $21.92 | 2.50% | 1.17%(f) | 1.14%(e),(f) | 2.58% | 338% | $984 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Quality Income Fund | Annual Report 2021
|
31 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Quality Income Fund (the
Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The Fund’s Board of Trustees
approved reverse stock splits of the issued and outstanding shares of the Fund (the Reverse Stock Split). The Reverse Stock Split was completed after the close of business on September 11, 2020. The impact of the
Reverse Stock Split was to decrease the number of shares outstanding and increase the net asset value per share for each share class of the Fund by the ratio of 4 to 1, resulting in no effect on the net assets of each
share class or the value of each affected shareholder’s investment. Capital stock share activity reflected in the Statement of Changes in Net Assets and per share data in the Financial Highlights have been
adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance,
| 32 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
credit ratings, credit enhancement and expected
life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or exchange bid quote from an approved independent broker-dealer. Debt securities maturing in
60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in
|
Columbia Quality Income Fund | Annual Report 2021
|
33 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
the event that a clearing broker becomes insolvent
or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a
pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 34 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain
or loss when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to manage exposure to fluctuations in interest rates. These instruments
may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the other party. Collateral may be collected or
posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or
expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Interest rate swaption contracts
Interest rate swaption contracts
entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into an interest rate swap contract on a future date. Each interest rate swaption contract
will specify if the buyer is entitled to receive the fixed or floating rate if the interest rate is exercised. Changes in the value of a purchased interest rate swaption contracts are reported as unrealized
appreciation or depreciation on options in the Statement of Assets and Liabilities. Gain or loss is recognized in the Statement of Operations when the interest rate swaption contract is closed or expires.
When the Fund writes an interest
rate swaption contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and Liabilities and is subsequently adjusted to
reflect the current fair value of the interest rate swaption contract written. Premiums received from writing interest rate swaption contracts that expire unexercised are recorded by the Fund on the expiration date as
realized gains from options written in the Statement of Operations. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also recorded
as realized gain, or if the premium is less than the amount paid for the closing purchase, as realized loss. These amounts are reflected as net realized gain (loss) on options written in the Statement of
Operations.
|
Columbia Quality Income Fund | Annual Report 2021
|
35 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
transactions in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
| 36 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Interest rate swap contracts
The Fund entered into interest rate
swap transactions which may include inflation rate swap contracts to manage interest rate and market risk exposure to produce incremental earnings and to gain exposure to or protect itself from market rate changes.
These instruments may be used for other purposes in future periods. An interest rate swap is an agreement between two parties where there are two flows and payments are made between the two counterparties and the
payments are dependent upon changes in an interest rate, inflation rate or inflation index calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of one type
of interest rate for another type of interest rate cash flow on specified dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby
the accrual for the exchange of cash flows does not begin until a specified date in the future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market
interest rate versus a fixed interest rate.
Interest rate swaps are valued
daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a
gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at May 31, 2021:
| Asset derivatives | ||
|
Risk exposure
category |
Statement
of assets and liabilities location |
Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 7,084,098* |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 2,280,058* |
| Interest rate risk | Investments, at value — Options purchased | 37,895,547 |
| Total | 47,259,703 |
|
Columbia Quality Income Fund | Annual Report 2021
|
37 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
| Liability derivatives | ||
|
Risk exposure
category |
Statement
of assets and liabilities location |
Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 715,717* |
| Credit risk | Upfront receipts on swap contracts | 16,220,841 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 16,370* |
| Interest rate risk | Options contracts written, at value | 2,463,065 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 1,073,367* |
| Total | 20,489,360 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended May 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2021:
| Derivative instrument |
Average notional
amounts ($) |
| Futures contracts — long | 391,674,165* |
| Futures contracts — short | 3,209,211* |
| Credit default swap contracts — buy protection | 476,374** |
| Credit default swap contracts — sell protection | 84,050,000* |
| Derivative instrument |
Average
value ($) |
| Options contracts — purchased | 21,372,895* |
| Options contracts — written | (515,279)** |
| Derivative instrument |
Average unrealized
appreciation ($)** |
Average unrealized
depreciation ($)** |
| Interest rate swap contracts | 68,927 | (78,928) |
| * | Based on the ending quarterly outstanding amounts for the year ended May 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended May 31, 2021. |
| 38 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. 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.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage 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.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity.
|
Columbia Quality Income Fund | Annual Report 2021
|
39 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
These adjustments are included in interest income
on the Statement of Operations. POs are stripped securities entitled to receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and
therefore are subject to fluctuations in price. POs are also subject to credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its
obligation. The Fund may also invest in IO or PO stripped mortgage-backed securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of May 31, 2021:
| Citi ($) (a) | Citi ($) (a) | JPMorgan ($) |
Morgan
Stanley ($) (a) |
Morgan
Stanley ($) (a) |
Total ($) | |
| Assets | ||||||
| Options purchased puts | 22,726,745 | - | - | 15,168,802 | - | 37,895,547 |
| OTC credit default swap contracts (b) | - | 919,867 | 880,296 | 5,283,935 | - | 7,084,098 |
| Total assets | 22,726,745 | 919,867 | 880,296 | 20,452,737 | - | 44,979,645 |
| Liabilities | ||||||
| Centrally cleared interest rate swap contracts (c) | - | - | - | - | 182,967 | 182,967 |
| Options contracts written | 1,041,980 | - | - | 1,421,085 | - | 2,463,065 |
| OTC credit default swap contracts (b) | - | 3,163,201 | 2,132,412 | 11,640,945 | - | 16,936,558 |
| Total liabilities | 1,041,980 | 3,163,201 | 2,132,412 | 13,062,030 | 182,967 | 19,582,590 |
| Total financial and derivative net assets | 21,684,765 | (2,243,334) | (1,252,116) | 7,390,707 | (182,967) | 25,397,055 |
| Total collateral received (pledged) (d) | 21,684,765 | (2,243,334) | (1,252,116) | 7,390,707 | (182,967) | 25,397,055 |
| Net amount (e) | - | - | - | - | - | - |
| (a) | Exposure can only be netted across transactions governed under the same master agreement with the same legal entity. |
| (b) | Over-the-Counter (OTC) swap contracts are presented at market value plus periodic payments receivable (payable), which is comprised of unrealized appreciation, unrealized depreciation, upfront payments and upfront receipts. |
| (c) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (d) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (e) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| 40 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to shareholders
Distributions from net investment
income, if any, are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.50% to 0.34% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.49% of the Fund’s average
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
|
Columbia Quality Income Fund | Annual Report 2021
|
41 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class. In addition, effective through September 30, 2021, Institutional 2 Class shares are
subject to a contractual transfer agency fee annual limitation of not more than 0.05% of the average daily net assets attributable to that share class.
For the year ended May 31,
2021, the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.14 |
| Advisor Class | 0.14 |
| Class C | 0.14 |
| Institutional Class | 0.14 |
| Institutional 2 Class | 0.05 |
| Institutional 3 Class | 0.01 |
| Class R | 0.14 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $3,853.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $461,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
| 42 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.50 - 1.00(a) | 171,705 |
| Class C | — | 1.00(b) | 2,578 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. In addition to the contractual agreement, the Investment Manager and certain of its affiliates have voluntarily agreed to waive fees and/or reimburse
Fund expenses (excluding certain fees and expenses described above) so that Fund level expenses (expenses directly attributable to the Fund and not to a specific share class) are waived proportionately across all
share classes. This arrangement may be revised or discontinued at any time. Reflected in the contractual cap commitments, effective through September 30, 2021, is the Transfer Agent’s contractual agreement to
limit total transfer agency fees to an annual rate of not more than 0.05% for Institutional 2 Class of the average daily net assets attributable to Institutional 2 Class, unless sooner terminated at the sole
discretion of the Board of Trustees. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future
periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
|
Columbia Quality Income Fund | Annual Report 2021
|
43 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, post-October capital losses, distributions, swap
investments, principal and/or interest of fixed income securities, distribution reclassifications, non-deductible expenses, investments in partnerships and excess distributions. To the extent these differences were
permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Excess of distributions
over net investment income ($) |
Accumulated
net realized (loss) ($) |
Paid in
capital ($) |
| 32,233 | 301,787 | (334,020) |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by these reclassifications.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 82,983,307 | 250,583 | 83,233,890 | 51,379,941 | — | 51,379,941 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| — | — | — | 51,542,981 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 2,582,567,314 | 66,170,932 | (14,627,951) | 51,542,981 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Under current tax rules, regulated
investment companies can elect to treat certain late-year ordinary losses incurred and post-October capital losses (capital losses realized after October 31) as arising on the first day of the following taxable year.
As of May 31, 2021, the Fund will elect to treat the following late-year ordinary losses and post-October capital losses as arising on June 1, 2021.
|
Late year
ordinary losses ($) |
Post-October
capital losses ($) |
| — | 7,450,785 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
| 44 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $7,667,249,286 and $7,455,033,812, respectively, for the year ended May 31, 2021, of which $7,150,987,771 and
$7,011,837,291, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
|
Columbia Quality Income Fund | Annual Report 2021
|
45 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer 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. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting
in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The
Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
LIBOR replacement risk
The elimination of London
Inter-Bank Offered Rate (LIBOR), among other "inter-bank offered" reference rates, may adversely affect the interest rates on, and value of, certain Fund investments for which the value is tied to LIBOR. Alternatives
to LIBOR have been established or are in development in most major currencies including the Secured Overnight Financing Rate (SOFR) that is intended to replace U.S. dollar LIBOR. The U.K. Financial Conduct Authority
and the ICE Benchmark Administration have announced that most LIBOR settings will no longer be published after December 31, 2021 and a majority of U.S. dollar LIBOR settings will cease publication after June 30, 2023.
It is possible that a subset of LIBOR settings will be published after these dates on a “synthetic” basis, but any such publications would be considered non-representative of the underlying market. Markets
are slowly developing in response to these new reference rates. Uncertainty related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition, poses risks
for the Fund. These risks are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices become settled.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. 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. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
| 46 | Columbia Quality Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, 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. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or
|
Columbia Quality Income Fund | Annual Report 2021
|
47 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
non-prime mortgages) underlying mortgage-backed
securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest payments to mortgage-backed securities holders, including the Fund. 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.
Shareholder concentration risk
At May 31, 2021, one unaffiliated
shareholder of record owned 12.6% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated shareholders of
record owned 60.4% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case
of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid
positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 48 | Columbia Quality Income Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Quality Income Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Quality Income Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the
financial highlights for each of the five years in the period ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not
received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Quality Income Fund | Annual Report 2021
|
49 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Section
163(j) Interest Dividends |
|
| 71.23% |
Section 163(j) Interest Dividends.
The percentage of ordinary income distributed during the fiscal year that shareholders may treat as interest income for purposes of IRC Section 163(j), subject to holding period requirements and other limitations.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 50 | Columbia Quality Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia Quality Income Fund | Annual Report 2021
|
51 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 52 | Columbia Quality Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia Quality Income Fund | Annual Report 2021
|
53 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 54 | Columbia Quality Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Columbia Quality Income Fund | Annual Report 2021
|
55 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 56 | Columbia Quality Income Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Quality Income Fund | Annual Report 2021
|
57 |
Columbia Quality Income Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN236_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia High Yield
Bond Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia High Yield Bond Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder reports
from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia High Yield Bond Fund | Annual
Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with high current income as its primary objective and, as its secondary objective, capital growth.
Portfolio management
Brian Lavin, CFA
Lead Portfolio Manager
Managed Fund since 2010
Daniel DeYoung
Portfolio Manager
Managed Fund since 2019
Returns for Class A shares are shown
with and without the maximum initial sales charge of 4.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The ICE BofA U.S. Cash Pay High
Yield Constrained Index tracks the performance of U.S. dollar-denominated below investment grade corporate debt, currently in a coupon paying period that is publicly issued in the U.S. domestic market.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia High Yield Bond Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions
or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Convertible Bonds | 0.2 |
| Corporate Bonds & Notes | 93.9 |
| Exchange-Traded Fixed Income Funds | 1.1 |
| Foreign Government Obligations | 0.3 |
| Money Market Funds | 2.8 |
| Senior Loans | 1.7 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| Quality breakdown (%) (at May 31, 2021) | |
| BBB rating | 1.3 |
| BB rating | 43.0 |
| B rating | 40.3 |
| CCC rating | 15.4 |
| Total | 100.0 |
Percentages indicated are based
upon total fixed income investments.
Bond ratings apply to the underlying
holdings of the Fund and not the Fund itself and are divided into categories ranging from highest to lowest credit quality, determined by using the average rating of Moody’s, S&P and Fitch. When ratings are
available from only two rating agencies, the average of the two rating is used. When a rating is available from only one rating agency, that rating is used. When a bond is not rated by any rating agency, it is
designated as “Not rated.” Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. The ratings assigned by credit
rating agencies are but one of the considerations that the Investment Manager and/or Fund’s subadviser incorporates into its credit analysis process, along with such other issuer-specific factors as cash flows,
capital structure and leverage ratios, ability to de-leverage (repay) through free cash flow, quality of management, market positioning and access to capital, as well as such security-specific factors as the terms of
the security (e.g., interest rate and time to maturity) and the amount and type of any collateral.
| 4 | Columbia High Yield Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period ended May
31, 2021, the Fund’s Class A shares returned 12.35% excluding sales charges. The Fund underperformed its benchmark, the ICE BofA U.S. Cash Pay High Yield Constrained Index, which returned 14.95%. Mutual funds,
unlike unmanaged indices, incur operating expenses.
Market overview
During the past 12 months, the
high-yield bond market benefited from ongoing market stabilization following the dramatic sell-off that occurred in March 2020 due to the onset of COVID-19 worldwide. Lower quality issuers outperformed over the
12-month period, with high-yield bonds rated BB, B and CCC returning 12.11%, 13.38% and 32.61%, respectively. The November 2020 announcement of favorable COVID-19 vaccination results and the successful U.S. vaccine
rollout that eventually resulted in broad reopening activity boosted returns for high-yield bonds. High yield was also supported by two additional U.S. stimulus agreements, as well as by continued policy accommodation
from the U.S. Federal Reserve. However, medium- and longer- term interest rate increases represented a modest headwind during the second half of the period. Full Democratic control of the legislative and executive
branches following the U.S. election resulted in additional fiscal stimulus, and increased the prospects for a sizeable infrastructure bill. In conjunction with already historic fiscal stimulus and broad reopening
activity, these circumstances drove the 10-year U.S. Treasury yield 0.94% higher over the period, to 1.60%, weighing on the performance of high-yield bonds.
Given the energy sector’s
large proportional size within the U.S. high-yield market, oil prices contributed meaningfully to the performance of high-yield bonds. Driven by OPEC+ production management and normalizing demand, oil prices ended the
period approximately 87% higher at $66.32 per barrel. As a result, the energy sector was a strong outperformer over the period, returning more than 28%. Other outperforming sectors were largely those that had been
more directly impacted by the global pandemic and had subsequently begun to rebound, such as transportation, automotive, leisure and retail. Elsewhere, more stable and defensive sectors such as utilities, media,
telecommunications and health care underperformed. Additionally, in light of elevated high-yield defaults during the March-May 2020 period (which removed a number of weaker issuers from the market), as well as ample
access to capital markets for many high-yield issuers, default activity moderated during the 12-month period. Lastly, the technical (supply/demand) environment for high yield was mixed during the 12 months ended May
31. The asset class saw strong retail inflows over the second half of 2020, but those flows turned negative in 2021 on heightened interest rate concerns and tighter valuations. New issue activity was elevated but
manageable over the period given the market’s continued focus on refinancing.
The Fund’s notable
detractors during the period
| • | The Fund’s industry allocation and security selection detracted from returns during the 12-month period. |
| • | Overweight allocations to more stable and defensive sectors such as electric-generation and cable were notable detractors. While these sectors exhibited positive total returns, they did not keep pace with the market rally. |
| • | The Fund’s security selection within bonds rated CCC detracted during the period, given the ratings category’s strong returns, particularly for distressed issuers. The Fund’s overweight allocation to CCC bonds only partially offset the Fund’s defensive issue selection within the category. |
The Fund’s notable
contributors during the period
| • | The most notable positive contribution to performance during the Fund’s most recent fiscal year came from security selection within the energy-exploration & production segment. |
| ○ | The Fund largely avoided the elevated default activity within the sector, while also maintaining overweight allocations to certain stressed issuers whose bond prices recovered along with commodity prices. |
| ○ | An overweight to this sector also was additive. |
| • | Security selection was beneficial within the support-services segment, driven by the Fund’s overweight to select home security, car rental, ride sharing and equipment rental companies. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Foreign investments subject the Fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent
financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Fixed-income securities present issuer default risk. A rise in
|
Columbia High Yield Bond Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
interest rates may result in a price decline of fixed-income instruments held by the Fund, negatively impacting its performance and NAV. Falling rates may result in the Fund investing in lower yielding
debt instruments, lowering the Fund’s income and yield. These risks may be heightened for longer maturity and duration securities. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. Prepayment and extension risk exists because the timing of payments on a loan, bond or other investment may accelerate when interest rates fall or decelerate when interest rates rise which may reduce investment
opportunities and potential returns. Floating rate loans typically present greater risk than other fixed-income investments as they are generally subject to legal or contractual resale restrictions, may trade less frequently and experience value
impairments during liquidation. Liquidity risk is associated with the difficulty of selling underlying investments at a desirable time or price. See the Fund’s prospectus for more information on these and other
risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia High Yield Bond Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Corporate Bonds & Notes (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| Endeavor Energy Resources LP/Finance, Inc.(a) | ||||
| 01/30/2028 | 5.750% | 2,572,000 | 2,721,955 | |
| EQT Corp. | ||||
| 01/15/2029 | 5.000% | 1,846,000 | 2,046,816 | |
| EQT Corp.(d) | ||||
| 02/01/2030 | 8.750% | 2,547,000 | 3,310,064 | |
| EQT Corp.(a) | ||||
| 05/15/2031 | 3.625% | 2,021,000 | 2,081,178 | |
| Hilcorp Energy I LP/Finance Co.(a) | ||||
| 11/01/2028 | 6.250% | 4,405,000 | 4,621,816 | |
| 02/01/2029 | 5.750% | 2,186,000 | 2,243,226 | |
| Indigo Natural Resources LLC(a) | ||||
| 02/01/2029 | 5.375% | 2,711,000 | 2,724,904 | |
| Matador Resources Co. | ||||
| 09/15/2026 | 5.875% | 10,159,000 | 10,200,692 | |
| MEG Energy Corp.(a) | ||||
| 02/01/2029 | 5.875% | 1,336,000 | 1,389,971 | |
| Newfield Exploration Co. | ||||
| 07/01/2024 | 5.625% | 239,000 | 265,733 | |
| 01/01/2026 | 5.375% | 2,025,000 | 2,280,755 | |
| Occidental Petroleum Corp. | ||||
| 08/15/2024 | 2.900% | 7,346,000 | 7,337,705 | |
| 04/15/2026 | 3.400% | 4,798,000 | 4,694,977 | |
| 08/15/2026 | 3.200% | 1,119,000 | 1,081,931 | |
| 08/15/2029 | 3.500% | 3,763,000 | 3,528,615 | |
| 09/01/2030 | 6.625% | 6,530,000 | 7,482,661 | |
| 01/01/2031 | 6.125% | 1,687,000 | 1,870,825 | |
| 09/15/2036 | 6.450% | 1,938,000 | 2,178,674 | |
| 03/15/2046 | 6.600% | 1,129,000 | 1,235,456 | |
| 04/15/2046 | 4.400% | 7,471,000 | 6,389,974 | |
| 08/15/2049 | 4.400% | 996,000 | 842,131 | |
| Ovintiv, Inc. | ||||
| 11/01/2031 | 7.200% | 305,000 | 398,969 | |
| SM Energy Co. | ||||
| 06/01/2025 | 5.625% | 1,555,000 | 1,487,965 | |
| 09/15/2026 | 6.750% | 5,933,000 | 5,914,064 | |
| 01/15/2027 | 6.625% | 3,582,000 | 3,584,161 | |
| Total | 126,382,832 | |||
| Leisure 3.4% | ||||
| Carnival Corp.(a) | ||||
| 03/01/2026 | 7.625% | 3,773,000 | 4,139,004 | |
| 03/01/2027 | 5.750% | 5,805,000 | 6,167,344 | |
| Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp. | ||||
| 06/01/2024 | 5.375% | 2,873,000 | 2,901,546 | |
| Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp./Millennium Operations LLC(a) | ||||
| 05/01/2025 | 5.500% | 4,476,000 | 4,675,835 | |
| 10/01/2028 | 6.500% | 1,198,000 | 1,275,870 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
13 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
15 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Corporate Bonds & Notes (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| CenturyLink, Inc.(a) | ||||
| 12/15/2026 | 5.125% | 3,266,000 | 3,385,748 | |
| 02/15/2027 | 4.000% | 1,570,000 | 1,589,975 | |
| Front Range BidCo, Inc.(a) | ||||
| 03/01/2027 | 4.000% | 5,856,000 | 5,753,025 | |
| 03/01/2028 | 6.125% | 3,961,000 | 4,031,590 | |
| Level 3 Financing, Inc.(a) | ||||
| 07/01/2028 | 4.250% | 6,359,000 | 6,378,735 | |
| Northwest Fiber LLC/Finance Sub, Inc.(a) | ||||
| 02/15/2028 | 6.000% | 1,696,000 | 1,679,829 | |
| Total | 32,852,868 | |||
|
Total Corporate Bonds & Notes
(Cost $1,652,454,351) |
1,708,477,807 | |||
| Exchange-Traded Fixed Income Funds 1.1% | ||
| Shares | Value ($) | |
| High Yield 1.1% | ||
| iShares iBoxx $ High Yield Corporate Bond ETF | 231,600 | 20,190,888 |
|
Total Exchange-Traded Fixed Income Funds
(Cost $20,057,605) |
20,190,888 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
17 |
| Senior Loans (continued) | ||||
| Borrower |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| DCert Buyer, Inc.(f),(g) | ||||
| 2nd Lien Term Loan | ||||
|
1-month USD LIBOR + 7.000%
02/19/2029 |
7.093% | 2,702,000 | 2,715,510 | |
| Epicore Software Corp.(f),(g) | ||||
| 2nd Lien Term Loan | ||||
|
1-month USD LIBOR + 7.750%
Floor 1.000% 07/31/2028 |
8.750% | 1,039,000 | 1,066,534 | |
| Project Alpha Intermediate Holding, Inc.(f),(g) | ||||
| Term Loan | ||||
|
1-month USD LIBOR + 4.000%
04/26/2024 |
4.100% | 2,503,139 | 2,504,190 | |
| UKG, Inc.(f),(g) | ||||
| 1st Lien Term Loan | ||||
|
3-month USD LIBOR + 3.750%
05/04/2026 |
3.843% | 1,863,620 | 1,864,980 | |
| Total | 11,360,619 | |||
|
Total Senior Loans
(Cost $31,690,420) |
31,729,889 | |||
| Money Market Funds 2.8% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(i),(j) | 51,315,833 | 51,310,701 |
|
Total Money Market Funds
(Cost $51,313,467) |
51,310,701 | |
|
Total Investments in Securities
(Cost: $1,763,596,869) |
1,820,248,955 | |
| Other Assets & Liabilities, Net | (3,640,075) | |
| Net Assets | 1,816,608,880 | |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At May 31, 2021, the total value of these securities amounted to $1,254,884,972, which represents 69.08% of total net assets. |
| (b) | Represents a security purchased on a when-issued basis. |
| (c) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (d) | Represents a variable rate security with a step coupon where the rate adjusts 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 interest rate shown was the current rate as of May 31, 2021. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of Investments (continued)
| (e) | Principal and interest may not be guaranteed by a governmental entity. |
| (f) | The stated interest rate represents the weighted average interest rate at May 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay, cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (g) | Variable rate security. The interest rate shown was the current rate as of May 31, 2021. |
| (h) | Represents a security purchased on a forward commitment basis. |
| (i) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (j) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 61,158,038 | 711,022,315 | (720,873,266) | 3,614 | 51,310,701 | (11,620) | 61,281 | 51,315,833 | |
Abbreviation Legend
| LIBOR | London Interbank Offered Rate |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
19 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Convertible Bonds | — | 3,436,560 | — | 3,436,560 |
| Corporate Bonds & Notes | — | 1,708,477,807 | — | 1,708,477,807 |
| Exchange-Traded Fixed Income Funds | 20,190,888 | — | — | 20,190,888 |
| Foreign Government Obligations | — | 5,103,110 | — | 5,103,110 |
| Senior Loans | — | 31,729,889 | — | 31,729,889 |
| Money Market Funds | 51,310,701 | — | — | 51,310,701 |
| Total Investments in Securities | 71,501,589 | 1,748,747,366 | — | 1,820,248,955 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Columbia High Yield Bond Fund | Annual Report 2021 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,712,283,402) | $1,768,938,254 |
| Affiliated issuers (cost $51,313,467) | 51,310,701 |
| Cash | 44,318 |
| Receivable for: | |
| Investments sold | 2,274,229 |
| Capital shares sold | 7,132,135 |
| Dividends | 1,617 |
| Interest | 22,194,451 |
| Foreign tax reclaims | 21,586 |
| Expense reimbursement due from Investment Manager | 792 |
| Prepaid expenses | 23,964 |
| Trustees’ deferred compensation plan | 1,080 |
| Total assets | 1,851,943,127 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 1,632,695 |
| Investments purchased on a delayed delivery basis | 25,188,461 |
| Capital shares purchased | 1,718,283 |
| Distributions to shareholders | 6,416,678 |
| Management services fees | 31,126 |
| Distribution and/or service fees | 4,993 |
| Transfer agent fees | 111,090 |
| Compensation of board members | 186,288 |
| Other expenses | 43,553 |
| Trustees’ deferred compensation plan | 1,080 |
| Total liabilities | 35,334,247 |
| Net assets applicable to outstanding capital stock | $1,816,608,880 |
| Represented by | |
| Paid in capital | 1,781,005,398 |
| Total distributable earnings (loss) | 35,603,482 |
| Total - representing net assets applicable to outstanding capital stock | $1,816,608,880 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
21 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $627,451,242 |
| Shares outstanding | 52,150,931 |
| Net asset value per share | $12.03 |
| Maximum sales charge | 4.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $12.63 |
| Advisor Class | |
| Net assets | $102,027,604 |
| Shares outstanding | 8,431,683 |
| Net asset value per share | $12.10 |
| Class C | |
| Net assets | $17,974,445 |
| Shares outstanding | 1,503,025 |
| Net asset value per share | $11.96 |
| Institutional Class | |
| Net assets | $191,647,583 |
| Shares outstanding | 15,942,139 |
| Net asset value per share | $12.02 |
| Institutional 2 Class | |
| Net assets | $82,318,802 |
| Shares outstanding | 6,866,291 |
| Net asset value per share | $11.99 |
| Institutional 3 Class | |
| Net assets | $779,694,834 |
| Shares outstanding | 64,918,967 |
| Net asset value per share | $12.01 |
| Class R | |
| Net assets | $15,494,370 |
| Shares outstanding | 1,283,939 |
| Net asset value per share | $12.07 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia High Yield Bond Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $853,187 |
| Dividends — affiliated issuers | 61,281 |
| Interest | 84,488,054 |
| Interfund lending | 357 |
| Total income | 85,402,879 |
| Expenses: | |
| Management services fees | 9,989,557 |
| Distribution and/or service fees | |
| Class A | 1,565,758 |
| Class C | 241,231 |
| Class R | 71,288 |
| Transfer agent fees | |
| Class A | 788,645 |
| Advisor Class | 129,461 |
| Class C | 30,365 |
| Institutional Class | 236,376 |
| Institutional 2 Class | 50,245 |
| Institutional 3 Class | 35,026 |
| Class R | 17,960 |
| Compensation of board members | 87,401 |
| Custodian fees | 20,350 |
| Printing and postage fees | 89,527 |
| Registration fees | 144,146 |
| Audit fees | 39,500 |
| Legal fees | 23,424 |
| Compensation of chief compliance officer | 322 |
| Other | 65,540 |
| Total expenses | 13,626,122 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (433,824) |
| Expense reduction | (1,745) |
| Total net expenses | 13,190,553 |
| Net investment income | 72,212,326 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 21,498,892 |
| Investments — affiliated issuers | (11,620) |
| Net realized gain | 21,487,272 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 84,111,802 |
| Investments — affiliated issuers | 3,614 |
| Net change in unrealized appreciation (depreciation) | 84,115,416 |
| Net realized and unrealized gain | 105,602,688 |
| Net increase in net assets resulting from operations | $177,815,014 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
23 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $72,212,326 | $71,204,961 |
| Net realized gain (loss) | 21,487,272 | (5,204,329) |
| Net change in unrealized appreciation (depreciation) | 84,115,416 | (19,182,857) |
| Net increase in net assets resulting from operations | 177,815,014 | 46,817,775 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (28,356,306) | (33,176,464) |
| Advisor Class | (4,905,238) | (4,988,087) |
| Class C | (914,630) | (1,245,738) |
| Institutional Class | (8,974,548) | (9,036,268) |
| Institutional 2 Class | (4,377,598) | (4,192,698) |
| Institutional 3 Class | (26,237,306) | (18,759,219) |
| Class R | (608,837) | (832,937) |
| Total distributions to shareholders | (74,374,463) | (72,231,411) |
| Increase (decrease) in net assets from capital stock activity | 365,946,919 | (98,548,727) |
| Total increase (decrease) in net assets | 469,387,470 | (123,962,363) |
| Net assets at beginning of year | 1,347,221,410 | 1,471,183,773 |
| Net assets at end of year | $1,816,608,880 | $1,347,221,410 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia High Yield Bond Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares(a) | Dollars ($) | Shares(a) | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 8,264,991 | 97,279,567 | 11,326,165 | 130,695,026 |
| Distributions reinvested | 2,321,040 | 27,363,682 | 2,770,327 | 32,013,534 |
| Redemptions | (13,558,506) | (159,608,974) | (19,498,614) | (224,162,581) |
| Net decrease | (2,972,475) | (34,965,725) | (5,402,122) | (61,454,021) |
| Advisor Class | ||||
| Subscriptions | 2,987,691 | 35,538,566 | 3,540,362 | 41,361,342 |
| Distributions reinvested | 408,304 | 4,840,814 | 425,525 | 4,933,242 |
| Redemptions | (3,715,454) | (44,138,596) | (2,917,909) | (33,384,045) |
| Net increase (decrease) | (319,459) | (3,759,216) | 1,047,978 | 12,910,539 |
| Class C | ||||
| Subscriptions | 268,330 | 3,132,206 | 283,564 | 3,214,242 |
| Distributions reinvested | 75,053 | 877,422 | 103,091 | 1,185,083 |
| Redemptions | (1,224,998) | (14,493,473) | (1,002,261) | (11,497,566) |
| Net decrease | (881,615) | (10,483,845) | (615,606) | (7,098,241) |
| Institutional Class | ||||
| Subscriptions | 6,639,646 | 77,994,366 | 7,987,677 | 88,646,660 |
| Distributions reinvested | 713,483 | 8,402,821 | 728,857 | 8,417,927 |
| Redemptions | (6,745,509) | (79,631,218) | (8,623,208) | (96,653,041) |
| Net increase | 607,620 | 6,765,969 | 93,326 | 411,546 |
| Institutional 2 Class | ||||
| Subscriptions | 4,940,909 | 57,522,970 | 11,568,108 | 132,577,910 |
| Distributions reinvested | 371,362 | 4,364,340 | 357,363 | 4,134,529 |
| Redemptions | (7,041,636) | (81,963,846) | (10,159,041) | (118,005,485) |
| Net increase (decrease) | (1,729,365) | (20,076,536) | 1,766,430 | 18,706,954 |
| Institutional 3 Class | ||||
| Subscriptions | 36,886,109 | 438,961,766 | 8,329,019 | 92,033,019 |
| Distributions reinvested | 2,090,952 | 24,757,782 | 1,480,160 | 17,077,934 |
| Redemptions | (3,037,650) | (35,799,950) | (14,599,656) | (166,668,967) |
| Net increase (decrease) | 35,939,411 | 427,919,598 | (4,790,477) | (57,558,014) |
| Class R | ||||
| Subscriptions | 358,217 | 4,258,173 | 406,385 | 4,747,696 |
| Distributions reinvested | 47,735 | 564,499 | 62,562 | 724,466 |
| Redemptions | (362,711) | (4,275,998) | (886,321) | (9,939,652) |
| Net increase (decrease) | 43,241 | 546,674 | (417,374) | (4,467,490) |
| Total net increase (decrease) | 30,687,358 | 365,946,919 | (8,317,845) | (98,548,727) |
| (a) | Share activity has been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
25 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Total
distributions to shareholders |
|
| Class A(c) | ||||||
| Year Ended 5/31/2021 | $11.19 | 0.52 | 0.85 | 1.37 | (0.53) | (0.53) |
| Year Ended 5/31/2020 | $11.44 | 0.56 | (0.25) | 0.31 | (0.56) | (0.56) |
| Year Ended 5/31/2019 | $11.39 | 0.56 | 0.05 | 0.61 | (0.56) | (0.56) |
| Year Ended 5/31/2018 | $11.92 | 0.56 | (0.57) | (0.01) | (0.52) | (0.52) |
| Year Ended 5/31/2017 | $11.38 | 0.56 | 0.54 | 1.10 | (0.56) | (0.56) |
| Advisor Class(c) | ||||||
| Year Ended 5/31/2021 | $11.26 | 0.55 | 0.85 | 1.40 | (0.56) | (0.56) |
| Year Ended 5/31/2020 | $11.50 | 0.60 | (0.24) | 0.36 | (0.60) | (0.60) |
| Year Ended 5/31/2019 | $11.46 | 0.60 | 0.04 | 0.64 | (0.60) | (0.60) |
| Year Ended 5/31/2018 | $11.99 | 0.56 | (0.53) | 0.03 | (0.56) | (0.56) |
| Year Ended 5/31/2017 | $11.45 | 0.60 | 0.54 | 1.14 | (0.60) | (0.60) |
| Class C(c) | ||||||
| Year Ended 5/31/2021 | $11.13 | 0.43 | 0.84 | 1.27 | (0.44) | (0.44) |
| Year Ended 5/31/2020 | $11.36 | 0.48 | (0.23) | 0.25 | (0.48) | (0.48) |
| Year Ended 5/31/2019 | $11.32 | 0.48 | 0.04 | 0.52 | (0.48) | (0.48) |
| Year Ended 5/31/2018 | $11.84 | 0.44 | (0.52) | (0.08) | (0.44) | (0.44) |
| Year Ended 5/31/2017 | $11.30 | 0.48 | 0.54 | 1.02 | (0.48) | (0.48) |
| Institutional Class(c) | ||||||
| Year Ended 5/31/2021 | $11.19 | 0.54 | 0.85 | 1.39 | (0.56) | (0.56) |
| Year Ended 5/31/2020 | $11.43 | 0.60 | (0.24) | 0.36 | (0.60) | (0.60) |
| Year Ended 5/31/2019 | $11.38 | 0.60 | 0.05 | 0.65 | (0.60) | (0.60) |
| Year Ended 5/31/2018 | $11.91 | 0.56 | (0.53) | 0.03 | (0.56) | (0.56) |
| Year Ended 5/31/2017 | $11.36 | 0.60 | 0.55 | 1.15 | (0.60) | (0.60) |
| Institutional 2 Class(c) | ||||||
| Year Ended 5/31/2021 | $11.16 | 0.55 | 0.85 | 1.40 | (0.57) | (0.57) |
| Year Ended 5/31/2020 | $11.39 | 0.60 | (0.23) | 0.37 | (0.60) | (0.60) |
| Year Ended 5/31/2019 | $11.35 | 0.60 | 0.04 | 0.64 | (0.60) | (0.60) |
| Year Ended 5/31/2018 | $11.88 | 0.56 | (0.53) | 0.03 | (0.56) | (0.56) |
| Year Ended 5/31/2017 | $11.35 | 0.60 | 0.53 | 1.13 | (0.60) | (0.60) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 26 | Columbia High Yield Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A(c) | |||||||
| Year Ended 5/31/2021 | $12.03 | 12.35% | 1.03% | 1.01%(d) | 4.39% | 58% | $627,451 |
| Year Ended 5/31/2020 | $11.19 | 2.82% | 1.04% | 1.03%(d) | 4.86% | 59% | $617,031 |
| Year Ended 5/31/2019 | $11.44 | 5.47% | 1.04% | 1.04%(d) | 4.93% | 41% | $692,138 |
| Year Ended 5/31/2018 | $11.39 | 0.10% | 1.03% | 1.03%(d) | 4.60% | 49% | $778,978 |
| Year Ended 5/31/2017 | $11.92 | 10.08% | 1.03% | 1.03%(d) | 4.77% | 60% | $929,057 |
| Advisor Class(c) | |||||||
| Year Ended 5/31/2021 | $12.10 | 12.89% | 0.78% | 0.76%(d) | 4.63% | 58% | $102,028 |
| Year Ended 5/31/2020 | $11.26 | 3.08% | 0.79% | 0.78%(d) | 5.11% | 59% | $98,512 |
| Year Ended 5/31/2019 | $11.50 | 5.36% | 0.79% | 0.79%(d) | 5.17% | 41% | $88,582 |
| Year Ended 5/31/2018 | $11.46 | 0.37% | 0.78% | 0.78%(d) | 4.89% | 49% | $112,377 |
| Year Ended 5/31/2017 | $11.99 | 10.32% | 0.79% | 0.79%(d) | 5.04% | 60% | $68,934 |
| Class C(c) | |||||||
| Year Ended 5/31/2021 | $11.96 | 11.66% | 1.78% | 1.76%(d) | 3.65% | 58% | $17,974 |
| Year Ended 5/31/2020 | $11.13 | 2.03% | 1.79% | 1.78%(d) | 4.12% | 59% | $26,532 |
| Year Ended 5/31/2019 | $11.36 | 4.68% | 1.79% | 1.79%(d) | 4.17% | 41% | $34,097 |
| Year Ended 5/31/2018 | $11.32 | (0.68%) | 1.78% | 1.78%(d) | 3.85% | 49% | $65,568 |
| Year Ended 5/31/2017 | $11.84 | 8.91% | 1.78% | 1.78%(d) | 4.02% | 60% | $84,315 |
| Institutional Class(c) | |||||||
| Year Ended 5/31/2021 | $12.02 | 12.54% | 0.78% | 0.76%(d) | 4.63% | 58% | $191,648 |
| Year Ended 5/31/2020 | $11.19 | 3.07% | 0.79% | 0.78%(d) | 5.11% | 59% | $171,521 |
| Year Ended 5/31/2019 | $11.43 | 5.73% | 0.79% | 0.79%(d) | 5.17% | 41% | $174,135 |
| Year Ended 5/31/2018 | $11.38 | 0.35% | 0.78% | 0.78%(d) | 4.84% | 49% | $242,148 |
| Year Ended 5/31/2017 | $11.91 | 10.36% | 0.79% | 0.79%(d) | 5.04% | 60% | $395,530 |
| Institutional 2 Class(c) | |||||||
| Year Ended 5/31/2021 | $11.99 | 12.74% | 0.71% | 0.69% | 4.70% | 58% | $82,319 |
| Year Ended 5/31/2020 | $11.16 | 3.14% | 0.72% | 0.71% | 5.15% | 59% | $95,933 |
| Year Ended 5/31/2019 | $11.39 | 5.82% | 0.71% | 0.71% | 5.23% | 41% | $77,805 |
| Year Ended 5/31/2018 | $11.35 | 0.40% | 0.71% | 0.71% | 4.92% | 49% | $136,612 |
| Year Ended 5/31/2017 | $11.88 | 10.08% | 0.70% | 0.70% | 5.11% | 60% | $143,247 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
27 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Total
distributions to shareholders |
|
| Institutional 3 Class(c) | ||||||
| Year Ended 5/31/2021 | $11.17 | 0.55 | 0.86 | 1.41 | (0.57) | (0.57) |
| Year Ended 5/31/2020 | $11.41 | 0.60 | (0.24) | 0.36 | (0.60) | (0.60) |
| Year Ended 5/31/2019 | $11.37 | 0.60 | 0.04 | 0.64 | (0.60) | (0.60) |
| Year Ended 5/31/2018 | $11.90 | 0.60 | (0.53) | 0.07 | (0.60) | (0.60) |
| Year Ended 5/31/2017 | $11.34 | 0.60 | 0.56 | 1.16 | (0.60) | (0.60) |
| Class R(c) | ||||||
| Year Ended 5/31/2021 | $11.23 | 0.49 | 0.85 | 1.34 | (0.50) | (0.50) |
| Year Ended 5/31/2020 | $11.47 | 0.52 | (0.24) | 0.28 | (0.52) | (0.52) |
| Year Ended 5/31/2019 | $11.43 | 0.52 | 0.04 | 0.56 | (0.52) | (0.52) |
| Year Ended 5/31/2018 | $11.96 | 0.52 | (0.53) | (0.01) | (0.52) | (0.52) |
| Year Ended 5/31/2017 | $11.41 | 0.52 | 0.55 | 1.07 | (0.52) | (0.52) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Per share amounts have been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 28 | Columbia High Yield Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class(c) | |||||||
| Year Ended 5/31/2021 | $12.01 | 12.99% | 0.67% | 0.64% | 4.70% | 58% | $779,695 |
| Year Ended 5/31/2020 | $11.17 | 3.19% | 0.66% | 0.66% | 5.23% | 59% | $323,763 |
| Year Ended 5/31/2019 | $11.41 | 5.87% | 0.66% | 0.66% | 5.29% | 41% | $385,410 |
| Year Ended 5/31/2018 | $11.37 | 0.45% | 0.66% | 0.66% | 4.99% | 49% | $475,135 |
| Year Ended 5/31/2017 | $11.90 | 10.13% | 0.65% | 0.65% | 5.17% | 60% | $353,045 |
| Class R(c) | |||||||
| Year Ended 5/31/2021 | $12.07 | 12.05% | 1.28% | 1.26%(d) | 4.13% | 58% | $15,494 |
| Year Ended 5/31/2020 | $11.23 | 2.57% | 1.29% | 1.28%(d) | 4.61% | 59% | $13,930 |
| Year Ended 5/31/2019 | $11.47 | 5.21% | 1.29% | 1.29%(d) | 4.68% | 41% | $19,019 |
| Year Ended 5/31/2018 | $11.43 | (0.14%) | 1.28% | 1.28%(d) | 4.36% | 49% | $22,450 |
| Year Ended 5/31/2017 | $11.96 | 9.79% | 1.28% | 1.28%(d) | 4.52% | 60% | $25,925 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
29 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia High Yield Bond Fund
(the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The Fund’s Board of Trustees
approved reverse stock splits of the issued and outstanding shares of the Fund (the Reverse Stock Split). The Reverse Stock Split was completed after the close of business on September 11, 2020. The impact of the
Reverse Stock Split was to decrease the number of shares outstanding and increase the net asset value per share for each share class of the Fund by the ratio of 4 to 1, resulting in no effect on the net assets of each
share class or the value of each affected shareholder’s investment. Capital stock share activity reflected in the Statement of Changes in Net Assets and per share data in the Financial Highlights have been
adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
| 30 | Columbia High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In
addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when
purchased, may become illiquid.
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
31 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. For
convertible securities, premiums attributable to the conversion feature are not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
| 32 | Columbia High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.66% to 0.40% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.63% of the Fund’s average
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
For the year ended May 31, 2021,
the Fund engaged in purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers. Those
purchase and sale transactions complied with provisions of Rule 17a-7 under the 1940 Act and were $128,768,228 and $0, respectively.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
33 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.13 |
| Advisor Class | 0.13 |
| Class C | 0.13 |
| Institutional Class | 0.13 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.13 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $1,745.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $6,519,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
| 34 | Columbia High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 4.75 | 0.50 - 1.00(a) | 255,180 |
| Class C | — | 1.00(b) | 2,290 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, distributions, capital loss carryforward and principal and/or interest of fixed income
securities. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
35 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The following reclassifications
were made:
|
Undistributed net
investment income ($) |
Accumulated
net realized (loss) ($) |
Paid in
capital ($) |
| 1,379,011 | (1,379,011) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 74,374,463 | — | 74,374,463 | 72,231,411 | — | 72,231,411 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 6,853,826 | — | (20,189,954) | 55,541,310 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 1,764,707,645 | 63,718,880 | (8,177,570) | 55,541,310 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at May 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended May 31,
2021, capital loss carryforwards utilized, if any, were as follows:
|
No expiration
short-term ($) |
No expiration
long-term ($) |
Total ($) | Utilized ($) |
| (9,021,376) | (11,168,578) | (20,189,954) | 20,018,764 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,283,912,883 and $892,669,226, respectively, for the year ended May 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
| 36 | Columbia High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Lender | 1,484,615 | 0.67 | 13 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
37 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer 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. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
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 rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting
in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The
Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. 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. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market
| 38 | Columbia High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
access, resource availability, facilities
operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in
human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other
third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may
arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market
countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political,
social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the
Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, affiliated
shareholders of record owned 67.2% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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
|
Columbia High Yield Bond Fund | Annual Report 2021
|
39 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
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 or one or more of its affiliates that provides services to
the Fund.
| 40 | Columbia High Yield Bond Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia High Yield Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia High Yield Bond Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the
financial highlights for each of the five years in the period ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, agent banks, transfer agent and brokers; when
replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia High Yield Bond Fund | Annual Report 2021
|
41 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Section
163(j) Interest Dividends |
|
| 98.83% |
Section 163(j) Interest Dividends.
The percentage of ordinary income distributed during the fiscal year that shareholders may treat as interest income for purposes of IRC Section 163(j), subject to holding period requirements and other limitations.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 42 | Columbia High Yield Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia High Yield Bond Fund | Annual Report 2021
|
43 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 44 | Columbia High Yield Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia High Yield Bond Fund | Annual Report 2021
|
45 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 46 | Columbia High Yield Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Columbia High Yield Bond Fund | Annual Report 2021
|
47 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 48 | Columbia High Yield Bond Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia High Yield Bond Fund | Annual Report 2021
|
49 |
Columbia High Yield Bond Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN160_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Dividend
Opportunity Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Dividend Opportunity Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Dividend Opportunity
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high level of current income. The Fund’s secondary objective is growth of income and capital.
Portfolio management
David King, CFA
Lead Portfolio Manager
Managed Fund since 2018
Yan Jin
Portfolio Manager
Managed Fund since 2018
Grace Lee, CAIA
Portfolio Manager
Managed Fund since October 2020
Morningstar style boxTM
The Morningstar Style Box is based on a fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows
investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.
© 2021 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Returns for Class A shares are shown
with and without the maximum initial sales charge of 5.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The MSCI USA High Dividend Yield
Index (Net) is composed of those securities in the MSCI USA Index that have higher-than-average dividend yield (e.g. 30% higher than that of the MSCI USA Index), a track record of consistent dividend payments and the
capacity to sustain future dividend payments. The MSCI USA Index is a free float adjusted market capitalization index that is designed to measure large- and mid-cap U.S. equity market performance.
The Russell 1000 Value Index, an
unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes (except the MSCI USA High Dividend Yield Index (Net), which reflects reinvested dividends net of
withholding taxes) or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Dividend Opportunity Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 91.9 |
| Convertible Preferred Stocks | 8.0 |
| Money Market Funds | 0.1 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
Percentages indicated are based
upon total equity investments. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that ended
May 31, 2021, the Fund’s Class A shares returned 34.85% excluding sales charges. During the same time period, the Fund outperformed its benchmark, the MSCI USA High Dividend Yield Index (Net), which returned
27.15%, and underperformed the Russell 1000 Value Index, which returned 44.38%.
Market overview
U.S. equities delivered
substantial gains for the 12 months ended May 31, 2021. Quick and unprecedented measures taken by policymakers and the U.S. Federal Reserve in the wake of the sharp COVID-19-driven market plunge in March 2020 spurred
markets to rally from the start of the period through the end, marked by some spikes in volatility on headlines around increasing COVID-19 cases and stalled talks on further stimulus. Market participants, however,
were cheered by expectations that the rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. Passage of a fiscal stimulus package, together with the proposal of a $2 trillion
infrastructure bill in late March 2021, provided a further boost to the economic outlook.
While the rally during the first
half of the period was largely driven by outsize gains in faster growing market segments such as mega-cap technology stocks, the second half of the year saw a rotation into more economically-sensitive, value-oriented
market segments. Within the benchmark, performance for the period was led by the materials, financials, and industrials sectors, while the communication services, utilities, and health care sectors trailed.
The Fund’s most notable
contributors during the period
| • | The Fund’s outperformance of its benchmark during the period was led by strong broad-based stock selection, particularly notable within the information technology, industrials, financials and consumer discretionary sectors. |
| • | Sector allocation was a secondary contributor, with the Fund’s overweight to the strong performing financials sector further boosting the Fund’s relative results. |
| • | Within financials, key contributors included Morgan Stanley, JP Morgan Chase and PNC Financial Services Group, all of which posted gains above 30%. Valuations for these stocks had become very depressed in the early part of the year, due in part to concerns about possible dividend reductions. These fears have since receded, boosting the stocks and aiding fund performance. |
| • | Within information technology: |
| ○ | An underweight position in chipmaker Intel enabled the Fund to sidestep the stock’s poor relative performance. The stock lagged the broader technology sector in 2020 due to concerns it had fallen behind the curve in terms of innovation. |
| ○ | The Fund benefited from owning a position in Broadcom, which exceeded earnings estimates and raised its forward guidance, leading to outperformance versus its industry peers. |
| • | Within industrials, the Fund’s position in Caterpillar was a top contributor to fund performance. Expectations for accelerating economic growth helped propel the stock to a series of all-time highs throughout the course of the first quarter of 2021. |
The Fund’s most notable
detractors during the period
| • | Stock selection within the utilities sector and the Fund’s allocation to the real estate sector, which is not represented in the benchmark, weighed on the Fund’s returns versus the benchmark. |
| • | Underweight allocations to the strong-performing industrials and consumer discretionary sectors also hampered relative results. |
| • | Within utilities, the Fund’s position in FirstEnergy weighed on results as the company’s stock plunged in mid-July after it was revealed that the company may have been involved in a corruption scandal involving Ohio state representatives. We sold FirstEnergy from the portfolio. |
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
| • | The Fund had decreased its position in Eli Lilly and Company earlier in the period as the company’s stock price lagged as the full phase 2 data from Donanemab, an immunotherapy treatment for early symptomatic Alzheimer’s disease, looked good, but still needed further validation. But as the stock price rallied in the second half of the period, the Fund did not participate as fully, detracting from performance relative to the benchmark. |
| • | The Fund’s position in Chevron Corp. detracted during the period as the company came under pressure from the uncertain outlook for energy demand. |
| • | Not owning Honeywell International and Johnson Controls International, both within the industrials sector, weighed on the Fund’s results versus the benchmark. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Foreign investments subject the Fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent
financial and accounting standards generally applicable to U.S. issuers. Dividend payments are not guaranteed and the amount, if any, can vary over time. See the Fund’s prospectus for more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Tobacco 2.9% | ||
| Altria Group, Inc. | 450,000 | 22,149,000 |
| Philip Morris International, Inc. | 525,000 | 50,625,750 |
| Total | 72,774,750 | |
| Total Consumer Staples | 279,798,625 | |
| Energy 7.6% | ||
| Oil, Gas & Consumable Fuels 7.6% | ||
| Chevron Corp. | 700,000 | 72,653,000 |
| Diamondback Energy, Inc. | 200,000 | 16,014,000 |
| Exxon Mobil Corp. | 1,300,000 | 75,881,000 |
| Valero Energy Corp. | 310,000 | 24,924,000 |
| Total | 189,472,000 | |
| Total Energy | 189,472,000 | |
| Financials 18.2% | ||
| Banks 10.4% | ||
| Bank of America Corp. | 1,040,000 | 44,085,600 |
| JPMorgan Chase & Co. | 625,000 | 102,650,000 |
| PNC Financial Services Group, Inc. (The) | 125,000 | 24,335,000 |
| Truist Financial Corp. | 425,000 | 26,256,500 |
| U.S. Bancorp | 600,000 | 36,468,000 |
| Zions Bancorp | 425,000 | 24,599,000 |
| Total | 258,394,100 | |
| Capital Markets 3.0% | ||
| Ares Capital Corp. | 625,000 | 12,168,750 |
| BlackRock, Inc. | 47,500 | 41,659,400 |
| State Street Corp. | 235,000 | 20,440,300 |
| Total | 74,268,450 | |
| Consumer Finance 0.7% | ||
| Discover Financial Services | 145,000 | 17,002,700 |
| Insurance 4.1% | ||
| Hartford Financial Services Group, Inc. (The) | 480,000 | 31,368,000 |
| MetLife, Inc. | 375,000 | 24,510,000 |
| Principal Financial Group, Inc. | 300,000 | 19,617,000 |
| Travelers Companies, Inc. (The) | 165,000 | 26,350,500 |
| Total | 101,845,500 | |
| Total Financials | 451,510,750 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Health Care 13.3% | ||
| Biotechnology 4.1% | ||
| AbbVie, Inc. | 650,000 | 73,580,000 |
| Amgen, Inc. | 125,000 | 29,742,500 |
| Total | 103,322,500 | |
| Pharmaceuticals 9.2% | ||
| Bristol-Myers Squibb Co. | 765,000 | 50,275,800 |
| Eli Lilly & Co. | 100,000 | 19,974,000 |
| Johnson & Johnson | 650,000 | 110,012,500 |
| Merck & Co., Inc. | 625,000 | 47,431,250 |
| Total | 227,693,550 | |
| Total Health Care | 331,016,050 | |
| Industrials 5.4% | ||
| Aerospace & Defense 1.7% | ||
| Raytheon Technologies Corp. | 490,000 | 43,467,900 |
| Air Freight & Logistics 2.2% | ||
| CH Robinson Worldwide, Inc. | 125,000 | 12,127,500 |
| United Parcel Service, Inc., Class B | 200,000 | 42,920,000 |
| Total | 55,047,500 | |
| Electrical Equipment 1.0% | ||
| Eaton Corp. PLC | 170,000 | 24,692,500 |
| Machinery 0.5% | ||
| AGCO Corp. | 82,500 | 11,415,525 |
| Total Industrials | 134,623,425 | |
| Information Technology 13.4% | ||
| Communications Equipment 2.5% | ||
| Cisco Systems, Inc. | 1,175,000 | 62,157,500 |
| Electronic Equipment, Instruments & Components 0.8% | ||
| Corning, Inc. | 425,000 | 18,542,750 |
| IT Services 2.0% | ||
| International Business Machines Corp. | 350,000 | 50,309,000 |
| Semiconductors & Semiconductor Equipment 5.7% | ||
| Broadcom, Inc. | 125,000 | 59,041,250 |
| Intel Corp. | 650,000 | 37,128,000 |
| Texas Instruments, Inc. | 235,000 | 44,607,700 |
| Total | 140,776,950 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Software 0.6% | ||
| NortonLifeLock, Inc. | 575,000 | 15,904,500 |
| Technology Hardware, Storage & Peripherals 1.8% | ||
| HP, Inc. | 825,000 | 24,114,750 |
| Seagate Technology Holdings PLC | 215,000 | 20,586,250 |
| Total | 44,701,000 | |
| Total Information Technology | 332,391,700 | |
| Materials 2.5% | ||
| Chemicals 1.9% | ||
| Dow, Inc. | 375,000 | 25,657,500 |
| Nutrien Ltd. | 325,000 | 20,198,750 |
| Total | 45,856,250 | |
| Metals & Mining 0.6% | ||
| Steel Dynamics, Inc. | 250,000 | 15,607,500 |
| Total Materials | 61,463,750 | |
| Real Estate 6.2% | ||
| Equity Real Estate Investment Trusts (REITS) 6.2% | ||
| Crown Castle International Corp. | 140,000 | 26,530,000 |
| Invitation Homes, Inc. | 375,000 | 13,601,250 |
| Life Storage, Inc. | 217,500 | 21,628,200 |
| Medical Properties Trust, Inc. | 1,075,000 | 22,757,750 |
| QTS Realty Trust Inc., Class A | 275,000 | 17,429,500 |
| Simon Property Group, Inc. | 150,000 | 19,273,500 |
| VICI Properties, Inc. | 400,000 | 12,452,000 |
| Welltower, Inc. | 260,000 | 19,440,200 |
| Total | 153,112,400 | |
| Total Real Estate | 153,112,400 | |
| Utilities 4.0% | ||
| Electric Utilities 3.2% | ||
| American Electric Power Co., Inc. | 215,000 | 18,490,000 |
| Duke Energy Corp. | 240,000 | 24,052,800 |
| Edison International | 300,000 | 16,761,000 |
| Pinnacle West Capital Corp. | 225,000 | 19,030,500 |
| Total | 78,334,300 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Multi-Utilities 0.8% | ||
| Ameren Corp. | 235,000 | 19,787,000 |
| Total Utilities | 98,121,300 | |
|
Total Common Stocks
(Cost $1,689,686,972) |
2,271,117,475 | |
| Convertible Preferred Stocks 8.0% | |||
| Issuer | Shares | Value ($) | |
| Communication Services 1.0% | |||
| Diversified Telecommunication Services 0.5% | |||
| 2020 Cash Mandatory Exchangeable Trust(a) | 5.250% | 10,000 | 12,329,800 |
| Media 0.5% | |||
| ViacomCBS, Inc. | 5.750% | 185,000 | 13,122,225 |
| Total Communication Services | 25,452,025 | ||
| Consumer Discretionary 0.8% | |||
| Auto Components 0.8% | |||
| Aptiv PLC | 5.500% | 120,000 | 20,384,400 |
| Total Consumer Discretionary | 20,384,400 | ||
| Financials 0.6% | |||
| Capital Markets 0.6% | |||
| KKR & Co., Inc. | 6.000% | 200,000 | 14,862,000 |
| Total Financials | 14,862,000 | ||
| Health Care 1.3% | |||
| Health Care Equipment & Supplies 1.3% | |||
| Becton Dickinson and Co. | 6.000% | 235,000 | 12,812,200 |
| Danaher Corp. | 5.000% | 12,700 | 18,070,830 |
| Total | 30,883,030 | ||
| Total Health Care | 30,883,030 | ||
| Convertible Preferred Stocks (continued) | |||
| Issuer | Shares | Value ($) | |
| Industrials 0.8% | |||
| Machinery 0.8% | |||
| Stanley Black & Decker, Inc. | 5.250% | 152,500 | 19,280,575 |
| Total Industrials | 19,280,575 | ||
| Utilities 3.5% | |||
| Electric Utilities 1.0% | |||
| NextEra Energy, Inc. | 6.219% | 500,000 | 24,190,000 |
| Multi-Utilities 2.5% | |||
| DTE Energy Co. | 6.250% | 725,000 | 37,011,250 |
| NiSource, Inc. | 7.750% | 240,000 | 25,543,200 |
| Total | 62,554,450 | ||
| Total Utilities | 86,744,450 | ||
|
Total Convertible Preferred Stocks
(Cost $163,045,513) |
197,606,480 | ||
| Money Market Funds 0.1% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(b),(c) | 3,382,629 | 3,382,291 |
|
Total Money Market Funds
(Cost $3,382,291) |
3,382,291 | |
|
Total Investments in Securities
(Cost: $1,856,114,776) |
2,472,106,246 | |
| Other Assets & Liabilities, Net | 8,556,475 | |
| Net Assets | 2,480,662,721 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At May 31, 2021, the total value of these securities amounted to $12,329,800, which represents 0.50% of total net assets. |
| (b) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 63,366,644 | 471,671,518 | (531,648,988) | (6,883) | 3,382,291 | 3,801 | 19,529 | 3,382,629 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Health Care | 331,016,050 | — | — | 331,016,050 |
| Industrials | 134,623,425 | — | — | 134,623,425 |
| Information Technology | 332,391,700 | — | — | 332,391,700 |
| Materials | 61,463,750 | — | — | 61,463,750 |
| Real Estate | 153,112,400 | — | — | 153,112,400 |
| Utilities | 98,121,300 | — | — | 98,121,300 |
| Total Common Stocks | 2,271,117,475 | — | — | 2,271,117,475 |
| Convertible Preferred Stocks | ||||
| Communication Services | — | 25,452,025 | — | 25,452,025 |
| Consumer Discretionary | — | 20,384,400 | — | 20,384,400 |
| Financials | — | 14,862,000 | — | 14,862,000 |
| Health Care | — | 30,883,030 | — | 30,883,030 |
| Industrials | — | 19,280,575 | — | 19,280,575 |
| Utilities | — | 86,744,450 | — | 86,744,450 |
| Total Convertible Preferred Stocks | — | 197,606,480 | — | 197,606,480 |
| Money Market Funds | 3,382,291 | — | — | 3,382,291 |
| Total Investments in Securities | 2,274,499,766 | 197,606,480 | — | 2,472,106,246 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,852,732,485) | $2,468,723,955 |
| Affiliated issuers (cost $3,382,291) | 3,382,291 |
| Receivable for: | |
| Capital shares sold | 762,956 |
| Dividends | 8,693,331 |
| Foreign tax reclaims | 1,810,258 |
| Prepaid expenses | 28,749 |
| Total assets | 2,483,401,540 |
| Liabilities | |
| Due to custodian | 32,300 |
| Payable for: | |
| Investments purchased | 582,664 |
| Capital shares purchased | 1,503,684 |
| Management services fees | 42,865 |
| Distribution and/or service fees | 12,831 |
| Transfer agent fees | 202,272 |
| Compensation of board members | 299,562 |
| Other expenses | 62,641 |
| Total liabilities | 2,738,819 |
| Net assets applicable to outstanding capital stock | $2,480,662,721 |
| Represented by | |
| Paid in capital | 1,717,297,150 |
| Total distributable earnings (loss) | 763,365,571 |
| Total - representing net assets applicable to outstanding capital stock | $2,480,662,721 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
13 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $1,375,445,279 |
| Shares outstanding | 34,540,227 |
| Net asset value per share | $39.82 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $42.25 |
| Advisor Class | |
| Net assets | $108,944,593 |
| Shares outstanding | 2,671,201 |
| Net asset value per share | $40.78 |
| Class C | |
| Net assets | $104,339,249 |
| Shares outstanding | 2,697,133 |
| Net asset value per share | $38.69 |
| Institutional Class | |
| Net assets | $572,006,825 |
| Shares outstanding | 14,278,594 |
| Net asset value per share | $40.06 |
| Institutional 2 Class | |
| Net assets | $134,774,723 |
| Shares outstanding | 3,354,569 |
| Net asset value per share | $40.18 |
| Institutional 3 Class | |
| Net assets | $145,246,838 |
| Shares outstanding | 3,549,153 |
| Net asset value per share | $40.92 |
| Class R | |
| Net assets | $39,905,214 |
| Shares outstanding | 1,002,773 |
| Net asset value per share | $39.79 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $88,515,283 |
| Dividends — affiliated issuers | 19,529 |
| Interest | 723,950 |
| Foreign taxes withheld | (131,328) |
| Total income | 89,127,434 |
| Expenses: | |
| Management services fees | 14,186,003 |
| Distribution and/or service fees | |
| Class A | 3,015,270 |
| Class C | 1,388,910 |
| Class R | 176,744 |
| Transfer agent fees | |
| Class A | 1,205,104 |
| Advisor Class | 90,985 |
| Class C | 139,709 |
| Institutional Class | 509,425 |
| Institutional 2 Class | 69,058 |
| Institutional 3 Class | 8,819 |
| Class R | 35,301 |
| Compensation of board members | 131,945 |
| Custodian fees | 13,949 |
| Printing and postage fees | 134,441 |
| Registration fees | 138,068 |
| Audit fees | 58,592 |
| Legal fees | 29,171 |
| Compensation of chief compliance officer | 433 |
| Other | 113,425 |
| Total expenses | 21,445,352 |
| Fees waived by transfer agent | |
| Institutional 2 Class | (16,500) |
| Institutional 3 Class | (8,819) |
| Expense reduction | (80) |
| Total net expenses | 21,419,953 |
| Net investment income | 67,707,481 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 139,318,086 |
| Investments — affiliated issuers | 3,801 |
| Foreign currency translations | 17,154 |
| Net realized gain | 139,339,041 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 468,113,839 |
| Investments — affiliated issuers | (6,883) |
| Foreign currency translations | 154,588 |
| Net change in unrealized appreciation (depreciation) | 468,261,544 |
| Net realized and unrealized gain | 607,600,585 |
| Net increase in net assets resulting from operations | $675,308,066 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
15 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $67,707,481 | $89,055,978 |
| Net realized gain | 139,339,041 | 62,980,663 |
| Net change in unrealized appreciation (depreciation) | 468,261,544 | (159,886,702) |
| Net increase (decrease) in net assets resulting from operations | 675,308,066 | (7,850,061) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (49,780,115) | (171,860,076) |
| Advisor Class | (3,897,357) | (10,333,193) |
| Class C | (5,293,570) | (23,821,036) |
| Institutional Class | (22,245,291) | (81,497,791) |
| Institutional 2 Class | (5,332,881) | (15,182,326) |
| Institutional 3 Class | (5,391,902) | (14,863,758) |
| Class R | (1,377,614) | (4,701,033) |
| Total distributions to shareholders | (93,318,730) | (322,259,213) |
| Decrease in net assets from capital stock activity | (293,283,708) | (119,529,118) |
| Total increase (decrease) in net assets | 288,705,628 | (449,638,392) |
| Net assets at beginning of year | 2,191,957,093 | 2,641,595,485 |
| Net assets at end of year | $2,480,662,721 | $2,191,957,093 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares(a) | Dollars ($) | Shares(a) | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 3,312,812 | 116,269,170 | 1,950,587 | 66,930,889 |
| Distributions reinvested | 1,478,968 | 48,709,943 | 4,939,997 | 169,092,563 |
| Redemptions | (8,574,790) | (285,007,347) | (8,990,006) | (305,077,157) |
| Net decrease | (3,783,010) | (120,028,234) | (2,099,422) | (69,053,705) |
| Advisor Class | ||||
| Subscriptions | 770,384 | 26,366,060 | 870,510 | 29,732,263 |
| Distributions reinvested | 114,776 | 3,885,061 | 294,419 | 10,291,375 |
| Redemptions | (737,784) | (25,510,345) | (935,329) | (32,320,096) |
| Net increase | 147,376 | 4,740,776 | 229,600 | 7,703,542 |
| Class C | ||||
| Subscriptions | 399,142 | 13,486,287 | 421,292 | 13,944,963 |
| Distributions reinvested | 161,820 | 5,160,333 | 674,365 | 22,585,747 |
| Redemptions | (3,324,000) | (112,033,671) | (2,019,635) | (67,609,954) |
| Net decrease | (2,763,038) | (93,387,051) | (923,978) | (31,079,244) |
| Institutional Class | ||||
| Subscriptions | 3,044,783 | 104,655,194 | 4,141,664 | 144,160,297 |
| Distributions reinvested | 622,962 | 20,632,493 | 2,192,344 | 75,480,127 |
| Redemptions | (5,894,727) | (197,308,230) | (8,115,804) | (273,365,141) |
| Net decrease | (2,226,982) | (72,020,543) | (1,781,796) | (53,724,717) |
| Institutional 2 Class | ||||
| Subscriptions | 736,609 | 24,847,911 | 974,503 | 32,575,307 |
| Distributions reinvested | 139,034 | 4,613,672 | 386,884 | 13,324,246 |
| Redemptions | (1,148,652) | (38,925,629) | (1,026,604) | (35,308,104) |
| Net increase (decrease) | (273,009) | (9,464,046) | 334,783 | 10,591,449 |
| Institutional 3 Class | ||||
| Subscriptions | 611,990 | 21,201,167 | 839,035 | 30,374,555 |
| Distributions reinvested | 148,415 | 5,027,936 | 394,286 | 13,797,423 |
| Redemptions | (768,172) | (26,458,210) | (808,683) | (28,524,625) |
| Net increase (decrease) | (7,767) | (229,107) | 424,638 | 15,647,353 |
| Class R | ||||
| Subscriptions | 121,921 | 4,116,264 | 197,439 | 6,843,192 |
| Distributions reinvested | 41,561 | 1,369,770 | 133,909 | 4,584,770 |
| Redemptions | (250,217) | (8,381,537) | (323,988) | (11,041,758) |
| Net increase (decrease) | (86,735) | (2,895,503) | 7,360 | 386,204 |
| Total net decrease | (8,993,165) | (293,283,708) | (3,808,815) | (119,529,118) |
| (a) | Share activity has been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
17 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Increase
from payment by affiliate |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A(c) | ||||||||
| Year Ended 5/31/2021 | $30.78 | 1.01 | 9.43 | — | 10.44 | (1.12) | (0.28) | (1.40) |
| Year Ended 5/31/2020 | $35.23 | 1.20 | (1.17) | — | 0.03 | (1.12) | (3.36) | (4.48) |
| Year Ended 5/31/2019 | $38.24 | 1.08 | 0.15 | — | 1.23 | (1.24) | (3.00) | (4.24) |
| Year Ended 5/31/2018 | $39.68 | 1.40 | 1.72 | — | 3.12 | (1.44) | (3.12) | (4.56) |
| Year Ended 5/31/2017 | $36.93 | 1.28 | 2.95 | 0.00(f) | 4.23 | (1.48) | — | (1.48) |
| Advisor Class(c) | ||||||||
| Year Ended 5/31/2021 | $31.49 | 1.12 | 9.65 | — | 10.77 | (1.20) | (0.28) | (1.48) |
| Year Ended 5/31/2020 | $35.96 | 1.32 | (1.23) | — | 0.09 | (1.20) | (3.36) | (4.56) |
| Year Ended 5/31/2019 | $38.94 | 1.20 | 0.14 | — | 1.34 | (1.32) | (3.00) | (4.32) |
| Year Ended 5/31/2018 | $40.32 | 1.52 | 1.74 | — | 3.26 | (1.52) | (3.12) | (4.64) |
| Year Ended 5/31/2017 | $37.51 | 1.40 | 2.97 | 0.00(f) | 4.37 | (1.56) | — | (1.56) |
| Class C(c) | ||||||||
| Year Ended 5/31/2021 | $29.93 | 0.74 | 9.18 | — | 9.92 | (0.88) | (0.28) | (1.16) |
| Year Ended 5/31/2020 | $34.34 | 0.92 | (1.13) | — | (0.21) | (0.84) | (3.36) | (4.20) |
| Year Ended 5/31/2019 | $37.37 | 0.80 | 0.13 | — | 0.93 | (0.96) | (3.00) | (3.96) |
| Year Ended 5/31/2018 | $38.86 | 1.08 | 1.67 | — | 2.75 | (1.12) | (3.12) | (4.24) |
| Year Ended 5/31/2017 | $36.20 | 1.00 | 2.86 | 0.00(f) | 3.86 | (1.20) | — | (1.20) |
| Institutional Class(c) | ||||||||
| Year Ended 5/31/2021 | $30.95 | 1.10 | 9.49 | — | 10.59 | (1.20) | (0.28) | (1.48) |
| Year Ended 5/31/2020 | $35.42 | 1.28 | (1.19) | — | 0.09 | (1.20) | (3.36) | (4.56) |
| Year Ended 5/31/2019 | $38.42 | 1.20 | 0.12 | — | 1.32 | (1.32) | (3.00) | (4.32) |
| Year Ended 5/31/2018 | $39.84 | 1.52 | 1.70 | — | 3.22 | (1.52) | (3.12) | (4.64) |
| Year Ended 5/31/2017 | $37.07 | 1.44 | 2.89 | 0.00(f) | 4.33 | (1.56) | — | (1.56) |
| Institutional 2 Class(c) | ||||||||
| Year Ended 5/31/2021 | $31.04 | 1.12 | 9.52 | — | 10.64 | (1.22) | (0.28) | (1.50) |
| Year Ended 5/31/2020 | $35.50 | 1.32 | (1.18) | — | 0.14 | (1.24) | (3.36) | (4.60) |
| Year Ended 5/31/2019 | $38.49 | 1.20 | 0.17 | — | 1.37 | (1.36) | (3.00) | (4.36) |
| Year Ended 5/31/2018 | $39.91 | 1.52 | 1.74 | — | 3.26 | (1.56) | (3.12) | (4.68) |
| Year Ended 5/31/2017 | $37.14 | 1.44 | 2.93 | 0.00(f) | 4.37 | (1.60) | — | (1.60) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A(c) | |||||||
| Year Ended 5/31/2021 | $39.82 | 34.85% | 1.01% | 1.01%(d) | 2.98% | 51% | $1,375,445 |
| Year Ended 5/31/2020 | $30.78 | (0.90%) | 1.00% | 1.00%(d) | 3.44% | 47% | $1,179,625 |
| Year Ended 5/31/2019 | $35.23 | 3.47% | 0.99% | 0.99%(d) | 2.92% | 66% | $1,424,224 |
| Year Ended 5/31/2018 | $38.24 | 7.96% | 0.98%(e) | 0.98%(d),(e) | 3.54% | 65% | $1,612,108 |
| Year Ended 5/31/2017 | $39.68 | 11.71%(g) | 0.99%(e) | 0.99%(d),(e) | 3.40% | 65% | $1,942,546 |
| Advisor Class(c) | |||||||
| Year Ended 5/31/2021 | $40.78 | 35.31% | 0.76% | 0.76%(d) | 3.23% | 51% | $108,945 |
| Year Ended 5/31/2020 | $31.49 | (0.74%) | 0.75% | 0.75%(d) | 3.72% | 47% | $79,477 |
| Year Ended 5/31/2019 | $35.96 | 3.77% | 0.74% | 0.74%(d) | 3.18% | 66% | $82,497 |
| Year Ended 5/31/2018 | $38.94 | 8.20% | 0.73%(e) | 0.73%(d),(e) | 3.76% | 65% | $114,441 |
| Year Ended 5/31/2017 | $40.32 | 11.90%(g) | 0.74%(e) | 0.74%(d),(e) | 3.66% | 65% | $101,179 |
| Class C(c) | |||||||
| Year Ended 5/31/2021 | $38.69 | 34.05% | 1.76% | 1.76%(d) | 2.26% | 51% | $104,339 |
| Year Ended 5/31/2020 | $29.93 | (1.67%) | 1.75% | 1.75%(d) | 2.68% | 47% | $163,439 |
| Year Ended 5/31/2019 | $34.34 | 2.64% | 1.74% | 1.74%(d) | 2.18% | 66% | $219,222 |
| Year Ended 5/31/2018 | $37.37 | 7.08% | 1.73%(e) | 1.73%(d),(e) | 2.80% | 65% | $312,766 |
| Year Ended 5/31/2017 | $38.86 | 10.88%(g) | 1.74%(e) | 1.74%(d),(e) | 2.67% | 65% | $392,361 |
| Institutional Class(c) | |||||||
| Year Ended 5/31/2021 | $40.06 | 35.26% | 0.76% | 0.76%(d) | 3.23% | 51% | $572,007 |
| Year Ended 5/31/2020 | $30.95 | (0.63%) | 0.75% | 0.75%(d) | 3.68% | 47% | $510,928 |
| Year Ended 5/31/2019 | $35.42 | 3.71% | 0.74% | 0.74%(d) | 3.18% | 66% | $647,702 |
| Year Ended 5/31/2018 | $38.42 | 8.19% | 0.73%(e) | 0.73%(d),(e) | 3.83% | 65% | $815,788 |
| Year Ended 5/31/2017 | $39.84 | 11.93%(g) | 0.75%(e) | 0.75%(d),(e) | 3.72% | 65% | $1,149,455 |
| Institutional 2 Class(c) | |||||||
| Year Ended 5/31/2021 | $40.18 | 35.37% | 0.72% | 0.71% | 3.29% | 51% | $134,775 |
| Year Ended 5/31/2020 | $31.04 | (0.69%) | 0.71% | 0.70% | 3.76% | 47% | $112,602 |
| Year Ended 5/31/2019 | $35.50 | 3.87% | 0.70% | 0.69% | 3.22% | 66% | $116,907 |
| Year Ended 5/31/2018 | $38.49 | 8.24% | 0.69%(e) | 0.68%(e) | 3.86% | 65% | $160,493 |
| Year Ended 5/31/2017 | $39.91 | 11.99%(g) | 0.68%(e) | 0.68%(e) | 3.75% | 65% | $238,847 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
19 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Increase
from payment by affiliate |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class(c) | ||||||||
| Year Ended 5/31/2021 | $31.59 | 1.16 | 9.68 | — | 10.84 | (1.23) | (0.28) | (1.51) |
| Year Ended 5/31/2020 | $36.06 | 1.36 | (1.23) | — | 0.13 | (1.24) | (3.36) | (4.60) |
| Year Ended 5/31/2019 | $39.03 | 1.24 | 0.15 | — | 1.39 | (1.36) | (3.00) | (4.36) |
| Year Ended 5/31/2018 | $40.41 | 1.56 | 1.74 | — | 3.30 | (1.56) | (3.12) | (4.68) |
| Year Ended 5/31/2017 | $37.59 | 1.48 | 2.98 | 0.00(f) | 4.46 | (1.64) | — | (1.64) |
| Class R(c) | ||||||||
| Year Ended 5/31/2021 | $30.76 | 0.92 | 9.43 | — | 10.35 | (1.04) | (0.28) | (1.32) |
| Year Ended 5/31/2020 | $35.20 | 1.12 | (1.16) | — | (0.04) | (1.04) | (3.36) | (4.40) |
| Year Ended 5/31/2019 | $38.20 | 1.00 | 0.12 | — | 1.12 | (1.12) | (3.00) | (4.12) |
| Year Ended 5/31/2018 | $39.65 | 1.28 | 1.71 | — | 2.99 | (1.32) | (3.12) | (4.44) |
| Year Ended 5/31/2017 | $36.90 | 1.20 | 2.95 | 0.00(f) | 4.15 | (1.40) | — | (1.40) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Per share amounts have been adjusted on a retroactive basis to reflect a 4 to 1 reverse stock split completed after the close of business on September 11, 2020. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | Ratios include line of credit interest expense which is less than 0.01%. |
| (f) | Rounds to zero. |
| (g) | The Fund received a payment from an affiliate. Had the Fund not received this payment, the total return would have been lower by 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class(c) | |||||||
| Year Ended 5/31/2021 | $40.92 | 35.36% | 0.67% | 0.66% | 3.33% | 51% | $145,247 |
| Year Ended 5/31/2020 | $31.59 | (0.63%) | 0.66% | 0.65% | 3.83% | 47% | $112,370 |
| Year Ended 5/31/2019 | $36.06 | 3.87% | 0.65% | 0.64% | 3.28% | 66% | $112,951 |
| Year Ended 5/31/2018 | $39.03 | 8.40% | 0.64%(e) | 0.63%(e) | 3.86% | 65% | $132,205 |
| Year Ended 5/31/2017 | $40.41 | 12.01%(g) | 0.63%(e) | 0.63%(e) | 3.82% | 65% | $159,887 |
| Class R(c) | |||||||
| Year Ended 5/31/2021 | $39.79 | 34.60% | 1.26% | 1.26%(d) | 2.73% | 51% | $39,905 |
| Year Ended 5/31/2020 | $30.76 | (1.19%) | 1.25% | 1.25%(d) | 3.21% | 47% | $33,516 |
| Year Ended 5/31/2019 | $35.20 | 3.21% | 1.24% | 1.24%(d) | 2.67% | 66% | $38,093 |
| Year Ended 5/31/2018 | $38.20 | 7.69% | 1.23%(e) | 1.23%(d),(e) | 3.28% | 65% | $43,418 |
| Year Ended 5/31/2017 | $39.65 | 11.32%(g) | 1.24%(e) | 1.24%(d),(e) | 3.17% | 65% | $45,454 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
21 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Dividend Opportunity
Fund (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The Fund’s Board of Trustees
approved reverse stock splits of the issued and outstanding shares of the Fund (the Reverse Stock Split). The Reverse Stock Split was completed after the close of business on September 11, 2020. The impact of the
Reverse Stock Split was to decrease the number of shares outstanding and increase the net asset value per share for each share class of the Fund by the ratio of 4 to 1, resulting in no effect on the net assets of each
share class or the value of each affected shareholder’s investment. Capital stock share activity reflected in the Statement of Changes in Net Assets and per share data in the Financial Highlights have been
adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many
securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the
| 22 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Board of Trustees. Under the policy, the Fund may
utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets,
certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the
current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
23 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
are allocated to dividend income, capital gain and
return of capital based on actual information reported. Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is
recorded as a realized gain. With respect to REITs, to the extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment
Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed
by the REITs, which could result in a proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid each calendar quarter. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
| 24 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.72% to 0.52% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.64% of the Fund’s average
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class. In addition, effective October 1, 2020 through September 30, 2021, Institutional 2
Class shares are subject to a contractual transfer agency fee annual limitation of not more than 0.04% and Institutional 3 Class shares are subject to a contractual transfer agency fee annual limitation of not more
than 0.00% of the average daily net assets attributable to each share class. Prior to October 1, 2020, Institutional 2 Class shares were subject to a contractual transfer agency fee annual limitation of not more than
0.05% and Institutional 3 Class shares were subject to a contractual transfer agency fee annual limitation of not more than 0.00% of the average daily net assets attributable to each share class.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
25 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.10 |
| Advisor Class | 0.10 |
| Class C | 0.10 |
| Institutional Class | 0.10 |
| Institutional 2 Class | 0.04 |
| Institutional 3 Class | 0.00 |
| Class R | 0.10 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $80.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $749,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 475,803 |
| Class C | — | 1.00(b) | 8,754 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
| 26 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Reflected in the contractual cap commitments, effective October 1, 2020 through September 30, 2021, is the Transfer Agent’s contractual agreement
to limit total transfer agency fees to an annual rate of not more than 0.04% for Institutional 2 Class and 0.00% for Institutional 3 Class of the average daily net assets attributable to each share class, unless
sooner terminated at the sole discretion of the Board of Trustees. Reflected in the contractual cap commitments, prior to October 1, 2020, is the Transfer Agent’s contractual agreement to limit total transfer
agency fees to an annual rate of not more than 0.05% for Institutional 2 Class and 0.00% for Institutional 3 Class of the average daily net assets attributable to each share class. Any fees waived and/or expenses
reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, re-characterization of distributions for investments, principal and/or interest of fixed
income securities, amortization/accretion on certain convertible securities, foreign currency transactions and deemed distributions. To the extent these differences were permanent, reclassifications were made among
the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Undistributed net
investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| (1,130,164) | 1,130,164 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 75,354,353 | 17,964,377 | 93,318,730 | 84,017,696 | 238,241,517 | 322,259,213 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 10,099,651 | 140,766,659 | — | 612,685,783 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 1,859,420,463 | 619,312,241 | (6,626,458) | 612,685,783 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,114,234,420 and $1,368,447,430, respectively, for the year ended May 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| 28 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
29 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, affiliated
shareholders of record owned 55.5% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 30 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Dividend Opportunity Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Dividend Opportunity Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as
of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the
financial highlights for each of the five years in the period ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not
received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Capital
gain dividend |
| 100.00% | 100.00% | $148,126,123 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 32 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 34 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 36 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
37 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 38 | Columbia Dividend Opportunity Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Dividend Opportunity Fund | Annual Report 2021
|
39 |
Columbia Dividend Opportunity Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN140_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Seligman
Technology and Information Fund
(formerly Columbia
Seligman Communications and Information Fund)
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Seligman Technology and Information Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive
shareholder reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Seligman Technology and Information
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with capital gain.
Portfolio management
Paul Wick
Lead Portfolio Manager
Managed Fund since 1990
Shekhar Pramanick
Technology Team Member
Managed Fund since 2013
Sanjay Devgan
Technology Team Member
Managed Fund since 2013
Jeetil Patel
Technology Team Member
Managed Fund since 2015
Vimal Patel
Technology Team Member
Managed Fund since 2018
Israel Hernandez
Technology Team Member
Managed Fund since March 2021
Morningstar style boxTM
The Morningstar Style Box is based on a fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows
investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.
© 2021 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Returns for Class A shares are shown
with and without the maximum initial sales charge of 5.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The S&P North American
Technology Sector Index is an unmanaged modified capitalization-weighted index based on a universe of technology-related stocks.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Seligman Technology and Information Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay
on Fund distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 99.7 |
| Corporate Bonds & Notes | 0.0(a) |
| Money Market Funds | 0.3 |
| Preferred Stocks | 0.0(a) |
| Total | 100.0 |
| (a) | Rounds to zero. |
Percentages indicated are based upon
total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| Equity sector breakdown (%) (at May 31, 2021) | |
| Communication Services | 10.4 |
| Consumer Discretionary | 2.5 |
| Financials | 0.0(a) |
| Health Care | 0.2 |
| Industrials | 2.2 |
| Information Technology | 84.7 |
| Total | 100.0 |
| (a) | Rounds to zero. |
Percentages indicated are based upon
total equity investments. The Fund’s portfolio composition is subject to change.
Percentages indicated are based
upon total equity investments. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that ended
May 31, 2021, the Fund’s Class A shares returned 70.10% excluding sales charges. During the same time period, the Fund significantly outperformed its benchmark, the S&P North American Technology Sector
Index, which returned 44.61%.
Market overview
U.S. equities delivered
substantial gains for the 12 months ended May 31, 2021. Quick and unprecedented measures taken by policymakers and the U.S. Federal Reserve in the wake of the sharp COVID-19-driven market plunge in March 2020 spurred
markets to rally from the start of the period through the end, marked by some spikes in volatility on headlines around increasing COVID-19 cases and stalled talks on further stimulus. Market participants, however,
were cheered by expectations that the rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. Passage of a fiscal stimulus package, together with the proposal of a $2 trillion
infrastructure bill in late March 2021, provided a further boost to the economic outlook.
While the rally during the first
half of the period was largely driven by outsize gains in faster growing market segments and beneficiaries of stay at home orders such as mega-cap technology stocks, the second half of the period saw a rotation into
more economically-sensitive, value-oriented market segments once an effective vaccine was announced and the global economy began to reopen.
Within the benchmark S&P North
American Technology Sector Index, several industries posted solid absolute gains, led by semiconductor & semiconductor equipment, technology hardware storage & peripherals, interactive media & services and
electronic equipment instruments & components. Lagging industries included diversified consumer services, professional services, communications equipment and entertainment.
The Fund’s notable
contributors during the period
| • | The Fund’s significant outperformance versus the benchmark during the period was driven primarily by strong stock selection, most notably in the semiconductors and semiconductor equipment industry. |
| • | Allocation was a secondary driver, particularly the Fund’s sizable overweight versus the benchmark in the semiconductors and semiconductor equipment industry and an underweight to the weaker performing IT services industry. |
| • | Individual securities driving Fund performance were top holdings in semi-capital equipment names Lam Research Corp. and Applied Materials, Inc., both of which continued to benefit from a global semiconductor shortage and the industry’s response of higher wafer fab equipment (WFE) spending which has increased from a record high of $60B in 2020. |
| • | The Fund’s position in Teradyne, Inc., the world leader in semiconductor test equipment, contributed to Fund returns as the company benefited from increased demand owing to the surge in home internet traffic and deployment of 5G cellular infrastructure. Not only is Teradyne testing new integrated circuits designed for 5G, but the company’s Lite Point division is a leading player in the cellular test market, with a strong position at Apple. As chips get incrementally more complex, they require longer test times, which means that the industry has to order more test equipment. Teradyne is also the world leader in collaborative robots as a result of having acquired Universal Robots of Denmark a few years ago. With the world economy accelerating post-COVID-19, demand for factory robots has skyrocketed. |
| • | Cerence, Inc., which develops voice and AI (artificial intelligence) software for the automotive industry, rose to new highs during the period as increased adoption of voice recognition for navigation and driver control continued to push shares of Cerence higher. |
| • | Within industrials, the portfolio’s holding in Bloom Energy Corp. continued to increase in value, as investors looking for alternative energy plays in a Biden administration bid up the entire solar, wind and hydrogen sectors. Bloom’s fuel cells can also produce hydrogen extremely efficiently, which we believe makes them a uniquely positioned company if hydrogen is successful as a next generation alternative energy source to combat climate change. |
The Fund’s notable
detractors during the period
| • | The Fund’s relative underweight, relative to the benchmark, in the communication services sector hindered results, though positive selections within the sector more than offset losses resulting from the allocation. |
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
| • | DropBox, Inc., a cloud-based storage and collaboration software company, underperformed the benchmark during the measured period, despite posting positive absolute double digit returns. The company has tested investors’ patience with lackluster products, periods of decelerating growth, and a series of executive departures. The company rebounded at the end of the period as earnings results highlighted the operating leverage and free cash flow generation of the business along with its attractive valuation relative to peers. |
| • | GoDaddy, Inc., a global web domain registrar and web hosting company, posted flat returns and underperformed the market for the measured period. The stock sold off at the beginning of the period after providing a business update citing weakness in select areas of the business and announcing layoffs and a restructuring of its outbound sales force. |
| • | The Fund’s lack of exposure to several beneficiaries of the “work/shop/game from home” themes detracted from relative performance during the period. Not owning semiconductor NVIDIA or electronic payment processors PayPal and Square on valuation concerns hurt relative performance as these stocks rallied on an uptick in their businesses from people spending more time at home. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuations. Foreign investments subject the Fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent
financial and accounting standards generally applicable to U.S. issuers. As a non-diversified fund, fewer investments could have a greater effect on performance. See the Fund’s prospectus for more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to
predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks 99.8% | ||
| Issuer | Shares | Value ($) |
| Communication Services 10.3% | ||
| Broadcasting 1.6% | ||
| Discovery, Inc., Class C(a) | 1,381,500 | 41,514,075 |
| Fox Corp., Class A | 3,437,300 | 128,383,155 |
| Total Broadcasting | 169,897,230 | |
| Cable & Satellite 0.5% | ||
| Comcast Corp., Class A | 907,600 | 52,041,784 |
| Total Cable & Satellite | 52,041,784 | |
| Interactive Home Entertainment 1.4% | ||
| Activision Blizzard, Inc. | 1,245,208 | 121,096,478 |
| Sciplay Corp., Class A(a),(b) | 1,610,933 | 27,788,594 |
| Total Interactive Home Entertainment | 148,885,072 | |
| Interactive Media & Services 6.6% | ||
| Alphabet, Inc., Class A(a) | 152,504 | 359,429,052 |
| Alphabet, Inc., Class C(a) | 134,162 | 323,539,713 |
| Total Interactive Media & Services | 682,968,765 | |
| Wireless Telecommunication Services 0.2% | ||
| T-Mobile USA, Inc.(a) | 126,900 | 17,950,005 |
| Total Wireless Telecommunication Services | 17,950,005 | |
| Total Communication Services | 1,071,742,856 | |
| Consumer Discretionary 2.5% | ||
| Consumer Electronics 0.1% | ||
| Vizio Holding Corp., Class A(a) | 232,854 | 5,085,532 |
| Total Consumer Electronics | 5,085,532 | |
| Internet & Direct Marketing Retail 2.4% | ||
| eBay, Inc. | 4,139,324 | 252,002,045 |
| Total Internet & Direct Marketing Retail | 252,002,045 | |
| Total Consumer Discretionary | 257,087,577 | |
| Health Care 0.2% | ||
| Biotechnology 0.2% | ||
| Apnimed, Inc.(a),(c),(d),(e) | 1,127,586 | 9,999,997 |
| Eiger BioPharmaceuticals, Inc.(a) | 1,560,241 | 12,263,494 |
| Total Biotechnology | 22,263,491 | |
| Total Health Care | 22,263,491 | |
| Industrials 2.2% | ||
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Electrical Components & Equipment 0.2% | ||
| indie Semiconductor, Inc. PIPE(a),(c),(d),(e),(f),(g) | 2,000,000 | 19,800,000 |
| Total Electrical Components & Equipment | 19,800,000 | |
| Heavy Electrical Equipment 2.0% | ||
| Bloom Energy Corp., Class A(a),(b) | 8,595,748 | 207,759,229 |
| Total Heavy Electrical Equipment | 207,759,229 | |
| Total Industrials | 227,559,229 | |
| Information Technology 84.6% | ||
| Application Software 8.9% | ||
| AppLovin Corp.(a) | 147,213 | 10,939,398 |
| Cerence, Inc.(a),(b) | 1,525,124 | 145,085,046 |
| Cognyte Software Ltd.(a) | 647,310 | 16,661,760 |
| Cornerstone OnDemand, Inc.(a) | 968,307 | 42,576,459 |
| Dropbox, Inc., Class A(a) | 8,129,709 | 222,347,541 |
| Salesforce.com, Inc.(a) | 418,551 | 99,656,993 |
| Synopsys, Inc.(a) | 1,276,065 | 324,554,372 |
| Verint Systems, Inc.(a) | 678,010 | 31,263,041 |
| Zendesk, Inc.(a) | 196,500 | 26,853,690 |
| Total Application Software | 919,938,300 | |
| Communications Equipment 5.4% | ||
| Arista Networks, Inc.(a) | 284,257 | 96,471,141 |
| Cisco Systems, Inc. | 745,000 | 39,410,500 |
| F5 Networks, Inc.(a) | 701,300 | 130,042,059 |
| Lumentum Holdings, Inc.(a) | 1,219,475 | 99,228,681 |
| Plantronics, Inc.(a),(b) | 3,792,247 | 124,385,701 |
| Telefonaktiebolaget LM Ericsson, ADR | 5,475,300 | 73,533,279 |
| Total Communications Equipment | 563,071,361 | |
| Data Processing & Outsourced Services 5.3% | ||
| Fidelity National Information Services, Inc. | 675,600 | 100,650,888 |
| Fiserv, Inc.(a) | 854,744 | 98,466,509 |
| Global Payments, Inc. | 197,989 | 38,352,449 |
| Pagseguro Digital Ltd., Class A(a) | 1,307,975 | 64,234,652 |
| Visa, Inc., Class A | 1,101,125 | 250,285,713 |
| Total Data Processing & Outsourced Services | 551,990,211 | |
| Electronic Equipment & Instruments 1.5% | ||
| Advanced Energy Industries, Inc. | 1,494,123 | 152,415,487 |
| Total Electronic Equipment & Instruments | 152,415,487 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Internet Services & Infrastructure 1.5% | ||
| GoDaddy, Inc., Class A(a) | 1,862,030 | 150,749,949 |
| Total Internet Services & Infrastructure | 150,749,949 | |
| IT Consulting & Other Services 0.4% | ||
| DXC Technology Co.(a) | 1,084,000 | 41,105,280 |
| Total IT Consulting & Other Services | 41,105,280 | |
| Semiconductor Equipment 16.6% | ||
| Applied Materials, Inc. | 2,980,081 | 411,638,588 |
| Lam Research Corp. | 1,265,343 | 822,283,149 |
| Teradyne, Inc. | 3,660,922 | 484,523,027 |
| Total Semiconductor Equipment | 1,718,444,764 | |
| Semiconductors 19.9% | ||
| Analog Devices, Inc. | 734,306 | 120,866,768 |
| Broadcom, Inc. | 868,126 | 410,041,953 |
| Intel Corp. | 1,308,469 | 74,739,749 |
| Marvell Technology, Inc. | 5,749,532 | 277,702,396 |
| Maxim Integrated Products, Inc. | 1,274,280 | 129,989,303 |
| mCube, Inc.(a),(c),(d),(e) | 6,015,834 | 24,965,710 |
| Micron Technology, Inc.(a) | 2,870,394 | 241,514,951 |
| NXP Semiconductors NV | 748,600 | 158,269,012 |
| Qorvo, Inc.(a) | 384,250 | 70,210,160 |
| Rambus, Inc.(a) | 2,012,200 | 39,358,632 |
| Renesas Electronics Corp.(a) | 8,655,600 | 90,700,086 |
| SMART Global Holdings, Inc.(a),(b) | 1,240,248 | 58,787,755 |
| Synaptics, Inc.(a),(b) | 2,809,429 | 354,915,165 |
| Transphorm, Inc.(a) | 3,000,000 | 14,625,000 |
| Total Semiconductors | 2,066,686,640 | |
| Systems Software 12.3% | ||
| Fortinet, Inc.(a) | 837,153 | 182,951,417 |
| McAfee Corp., Class A | 2,807,020 | 70,540,413 |
| Microsoft Corp. | 1,398,200 | 349,102,576 |
| NortonLifeLock, Inc. | 6,941,208 | 191,993,813 |
| Oracle Corp. | 1,553,100 | 122,291,094 |
| Palo Alto Networks, Inc.(a) | 459,294 | 166,838,545 |
| SailPoint Technologies Holdings, Inc.(a) | 655,590 | 30,504,603 |
| Tenable Holdings, Inc.(a) | 313,144 | 13,089,419 |
| Xperi Holding Corp.(b) | 6,928,741 | 148,413,632 |
| Total Systems Software | 1,275,725,512 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Technology Hardware, Storage & Peripherals 12.8% | ||
| Apple, Inc. | 3,889,600 | 484,683,056 |
| Dell Technologies, Inc.(a) | 1,596,236 | 157,452,719 |
| HP, Inc. | 5,141,931 | 150,298,643 |
| NetApp, Inc. | 3,492,000 | 270,176,040 |
| Western Digital Corp.(a) | 3,544,792 | 266,674,702 |
| Total Technology Hardware, Storage & Peripherals | 1,329,285,160 | |
| Total Information Technology | 8,769,412,664 | |
|
Total Common Stocks
(Cost: $4,648,191,788) |
10,348,065,817 | |
| Corporate Bonds & Notes 0.0% | |||
| Issuer |
Coupon
Rate |
Principal
Amount |
Value ($) |
| Other Industry 0.0% | |||
| Common Bond Communities(c),(d),(e) | |||
| 04/15/2022 | 4.000% | 565,777 | 565,777 |
|
Total Corporate Bonds & Notes
(Cost: $565,777) |
565,777 | ||
| Preferred Stocks 0.0% | |||
| Issuer | Shares | Value ($) | |
| Financials 0.0% | |||
| Consumer Finance 0.0% | |||
| CommonBond, Inc.(c),(d),(e) | 1.000% | 2,159,244 | 3,951,416 |
| Total Financials | 3,951,416 | ||
|
Total Preferred Stocks
(Cost: $10,000,000) |
3,951,416 | ||
| Money Market Funds 0.3% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(b),(h) | 26,427,015 | 26,424,373 |
|
Total Money Market Funds
(Cost: $26,424,353) |
26,424,373 | |
|
Total Investments in Securities
(Cost $4,685,181,918) |
10,379,007,383 | |
| Other Assets & Liabilities, Net | (9,291,376) | |
| Net Assets | $10,369,716,007 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| † | Issuer was not an affiliate at the end of period. |
| ‡ | Issuer was not an affiliate at the beginning of period. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2021, the total value of these securities amounted to $59,282,900, which represents 0.57% of total net assets. |
| (d) | Denotes a restricted security, which is subject to legal or contractual restrictions on resale under federal securities laws. Disposal of a restricted investment may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Private placement securities are generally considered to be restricted, although certain of those securities may be traded between qualified institutional investors under the provisions of Section 4(a)(2) and Rule 144A. The Fund will not incur any registration costs upon such a trade. These securities are valued at fair value determined in good faith under consistently applied procedures established by the Fund’s Board of Trustees. At May 31, 2021, the total market value of these securities amounted to $59,282,900, which represents 0.57% of total net assets. Additional information on these securities is as follows: |
| Security |
Acquisition
Dates |
Shares | Cost ($) | Value ($) |
| CommonBond, Inc. | 03/19/2018 | 2,159,244 | 10,000,000 | 3,951,416 |
| Common Bond Communities | 10/15/2020 | 565,777 | 565,777 | 565,777 |
| mCube, Inc. | 09/08/2020 | 6,015,834 | 25,000,001 | 24,965,710 |
| indie Semiconductor, Inc. PIPE | 12/14/2020 | 2,000,000 | 20,037,644 | 19,800,000 |
| Apnimed, Inc. | 03/12/2021 | 1,127,586 | 9,999,997 | 9,999,997 |
| 65,603,419 | 59,282,900 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of Investments (continued)
| (e) | Valuation based on significant unobservable inputs. |
| (f) | At May 31, 2021, the Fund had unfunded commitments to purchase shares for the securities shown below: |
| Security | Shares | Cost ($) |
| indie Semiconductor, Inc. PIPE | 2,000,000 | 20,037,644 |
| (g) | Represents a security purchased on a when-issued basis. |
| (h) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
Abbreviation Legend
| ADR | American Depositary Receipt |
| PIPE | Private Investment in Public Equity |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 1,071,742,856 | — | — | 1,071,742,856 |
| Consumer Discretionary | 257,087,577 | — | — | 257,087,577 |
| Health Care | 12,263,494 | — | 9,999,997 | 22,263,491 |
| Industrials | 207,759,229 | — | 19,800,000 | 227,559,229 |
| Information Technology | 8,639,121,868 | 105,325,086 | 24,965,710 | 8,769,412,664 |
| Total Common Stocks | 10,187,975,024 | 105,325,086 | 54,765,707 | 10,348,065,817 |
| Corporate Bonds & Notes | — | — | 565,777 | 565,777 |
| Preferred Stocks | ||||
| Financials | — | — | 3,951,416 | 3,951,416 |
| Total Preferred Stocks | — | — | 3,951,416 | 3,951,416 |
| Money Market Funds | 26,424,373 | — | — | 26,424,373 |
| Total Investments in Securities | 10,214,399,397 | 105,325,086 | 59,282,900 | 10,379,007,383 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $4,082,595,192) | $9,430,532,934 |
| Affiliated issuers (cost $602,586,726) | 948,474,449 |
| Cash | 37,644 |
| Receivable for: | |
| Investments sold | 13,476,467 |
| Capital shares sold | 11,419,067 |
| Dividends | 4,422,188 |
| Interest | 13,951 |
| Foreign tax reclaims | 151,790 |
| Prepaid expenses | 95,516 |
| Total assets | 10,408,624,006 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 5,239,542 |
| Investments purchased on a delayed delivery basis | 20,037,644 |
| Capital shares purchased | 12,055,711 |
| Management services fees | 234,690 |
| Distribution and/or service fees | 61,221 |
| Transfer agent fees | 815,336 |
| Compensation of board members | 329,754 |
| Other expenses | 134,101 |
| Total liabilities | 38,907,999 |
| Net assets applicable to outstanding capital stock | $10,369,716,007 |
| Represented by | |
| Paid in capital | 3,770,541,399 |
| Total distributable earnings (loss) | 6,599,174,608 |
| Total - representing net assets applicable to outstanding capital stock | $10,369,716,007 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
13 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $7,078,794,437 |
| Shares outstanding | 58,221,687 |
| Net asset value per share | $121.58 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $129.00 |
| Advisor Class | |
| Net assets | $317,883,054 |
| Shares outstanding | 2,719,785 |
| Net asset value per share | $116.88 |
| Class C | |
| Net assets | $416,301,146 |
| Shares outstanding | 6,016,248 |
| Net asset value per share | $69.20 |
| Institutional Class | |
| Net assets | $2,027,452,914 |
| Shares outstanding | 14,794,127 |
| Net asset value per share | $137.04 |
| Institutional 2 Class | |
| Net assets | $320,652,297 |
| Shares outstanding | 2,325,388 |
| Net asset value per share | $137.89 |
| Institutional 3 Class | |
| Net assets | $115,172,799 |
| Shares outstanding | 843,869 |
| Net asset value per share | $136.48 |
| Class R | |
| Net assets | $93,459,360 |
| Shares outstanding | 825,864 |
| Net asset value per share | $113.17 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $85,205,244 |
| Dividends — affiliated issuers | 1,422,675 |
| Interest | 19,654 |
| Foreign taxes withheld | (336,536) |
| Total income | 86,311,037 |
| Expenses: | |
| Management services fees | 71,805,854 |
| Distribution and/or service fees | |
| Class A | 14,539,063 |
| Class C | 3,933,544 |
| Class R | 388,306 |
| Transfer agent fees | |
| Class A | 5,479,944 |
| Advisor Class | 241,541 |
| Class C | 371,349 |
| Institutional Class | 1,579,904 |
| Institutional 2 Class | 151,345 |
| Institutional 3 Class | 5,433 |
| Class R | 73,213 |
| Compensation of board members | 214,924 |
| Custodian fees | 59,918 |
| Printing and postage fees | 276,057 |
| Registration fees | 199,178 |
| Audit fees | 30,280 |
| Legal fees | 88,249 |
| Interest on interfund lending | 347 |
| Compensation of chief compliance officer | 1,753 |
| Other | 409,960 |
| Total expenses | 99,850,162 |
| Expense reduction | (4,824) |
| Total net expenses | 99,845,338 |
| Net investment loss | (13,534,301) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 1,330,777,080 |
| Investments — affiliated issuers | 72,030,476 |
| Foreign currency translations | (82,010) |
| Options purchased | 2,732,634 |
| Options contracts written | (11,447,588) |
| Net realized gain | 1,394,010,592 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 2,726,825,869 |
| Investments — affiliated issuers | 358,317,607 |
| Foreign currency translations | 18,175 |
| Options contracts written | 700,220 |
| Net change in unrealized appreciation (depreciation) | 3,085,861,871 |
| Net realized and unrealized gain | 4,479,872,463 |
| Net increase in net assets resulting from operations | $4,466,338,162 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
15 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income (loss) | $(13,534,301) | $35,550,696 |
| Net realized gain | 1,394,010,592 | 642,624,661 |
| Net change in unrealized appreciation (depreciation) | 3,085,861,871 | 994,550,657 |
| Net increase in net assets resulting from operations | 4,466,338,162 | 1,672,726,014 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (592,051,323) | (491,295,474) |
| Advisor Class | (28,846,355) | (20,293,806) |
| Class C | (63,180,278) | (56,916,922) |
| Institutional Class | (156,391,019) | (126,323,675) |
| Institutional 2 Class | (25,114,865) | (22,823,937) |
| Institutional 3 Class | (7,867,166) | (4,256,818) |
| Class R | (8,159,269) | (8,122,682) |
| Total distributions to shareholders | (881,610,275) | (730,033,314) |
| Increase in net assets from capital stock activity | 118,205,067 | 171,158,582 |
| Total increase in net assets | 3,702,932,954 | 1,113,851,282 |
| Net assets at beginning of year | 6,666,783,053 | 5,552,931,771 |
| Net assets at end of year | $10,369,716,007 | $6,666,783,053 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 3,156,874 | 330,601,821 | 3,631,048 | 271,430,454 |
| Distributions reinvested | 5,322,400 | 540,329,989 | 5,938,144 | 448,804,890 |
| Redemptions | (7,223,520) | (731,901,184) | (8,277,755) | (618,677,428) |
| Net increase | 1,255,754 | 139,030,626 | 1,291,437 | 101,557,916 |
| Advisor Class | ||||
| Subscriptions | 806,303 | 81,183,903 | 809,934 | 58,706,500 |
| Distributions reinvested | 248,817 | 24,254,634 | 228,721 | 16,655,474 |
| Redemptions | (831,206) | (84,452,889) | (733,438) | (53,849,086) |
| Net increase | 223,914 | 20,985,648 | 305,217 | 21,512,888 |
| Class C | ||||
| Subscriptions | 810,016 | 48,773,047 | 1,100,297 | 51,642,303 |
| Distributions reinvested | 1,047,369 | 60,726,464 | 1,136,454 | 52,526,908 |
| Redemptions | (2,878,542) | (176,348,029) | (3,043,620) | (141,478,408) |
| Net decrease | (1,021,157) | (66,848,518) | (806,869) | (37,309,197) |
| Institutional Class | ||||
| Subscriptions | 2,349,567 | 266,415,040 | 3,050,121 | 253,586,434 |
| Distributions reinvested | 1,156,580 | 132,185,564 | 1,259,517 | 105,925,376 |
| Redemptions | (3,378,826) | (384,695,180) | (3,496,339) | (287,226,991) |
| Net increase | 127,321 | 13,905,424 | 813,299 | 72,284,819 |
| Institutional 2 Class | ||||
| Subscriptions | 747,897 | 89,315,567 | 851,764 | 72,125,615 |
| Distributions reinvested | 217,657 | 25,026,231 | 268,233 | 22,679,076 |
| Redemptions | (1,167,158) | (133,737,781) | (980,532) | (82,057,697) |
| Net increase (decrease) | (201,604) | (19,395,983) | 139,465 | 12,746,994 |
| Institutional 3 Class | ||||
| Subscriptions | 434,712 | 50,495,303 | 266,307 | 22,545,796 |
| Distributions reinvested | 64,409 | 7,328,472 | 49,874 | 4,175,976 |
| Redemptions | (217,198) | (24,730,651) | (186,942) | (15,598,053) |
| Net increase | 281,923 | 33,093,124 | 129,239 | 11,123,719 |
| Class R | ||||
| Subscriptions | 240,018 | 22,536,390 | 297,966 | 21,165,558 |
| Distributions reinvested | 84,346 | 7,979,128 | 105,728 | 7,503,529 |
| Redemptions | (363,502) | (33,080,772) | (555,826) | (39,427,644) |
| Net decrease | (39,138) | (2,565,254) | (152,132) | (10,758,557) |
| Total net increase | 627,013 | 118,205,067 | 1,719,656 | 171,158,582 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
17 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $79.11 | (0.19) | 53.51 | 53.32 | (0.44) | (10.41) | (10.85) |
| Year Ended 5/31/2020 | $67.52 | 0.41(e) | 20.34 | 20.75 | — | (9.16) | (9.16) |
| Year Ended 5/31/2019 | $76.76 | (0.03) | (2.02) | (2.05) | — | (7.19) | (7.19) |
| Year Ended 5/31/2018 | $72.96 | (0.29) | 11.98 | 11.69 | — | (7.89) | (7.89) |
| Year Ended 5/31/2017 | $55.64 | (0.27) | 22.39 | 22.12 | — | (4.80) | (4.80) |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $76.31 | 0.06 | 51.57 | 51.63 | (0.52) | (10.54) | (11.06) |
| Year Ended 5/31/2020 | $65.38 | 0.58(e) | 19.69 | 20.27 | — | (9.34) | (9.34) |
| Year Ended 5/31/2019 | $74.50 | 0.14 | (2.00) | (1.86) | — | (7.26) | (7.26) |
| Year Ended 5/31/2018 | $71.01 | (0.10) | 11.65 | 11.55 | — | (8.06) | (8.06) |
| Year Ended 5/31/2017 | $54.25 | (0.10) | 21.80 | 21.70 | — | (4.94) | (4.94) |
| Class C | |||||||
| Year Ended 5/31/2021 | $48.21 | (0.57) | 31.78 | 31.21 | (0.20) | (10.02) | (10.22) |
| Year Ended 5/31/2020 | $43.98 | (0.10)(e) | 13.09 | 12.99 | — | (8.76) | (8.76) |
| Year Ended 5/31/2019 | $52.96 | (0.37) | (1.65) | (2.02) | — | (6.96) | (6.96) |
| Year Ended 5/31/2018 | $52.49 | (0.60) | 8.45 | 7.85 | — | (7.38) | (7.38) |
| Year Ended 5/31/2017 | $41.15 | (0.54) | 16.28 | 15.74 | — | (4.40) | (4.40) |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $88.14 | 0.07 | 59.89 | 59.96 | (0.52) | (10.54) | (11.06) |
| Year Ended 5/31/2020 | $74.36 | 0.67(e) | 22.45 | 23.12 | — | (9.34) | (9.34) |
| Year Ended 5/31/2019 | $83.59 | 0.16 | (2.13) | (1.97) | — | (7.26) | (7.26) |
| Year Ended 5/31/2018 | $78.77 | (0.11) | 12.99 | 12.88 | — | (8.06) | (8.06) |
| Year Ended 5/31/2017 | $59.72 | (0.13) | 24.12 | 23.99 | — | (4.94) | (4.94) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $88.63 | 0.11 | 60.24 | 60.35 | (0.53) | (10.56) | (11.09) |
| Year Ended 5/31/2020 | $74.73 | 0.71(e) | 22.57 | 23.28 | — | (9.38) | (9.38) |
| Year Ended 5/31/2019 | $83.94 | 0.20 | (2.13) | (1.93) | — | (7.28) | (7.28) |
| Year Ended 5/31/2018 | $79.07 | (0.07) | 13.04 | 12.97 | — | (8.10) | (8.10) |
| Year Ended 5/31/2017 | $59.94 | (0.07) | 24.20 | 24.13 | — | (5.00) | (5.00) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $121.58 | 70.10% | 1.20%(c) | 1.20%(c),(d) | (0.19%) | 32% | $7,078,794 |
| Year Ended 5/31/2020 | $79.11 | 31.36% | 1.23%(c),(f) | 1.23%(c),(d),(f) | 0.54% | 37% | $4,506,828 |
| Year Ended 5/31/2019 | $67.52 | (1.50%) | 1.25%(c) | 1.24%(c),(d) | (0.05%) | 37% | $3,759,214 |
| Year Ended 5/31/2018 | $76.76 | 16.85% | 1.24% | 1.24%(d) | (0.39%) | 39% | $3,767,260 |
| Year Ended 5/31/2017 | $72.96 | 41.72% | 1.29% | 1.29%(d) | (0.43%) | 54% | $3,465,647 |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $116.88 | 70.53% | 0.95%(c) | 0.95%(c),(d) | 0.06% | 32% | $317,883 |
| Year Ended 5/31/2020 | $76.31 | 31.69% | 0.98%(c),(f) | 0.98%(c),(d),(f) | 0.79% | 37% | $190,471 |
| Year Ended 5/31/2019 | $65.38 | (1.26%) | 0.99%(c) | 0.99%(c),(d) | 0.21% | 37% | $143,228 |
| Year Ended 5/31/2018 | $74.50 | 17.15% | 0.99% | 0.99%(d) | (0.14%) | 39% | $154,144 |
| Year Ended 5/31/2017 | $71.01 | 42.07% | 1.03% | 1.03%(d) | (0.17%) | 54% | $82,405 |
| Class C | |||||||
| Year Ended 5/31/2021 | $69.20 | 68.85% | 1.94%(c) | 1.94%(c),(d) | (0.96%) | 32% | $416,301 |
| Year Ended 5/31/2020 | $48.21 | 30.39% | 1.98%(c),(f) | 1.98%(c),(d),(f) | (0.22%) | 37% | $339,268 |
| Year Ended 5/31/2019 | $43.98 | (2.23%) | 1.99%(c) | 1.99%(c),(d) | (0.75%) | 37% | $344,977 |
| Year Ended 5/31/2018 | $52.96 | 15.98% | 1.99% | 1.99%(d) | (1.14%) | 39% | $957,190 |
| Year Ended 5/31/2017 | $52.49 | 40.64% | 2.04% | 2.04%(d) | (1.18%) | 54% | $890,068 |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $137.04 | 70.53% | 0.95%(c) | 0.95%(c),(d) | 0.06% | 32% | $2,027,453 |
| Year Ended 5/31/2020 | $88.14 | 31.70% | 0.98%(c),(f) | 0.98%(c),(d),(f) | 0.80% | 37% | $1,292,741 |
| Year Ended 5/31/2019 | $74.36 | (1.25%) | 0.99%(c) | 0.99%(c),(d) | 0.21% | 37% | $1,030,165 |
| Year Ended 5/31/2018 | $83.59 | 17.14% | 0.99% | 0.99%(d) | (0.14%) | 39% | $1,205,243 |
| Year Ended 5/31/2017 | $78.77 | 42.05% | 1.04% | 1.04%(d) | (0.19%) | 54% | $882,557 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $137.89 | 70.60% | 0.91%(c) | 0.91%(c) | 0.09% | 32% | $320,652 |
| Year Ended 5/31/2020 | $88.63 | 31.76% | 0.94%(c),(f) | 0.94%(c),(f) | 0.83% | 37% | $223,964 |
| Year Ended 5/31/2019 | $74.73 | (1.20%) | 0.95%(c) | 0.95%(c) | 0.25% | 37% | $178,417 |
| Year Ended 5/31/2018 | $83.94 | 17.20% | 0.94% | 0.94% | (0.09%) | 39% | $173,624 |
| Year Ended 5/31/2017 | $79.07 | 42.16% | 0.96% | 0.96% | (0.10%) | 54% | $125,534 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
19 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income (loss) |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $87.79 | 0.19 | 59.63 | 59.82 | (0.54) | (10.59) | (11.13) |
| Year Ended 5/31/2020 | $74.09 | 0.78(e) | 22.33 | 23.11 | — | (9.41) | (9.41) |
| Year Ended 5/31/2019 | $83.26 | 0.24 | (2.12) | (1.88) | — | (7.29) | (7.29) |
| Year Ended 5/31/2018 | $78.48 | (0.00)(g) | 12.90 | 12.90 | — | (8.12) | (8.12) |
| Year Ended 5/31/2017(h) | $71.02 | (0.02) | 7.48 | 7.46 | — | — | — |
| Class R | |||||||
| Year Ended 5/31/2021 | $74.19 | (0.42) | 50.04 | 49.62 | (0.36) | (10.28) | (10.64) |
| Year Ended 5/31/2020 | $63.78 | 0.19(e) | 19.20 | 19.39 | — | (8.98) | (8.98) |
| Year Ended 5/31/2019 | $73.05 | (0.20) | (1.96) | (2.16) | — | (7.11) | (7.11) |
| Year Ended 5/31/2018 | $69.79 | (0.46) | 11.44 | 10.98 | — | (7.72) | (7.72) |
| Year Ended 5/31/2017 | $53.42 | (0.41) | 21.45 | 21.04 | — | (4.67) | (4.67) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | Net investment income per share includes special dividends. The per share effect of these dividends amounted to: |
| Year Ended | Class A |
Advisor
Class |
Class C |
Institutional
Class |
Institutional 2
Class |
Institutional 3
Class |
Class R |
| 05/31/2020 | $0.52 | $0.50 | $0.32 | $0.58 | $0.58 | $0.58 | $0.49 |
| (f) | Ratios include line of credit interest expense which is less than 0.01%. |
| (g) | Rounds to zero. |
| (h) | Institutional 3 Class shares commenced operations on March 1, 2017. Per share data and total return reflect activity from that date. |
| (i) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income (loss) ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $136.48 | 70.67% | 0.86%(c) | 0.86%(c) | 0.17% | 32% | $115,173 |
| Year Ended 5/31/2020 | $87.79 | 31.81% | 0.89%(c),(f) | 0.89%(c),(f) | 0.93% | 37% | $49,333 |
| Year Ended 5/31/2019 | $74.09 | (1.14%) | 0.90%(c) | 0.90%(c) | 0.31% | 37% | $32,058 |
| Year Ended 5/31/2018 | $83.26 | 17.25% | 0.90% | 0.90% | (0.00%)(g) | 39% | $20,050 |
| Year Ended 5/31/2017(h) | $78.48 | 10.51% | 0.92%(i) | 0.92%(i) | (0.04%)(i) | 54% | $222 |
| Class R | |||||||
| Year Ended 5/31/2021 | $113.17 | 69.70% | 1.44%(c) | 1.44%(c),(d) | (0.44%) | 32% | $93,459 |
| Year Ended 5/31/2020 | $74.19 | 31.03% | 1.48%(c),(f) | 1.48%(c),(d),(f) | 0.27% | 37% | $64,178 |
| Year Ended 5/31/2019 | $63.78 | (1.75%) | 1.49%(c) | 1.49%(c),(d) | (0.29%) | 37% | $64,874 |
| Year Ended 5/31/2018 | $73.05 | 16.57% | 1.49% | 1.49%(d) | (0.64%) | 39% | $76,007 |
| Year Ended 5/31/2017 | $69.79 | 41.36% | 1.54% | 1.54%(d) | (0.68%) | 54% | $71,811 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
21 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Seligman Technology and
Information Fund (formerly known as Columbia Seligman Communications and Information Fund) (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a non-diversified fund. The Trust is registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Effective June 9, 2021, Columbia
Seligman Communications and Information Fund was renamed Columbia Seligman Technology and Information Fund.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange
| 22 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
rates are determined at the scheduled closing time
of the New York Stock Exchange. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such
exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the
Board of Trustees. Under the policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited
to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good
faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if
available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
23 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
sell or terminate, including at favorable prices)
and the potential for market movements which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if
applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the
clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
| 24 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to produce incremental earnings, to facilitate buying and selling of
securities for investments, to protect gains, to decrease the Fund’s exposure to equity market risk and to increase return on investments. These instruments may be used for other purposes in future periods.
Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the other party. Collateral may be collected or posted by the Fund to secure over-the-counter
option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at May 31, 2021:
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended May 31, 2021:
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
25 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |
| Risk exposure category |
Options
contracts written ($) |
| Equity risk | 700,220 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2021:
| Derivative instrument |
Average
value ($) |
| Options contracts — purchased | 132,442* |
| Options contracts — written | (7,694,697)** |
| * | Based on the ending daily outstanding amounts for the year ended May 31, 2021. |
| ** | Based on the ending quarterly outstanding amounts for the year ended May 31, 2021. |
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
| 26 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.915% to 0.755% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.837% of the Fund’s
average daily net assets.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Class A | 0.09 |
| Advisor Class | 0.09 |
| Class C | 0.09 |
| Institutional Class | 0.09 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.09 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $4,824.
| 28 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $15,255,000 for Class C shares. This amount is based on the most recent information available
as of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the
distribution and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 2,279,036 |
| Class C | — | 1.00(b) | 12,924 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
29 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
agreement may be modified or amended only with
approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the
Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, distribution reclassifications, net operating loss reclassification and foreign currency
transactions. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Excess of distributions
over net investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| 13,519,480 | (13,519,480) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 130,650,547 | 750,959,728 | 881,610,275 | 32,719,905 | 697,313,409 | 730,033,314 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 168,394,426 | 750,885,751 | — | 5,680,198,672 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 4,698,808,711 | 5,739,887,786 | (59,689,114) | 5,680,198,672 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
| 30 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $2,720,423,718 and $3,494,091,803, respectively, for the year ended May 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Borrower | 5,175,000 | 0.60 | 4 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
31 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 9. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information 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 information 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. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting
| 32 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
different communities at different times with
varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to
continue ordinary business operations and technology functions over near- or longer-term periods.
Non-diversification risk
A non-diversified fund is permitted
to invest a greater percentage of its total assets in 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.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued. Other than as noted below, there were no items requiring adjustment of the financial statements or additional
disclosure.
The Fund’s Board of Trustees
approved changes to the Fund’s name and principal investment strategies. As a result, effective June 9, 2021, the Fund’s name has been changed to Columbia Seligman Technology and Information Fund and the
Fund has modified its 80% investment policy to align with the new fund name.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
33 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Seligman Technology and Information Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Seligman Technology and Information Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as
the "Fund") as of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the
related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the
financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not
received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 34 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Capital
gain dividend |
| 82.18% | 81.16% | $1,230,985,685 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| 36 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
37 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
| 38 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
39 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
| 40 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
|
Columbia Seligman Technology and Information Fund | Annual Report 2021
|
41 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
| 42 | Columbia Seligman Technology and Information Fund | Annual Report 2021 |
Columbia Seligman Technology and Information Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN219_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Columbia Large Cap
Value Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Columbia Large Cap Value Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder reports
from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Large Cap Value Fund | Annual
Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high level of current income and, as a secondary objective, steady growth of capital.
Portfolio management
Hugh Mullin, CFA
Portfolio Manager
Managed Fund since 2013
Morningstar style boxTM
The Morningstar Style Box is based on a fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows
investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.
© 2021 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Returns for Class A shares are shown
with and without the maximum initial sales charge of 5.75%. Returns for Class C shares are shown with and without the 1.00% contingent deferred sales charge for the first year only. The Fund’s other share
classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and
fees associated with each share class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the
redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee
waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Russell 1000 Value Index, an
unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (May 31, 2011 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Large Cap Value Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions
or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 97.5 |
| Convertible Bonds | 1.4 |
| Money Market Funds | 1.1 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
Percentages indicated are based
upon total equity investments. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Large Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that ended
May 31, 2021, the Fund’s Class A shares returned 46.70% excluding sales charges. The Fund outperformed its benchmark, the Russell 1000 Value Index, which returned 44.38% for the same time period.
Market overview
During a year like no other, U.S.
equity markets delivered substantial gains for the annual period ended May 31, 2021. Quick and unprecedented measures taken by government policymakers and the U.S. Federal Reserve in the wake of the sharp
COVID-19-driven market plunge in March 2020 spurred U.S. equities overall to rally from the start of the annual period through to the end, albeit marked by spikes in volatility on headlines around increasing COVID-19
cases, divisive U.S. elections, stalled talks on further fiscal stimulus and potentially higher inflation. Market uncertainty levels were unusually high. Market participants, however, were cheered by expectations that
the development, approval and subsequent accelerated rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. Passage of a fiscal stimulus package and the proposal of a substantial
infrastructure bill in late March 2021, together with eased activity restrictions and better than expected economic data, provided further boosts to investor sentiment.
The U.S. equity market rally was
largely driven during the first half of the annual period by outsized gains in mega-cap technology stocks and other growth-oriented sectors, but the second half of the annual period saw a rotation into more
value-oriented market segments across the capitalization spectrum. There was also wide dispersion among sector returns within the benchmark, though gains were strong and broad-based, with each sector generating a
double-digit return. The best-performing sectors within the benchmark during the annual period were the financials, materials, industrials and consumer discretionary sectors. The utilities, health care, consumer
staples and information technology sectors were comparatively weakest.
The Fund’s notable
contributors during the period
| • | Strong stock selection was the primary driver of the Fund’s outperformance of the benchmark, particularly in the information technology, materials and industrials sectors. Allocation decisions were a secondary contributor. |
| • | Among individual holdings, the Fund’s position in Freeport-McMoRan, Inc., a metals miner within the materials sector, contributed most positively to relative performance. Shares of Freeport-McMoRan rose on a sharp rebound in spot copper prices, up approximately 90% during the annual period on rising demand and constrained supply. Deleveraging of the company’s balance sheet and the successful transition of its Grasberg mine in Indonesia from above- to under-ground operations also supported its gains during the annual period. |
| • | FedEx Corp., a packages and freight delivery company within the industrials sector, benefited from strong execution of its plan for better integration of its internal networks. A significantly improved competitive environment given the COVID-19 pandemic-driven shutdown of most commercial airline traffic and stronger than expected demand for its services given heightened e-commerce activity during the lockdown further boosted FedEx’s performance during the annual period. |
| • | Lam Research Corp., a semiconductor processing equipment manufacturer within the information technology sector, was a strong positive contributor. Its shares rose on continued strong management team execution of its long-term plan and on higher demand for semiconductors as COVID-19 drove a dramatic change in where and how people work and learn. |
| • | Albemarle Corp., a specialty chemicals producer within the materials sector, benefited most during the annual period from its lithium business segment. The price of lithium, a key component of batteries, rose during the annual period on heightened demand for consumer electronics and enthusiasm around the outlook for electric vehicles. Albemarle’s shares also gained on effective cost controls, better capital discipline and an improving balance sheet given the February 2021 agreement to sell its fine chemistry business to W.R. Grace in an effort to refine its portfolio and focus on its core-growth-oriented business segments. (The transaction was completed on June 1, 2021.) |
| • | Not having a position in semiconductor bellwether Intel Corp., which posted a negative absolute return during the annual period, also notably contributed to the Fund’s results compared to the benchmark. Intel’s shares fell on concerns around the company’s strategic direction and on a series of manufacturing setbacks under its then-CEO, who left the firm in February 2021. |
|
Columbia Large Cap Value Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
detractors during the period
| • | The sectors that detracted most from the Fund’s relative results during the annual period were health care, real estate and financials, where unfavorable stock selection drove most of the underperformance. |
| • | Among the individual stocks that detracted most from relative results was an out-of-benchmark position in American Tower Corp., which significantly underperformed the benchmark during the annual period. The wireless communications and broadcast tower real estate investment trust underperformed primarily on investor concerns around the impact of the merger of T-Mobile and Sprint on cell tower infrastructure. |
| • | Merck & Co., Inc., a pharmaceuticals and animal health company in the health care sector, saw its share price decline as some patients either delayed treatment or diagnoses during the COVID-19 pandemic, slightly decreasing demand for its products. Also, investors favored more industrial, cyclical and economic re-opening plays rather than more traditionally defensive stocks, such as Merck, during the annual period. |
| • | Baxter International Inc., a medical products and technologies manufacturer in the health care sector, similarly experienced a share price decline as the health care sector in general was not in favor by investors during the annual period. Also, Baxter International suffered from some COVID-19-related profitability and margin missteps. Given our outlook for its growth and margins, we sold the Fund’s position in Baxter International by the end of the annual period. |
| • | Northrop Grumman Corp., a global security company in the industrials sector providing systems, products and solutions in aerospace, electronics, information systems and technical services, had only a modest share price gain during the annual period, pressured by traditionally defensive sectors not being in favor by the market. While we believe the company’s fundamentals remained strong, its performance was muted by an uncertain outlook for the U.S. Department of Defense’s future budget and spending priorities given the Democrats’ election wins. |
| • | AT&T Inc., a telecommunications company, eked out only a modestly positive share price gain during the annual period on heightened concerns for its media business segment given increasing cord-cutting and streaming trends and for its wireless business segment given greater competition in that space. Further suppressing investor enthusiasm for AT&T was the debt load on its balance sheet, its July 2020 leadership transition and its talks of business restructuring. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Foreign investments subject the Fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent
financial and accounting standards generally applicable to U.S. issuers. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector. Dividend payments are not guaranteed and the amount, if any, can vary over time. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. See the Fund’s prospectus for more information on
these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Large Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing fund costs, which generally include management fees,
distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with
the ongoing costs of investing in other mutual funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
7 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks 97.4% | ||
| Issuer | Shares | Value ($) |
| Communication Services 6.5% | ||
| Diversified Telecommunication Services 1.7% | ||
| AT&T, Inc. | 1,607,800 | 47,317,554 |
| Media 3.2% | ||
| Comcast Corp., Class A | 1,245,900 | 71,439,906 |
| DISH Network Corp., Class A(a) | 474,345 | 20,643,494 |
| Total | 92,083,400 | |
| Wireless Telecommunication Services 1.6% | ||
| T-Mobile USA, Inc.(a) | 313,800 | 44,387,010 |
| Total Communication Services | 183,787,964 | |
| Consumer Discretionary 6.7% | ||
| Hotels, Restaurants & Leisure 2.5% | ||
| Darden Restaurants, Inc. | 267,300 | 38,285,379 |
| Las Vegas Sands Corp.(a) | 542,400 | 31,323,600 |
| Total | 69,608,979 | |
| Household Durables 1.3% | ||
| Toll Brothers, Inc. | 567,100 | 36,997,604 |
| Specialty Retail 1.8% | ||
| Home Depot, Inc. (The) | 163,300 | 52,078,003 |
| Textiles, Apparel & Luxury Goods 1.1% | ||
| Levi Strauss & Co., Class A | 1,148,300 | 30,728,508 |
| Total Consumer Discretionary | 189,413,094 | |
| Consumer Staples 6.7% | ||
| Beverages 1.3% | ||
| Coca-Cola Co. (The) | 680,500 | 37,624,845 |
| Food & Staples Retailing 1.8% | ||
| Walmart, Inc. | 363,113 | 51,572,939 |
| Household Products 1.9% | ||
| Procter & Gamble Co. (The) | 387,400 | 52,240,890 |
| Tobacco 1.7% | ||
| Philip Morris International, Inc. | 497,500 | 47,973,925 |
| Total Consumer Staples | 189,412,599 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Energy 5.6% | ||
| Oil, Gas & Consumable Fuels 5.6% | ||
| Chevron Corp. | 284,600 | 29,538,634 |
| ConocoPhillips Co. | 754,400 | 42,050,256 |
| EOG Resources, Inc. | 509,000 | 40,893,060 |
| Valero Energy Corp. | 542,800 | 43,641,120 |
| Total | 156,123,070 | |
| Total Energy | 156,123,070 | |
| Financials 23.1% | ||
| Banks 11.4% | ||
| Bank of America Corp. | 1,422,943 | 60,318,554 |
| Citigroup, Inc. | 773,200 | 60,858,572 |
| JPMorgan Chase & Co. | 625,600 | 102,748,544 |
| PNC Financial Services Group, Inc. (The) | 250,301 | 48,728,598 |
| Truist Financial Corp. | 746,500 | 46,118,770 |
| Total | 318,773,038 | |
| Capital Markets 4.6% | ||
| Bank of New York Mellon Corp. (The) | 764,600 | 39,820,368 |
| Intercontinental Exchange, Inc. | 289,500 | 32,678,760 |
| Morgan Stanley | 628,400 | 57,152,980 |
| Total | 129,652,108 | |
| Diversified Financial Services 3.1% | ||
| Berkshire Hathaway, Inc., Class B(a) | 304,038 | 88,000,759 |
| Insurance 4.0% | ||
| Allstate Corp. (The) | 295,124 | 40,316,890 |
| Chubb Ltd. | 224,800 | 38,213,752 |
| Lincoln National Corp. | 467,700 | 32,640,783 |
| Total | 111,171,425 | |
| Total Financials | 647,597,330 | |
| Health Care 11.8% | ||
| Biotechnology 0.2% | ||
| BioMarin Pharmaceutical, Inc.(a) | 71,200 | 5,503,760 |
| Health Care Equipment & Supplies 3.2% | ||
| Becton Dickinson and Co. | 137,300 | 33,211,497 |
| Medtronic PLC | 444,900 | 56,319,891 |
| Total | 89,531,388 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Health Care Providers & Services 2.8% | ||
| Cigna Corp. | 165,200 | 42,762,020 |
| Humana, Inc. | 79,300 | 34,709,610 |
| Total | 77,471,630 | |
| Pharmaceuticals 5.6% | ||
| Bristol-Myers Squibb Co. | 529,400 | 34,792,168 |
| Johnson & Johnson | 511,900 | 86,639,075 |
| Merck & Co., Inc. | 479,400 | 36,381,666 |
| Total | 157,812,909 | |
| Total Health Care | 330,319,687 | |
| Industrials 13.2% | ||
| Aerospace & Defense 1.1% | ||
| Northrop Grumman Corp. | 82,000 | 30,001,340 |
| Air Freight & Logistics 1.6% | ||
| FedEx Corp. | 145,100 | 45,678,931 |
| Airlines 1.4% | ||
| Alaska Air Group, Inc.(a) | 587,500 | 40,655,000 |
| Building Products 1.5% | ||
| Trane Technologies PLC | 228,900 | 42,666,960 |
| Electrical Equipment 1.4% | ||
| Eaton Corp. PLC | 268,952 | 39,065,278 |
| Industrial Conglomerates 1.2% | ||
| 3M Co. | 163,500 | 33,197,040 |
| Machinery 3.5% | ||
| AGCO Corp. | 237,100 | 32,807,527 |
| Ingersoll Rand, Inc.(a) | 616,400 | 30,598,096 |
| Stanley Black & Decker, Inc. | 167,300 | 36,270,640 |
| Total | 99,676,263 | |
| Road & Rail 1.5% | ||
| Norfolk Southern Corp. | 144,800 | 40,674,320 |
| Total Industrials | 371,615,132 | |
| Information Technology 10.4% | ||
| Communications Equipment 2.0% | ||
| Cisco Systems, Inc. | 1,065,600 | 56,370,240 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| IT Services 2.2% | ||
| Fiserv, Inc.(a) | 318,388 | 36,678,298 |
| MasterCard, Inc., Class A | 70,800 | 25,529,064 |
| Total | 62,207,362 | |
| Semiconductors & Semiconductor Equipment 3.4% | ||
| Broadcom, Inc. | 62,700 | 29,615,091 |
| Lam Research Corp. | 60,700 | 39,445,895 |
| ON Semiconductor Corp.(a) | 654,200 | 26,194,168 |
| Total | 95,255,154 | |
| Software 0.8% | ||
| Microsoft Corp. | 92,100 | 22,995,528 |
| Technology Hardware, Storage & Peripherals 2.0% | ||
| Apple, Inc. | 169,100 | 21,071,551 |
| Western Digital Corp.(a) | 457,000 | 34,380,110 |
| Total | 55,451,661 | |
| Total Information Technology | 292,279,945 | |
| Materials 4.9% | ||
| Chemicals 3.7% | ||
| Albemarle Corp. | 167,258 | 27,945,466 |
| Eastman Chemical Co. | 326,400 | 40,930,560 |
| Linde PLC | 118,600 | 35,651,160 |
| Total | 104,527,186 | |
| Metals & Mining 1.2% | ||
| Freeport-McMoRan, Inc. | 762,762 | 32,585,193 |
| Total Materials | 137,112,379 | |
| Real Estate 4.2% | ||
| Equity Real Estate Investment Trusts (REITS) 4.2% | ||
| Alexandria Real Estate Equities, Inc. | 143,000 | 25,491,180 |
| American Tower Corp. | 126,500 | 32,315,690 |
| Duke Realty Corp. | 733,291 | 34,068,700 |
| Welltower, Inc. | 339,500 | 25,384,415 |
| Total | 117,259,985 | |
| Total Real Estate | 117,259,985 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
9 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Utilities 4.3% | ||
| Electric Utilities 1.8% | ||
| Pinnacle West Capital Corp. | 200,000 | 16,916,000 |
| Xcel Energy, Inc. | 480,508 | 34,058,407 |
| Total | 50,974,407 | |
| Multi-Utilities 2.5% | ||
| Ameren Corp. | 376,081 | 31,666,020 |
| DTE Energy Co. | 283,600 | 39,133,964 |
| Total | 70,799,984 | |
| Total Utilities | 121,774,391 | |
|
Total Common Stocks
(Cost $1,651,431,369) |
2,736,695,576 | |
| Convertible Bonds 1.4% | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| Cable and Satellite 0.4% | ||||
| DISH Network Corp. | ||||
| Subordinated | ||||
| 08/15/2026 | 3.375% | 11,987,000 | 12,370,584 | |
| Convertible Bonds (continued) | ||||
| Issuer |
Coupon
Rate |
Principal
Amount ($) |
Value ($) | |
| Consumer Cyclical Services 1.0% | ||||
| Lyft, Inc.(b) | ||||
| 05/15/2025 | 1.500% | 16,996,000 | 27,601,504 | |
|
Total Convertible Bonds
(Cost $28,954,035) |
39,972,088 | |||
| Money Market Funds 1.1% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(c),(d) | 31,169,109 | 31,165,992 |
|
Total Money Market Funds
(Cost $31,165,992) |
31,165,992 | |
|
Total Investments in Securities
(Cost: $1,711,551,396) |
2,807,833,656 | |
| Other Assets & Liabilities, Net | 2,270,782 | |
| Net Assets | 2,810,104,438 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At May 31, 2021, the total value of these securities amounted to $27,601,504, which represents 0.98% of total net assets. |
| (c) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 18,672,136 | 663,776,677 | (651,276,739) | (6,082) | 31,165,992 | 2,114 | 29,099 | 31,169,109 | |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at May 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
11 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,680,385,404) | $2,776,667,664 |
| Affiliated issuers (cost $31,165,992) | 31,165,992 |
| Receivable for: | |
| Capital shares sold | 924,277 |
| Dividends | 4,087,913 |
| Interest | 126,788 |
| Foreign tax reclaims | 51,101 |
| Prepaid expenses | 30,694 |
| Total assets | 2,813,054,429 |
| Liabilities | |
| Due to custodian | 51,101 |
| Payable for: | |
| Capital shares purchased | 2,312,610 |
| Management services fees | 48,017 |
| Distribution and/or service fees | 13,085 |
| Transfer agent fees | 148,422 |
| Compensation of board members | 314,705 |
| Other expenses | 62,051 |
| Total liabilities | 2,949,991 |
| Net assets applicable to outstanding capital stock | $2,810,104,438 |
| Represented by | |
| Paid in capital | 1,657,885,688 |
| Total distributable earnings (loss) | 1,152,218,750 |
| Total - representing net assets applicable to outstanding capital stock | $2,810,104,438 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Large Cap Value Fund | Annual Report 2021 |
Statement of Assets and Liabilities (continued)
May 31, 2021
May 31, 2021
| Class A | |
| Net assets | $1,849,691,085 |
| Shares outstanding | 106,354,262 |
| Net asset value per share | $17.39 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class A shares) | $18.45 |
| Advisor Class | |
| Net assets | $42,909,062 |
| Shares outstanding | 2,468,608 |
| Net asset value per share | $17.38 |
| Class C | |
| Net assets | $13,359,200 |
| Shares outstanding | 770,747 |
| Net asset value per share | $17.33 |
| Institutional Class | |
| Net assets | $224,530,824 |
| Shares outstanding | 12,931,429 |
| Net asset value per share | $17.36 |
| Institutional 2 Class | |
| Net assets | $28,324,297 |
| Shares outstanding | 1,628,617 |
| Net asset value per share | $17.39 |
| Institutional 3 Class | |
| Net assets | $648,128,652 |
| Shares outstanding | 36,803,475 |
| Net asset value per share | $17.61 |
| Class R | |
| Net assets | $3,161,318 |
| Shares outstanding | 183,178 |
| Net asset value per share | $17.26 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
13 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $47,162,844 |
| Dividends — affiliated issuers | 29,099 |
| Interest | 545,651 |
| Total income | 47,737,594 |
| Expenses: | |
| Management services fees | 13,600,050 |
| Distribution and/or service fees | |
| Class A | 3,948,515 |
| Class C | 162,083 |
| Class R | 13,104 |
| Transfer agent fees | |
| Class A | 1,440,704 |
| Advisor Class | 31,093 |
| Class C | 15,054 |
| Institutional Class | 145,935 |
| Institutional 2 Class | 9,780 |
| Institutional 3 Class | 18,827 |
| Class R | 2,381 |
| Compensation of board members | 131,743 |
| Custodian fees | 11,480 |
| Printing and postage fees | 110,855 |
| Registration fees | 119,320 |
| Audit fees | 29,500 |
| Legal fees | 28,434 |
| Compensation of chief compliance officer | 426 |
| Other | 95,201 |
| Total expenses | 19,914,485 |
| Expense reduction | (80) |
| Total net expenses | 19,914,405 |
| Net investment income | 27,823,189 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 85,803,729 |
| Investments — affiliated issuers | 2,114 |
| Net realized gain | 85,805,843 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 728,078,394 |
| Investments — affiliated issuers | (6,082) |
| Net change in unrealized appreciation (depreciation) | 728,072,312 |
| Net realized and unrealized gain | 813,878,155 |
| Net increase in net assets resulting from operations | $841,701,344 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Large Cap Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 |
|
| Operations | ||
| Net investment income | $27,823,189 | $30,937,784 |
| Net realized gain | 85,805,843 | 13,507,525 |
| Net change in unrealized appreciation (depreciation) | 728,072,312 | (20,973,346) |
| Net increase in net assets resulting from operations | 841,701,344 | 23,471,963 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (21,349,285) | (98,233,617) |
| Advisor Class | (540,952) | (2,123,384) |
| Class C | (117,494) | (1,148,874) |
| Institutional Class | (2,508,417) | (10,012,314) |
| Institutional 2 Class | (357,200) | (1,216,640) |
| Institutional 3 Class | (2,883,504) | (236,417) |
| Class R | (29,617) | (184,679) |
| Total distributions to shareholders | (27,786,469) | (113,155,925) |
| Increase (decrease) in net assets from capital stock activity | 359,233,147 | (135,116,293) |
| Total increase (decrease) in net assets | 1,173,148,022 | (224,800,255) |
| Net assets at beginning of year | 1,636,956,416 | 1,861,756,671 |
| Net assets at end of year | $2,810,104,438 | $1,636,956,416 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
15 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 3,242,162 | 47,775,587 | 3,411,650 | 44,474,776 |
| Distributions reinvested | 1,562,547 | 21,205,338 | 7,286,221 | 97,651,601 |
| Redemptions | (17,368,965) | (241,756,304) | (19,862,101) | (256,882,926) |
| Net decrease | (12,564,256) | (172,775,379) | (9,164,230) | (114,756,549) |
| Advisor Class | ||||
| Subscriptions | 548,904 | 8,140,246 | 464,848 | 6,070,395 |
| Distributions reinvested | 39,630 | 539,038 | 159,239 | 2,122,498 |
| Redemptions | (653,497) | (9,034,745) | (768,564) | (10,137,787) |
| Net decrease | (64,963) | (355,461) | (144,477) | (1,944,894) |
| Class C | ||||
| Subscriptions | 129,843 | 1,930,302 | 141,428 | 1,829,287 |
| Distributions reinvested | 8,718 | 114,905 | 81,500 | 1,106,656 |
| Redemptions | (871,721) | (12,590,364) | (593,199) | (7,745,714) |
| Net decrease | (733,160) | (10,545,157) | (370,271) | (4,809,771) |
| Institutional Class | ||||
| Subscriptions | 5,563,063 | 81,537,117 | 2,790,603 | 36,666,374 |
| Distributions reinvested | 182,563 | 2,499,905 | 749,518 | 9,981,221 |
| Redemptions | (3,996,584) | (55,485,421) | (4,965,575) | (63,444,917) |
| Net increase (decrease) | 1,749,042 | 28,551,601 | (1,425,454) | (16,797,322) |
| Institutional 2 Class | ||||
| Subscriptions | 594,993 | 8,733,199 | 556,942 | 7,243,544 |
| Distributions reinvested | 26,169 | 356,925 | 91,278 | 1,215,347 |
| Redemptions | (534,790) | (7,648,614) | (406,286) | (5,134,776) |
| Net increase | 86,372 | 1,441,510 | 241,934 | 3,324,115 |
| Institutional 3 Class | ||||
| Subscriptions | 40,488,544 | 576,516,812 | 149,044 | 1,992,862 |
| Distributions reinvested | 183,917 | 2,883,461 | 17,535 | 236,258 |
| Redemptions | (4,143,648) | (66,296,070) | (106,209) | (1,328,192) |
| Net increase | 36,528,813 | 513,104,203 | 60,370 | 900,928 |
| Class R | ||||
| Subscriptions | 75,902 | 1,098,094 | 39,919 | 495,252 |
| Distributions reinvested | 2,194 | 29,607 | 13,786 | 184,135 |
| Redemptions | (93,604) | (1,315,871) | (139,323) | (1,712,187) |
| Net decrease | (15,508) | (188,170) | (85,618) | (1,032,800) |
| Total net increase (decrease) | 24,986,340 | 359,233,147 | (10,887,746) | (135,116,293) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Large Cap Value Fund | Annual Report 2021 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $12.02 | 0.18 | 5.38 | 5.56 | (0.19) | — | (0.19) |
| Year Ended 5/31/2020 | $12.66 | 0.22 | (0.05) | 0.17 | (0.21) | (0.60) | (0.81) |
| Year Ended 5/31/2019 | $14.04 | 0.20 | (0.16) | 0.04 | (0.19) | (1.23) | (1.42) |
| Year Ended 5/31/2018 | $13.92 | 0.17 | 0.94 | 1.11 | (0.16) | (0.83) | (0.99) |
| Year Ended 5/31/2017 | $12.35 | 0.18 | 1.79 | 1.97 | (0.17) | (0.23) | (0.40) |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $12.02 | 0.21 | 5.37 | 5.58 | (0.22) | — | (0.22) |
| Year Ended 5/31/2020 | $12.66 | 0.25 | (0.05) | 0.20 | (0.24) | (0.60) | (0.84) |
| Year Ended 5/31/2019 | $14.03 | 0.24 | (0.15) | 0.09 | (0.23) | (1.23) | (1.46) |
| Year Ended 5/31/2018 | $13.91 | 0.21 | 0.94 | 1.15 | (0.20) | (0.83) | (1.03) |
| Year Ended 5/31/2017 | $12.35 | 0.21 | 1.79 | 2.00 | (0.21) | (0.23) | (0.44) |
| Class C | |||||||
| Year Ended 5/31/2021 | $11.99 | 0.07 | 5.36 | 5.43 | (0.09) | — | (0.09) |
| Year Ended 5/31/2020 | $12.62 | 0.12 | (0.05) | 0.07 | (0.10) | (0.60) | (0.70) |
| Year Ended 5/31/2019 | $13.99 | 0.10 | (0.15) | (0.05) | (0.09) | (1.23) | (1.32) |
| Year Ended 5/31/2018 | $13.88 | 0.06 | 0.93 | 0.99 | (0.05) | (0.83) | (0.88) |
| Year Ended 5/31/2017 | $12.32 | 0.08 | 1.79 | 1.87 | (0.08) | (0.23) | (0.31) |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $12.00 | 0.21 | 5.37 | 5.58 | (0.22) | — | (0.22) |
| Year Ended 5/31/2020 | $12.65 | 0.25 | (0.06) | 0.19 | (0.24) | (0.60) | (0.84) |
| Year Ended 5/31/2019 | $14.02 | 0.24 | (0.15) | 0.09 | (0.23) | (1.23) | (1.46) |
| Year Ended 5/31/2018 | $13.90 | 0.20 | 0.95 | 1.15 | (0.20) | (0.83) | (1.03) |
| Year Ended 5/31/2017 | $12.34 | 0.20 | 1.80 | 2.00 | (0.21) | (0.23) | (0.44) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $12.03 | 0.22 | 5.37 | 5.59 | (0.23) | — | (0.23) |
| Year Ended 5/31/2020 | $12.67 | 0.25 | (0.04) | 0.21 | (0.25) | (0.60) | (0.85) |
| Year Ended 5/31/2019 | $14.04 | 0.25 | (0.15) | 0.10 | (0.24) | (1.23) | (1.47) |
| Year Ended 5/31/2018 | $13.93 | 0.21 | 0.93 | 1.14 | (0.20) | (0.83) | (1.03) |
| Year Ended 5/31/2017 | $12.36 | 0.22 | 1.80 | 2.02 | (0.22) | (0.23) | (0.45) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Large Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Class A | |||||||
| Year Ended 5/31/2021 | $17.39 | 46.70% | 1.01% | 1.01%(c) | 1.25% | 27% | $1,849,691 |
| Year Ended 5/31/2020 | $12.02 | 0.73% | 1.02% | 1.02%(c) | 1.64% | 15% | $1,429,986 |
| Year Ended 5/31/2019 | $12.66 | 0.62% | 1.02% | 1.02%(c) | 1.49% | 23% | $1,621,964 |
| Year Ended 5/31/2018 | $14.04 | 7.82% | 1.01% | 1.01%(c) | 1.17% | 21% | $1,836,324 |
| Year Ended 5/31/2017 | $13.92 | 16.17% | 1.03% | 1.03%(c) | 1.40% | 31% | $1,986,051 |
| Advisor Class | |||||||
| Year Ended 5/31/2021 | $17.38 | 46.97% | 0.76% | 0.76%(c) | 1.50% | 27% | $42,909 |
| Year Ended 5/31/2020 | $12.02 | 1.01% | 0.77% | 0.77%(c) | 1.89% | 15% | $30,446 |
| Year Ended 5/31/2019 | $12.66 | 0.95% | 0.77% | 0.77%(c) | 1.74% | 23% | $33,903 |
| Year Ended 5/31/2018 | $14.03 | 8.10% | 0.77% | 0.77%(c) | 1.50% | 21% | $42,087 |
| Year Ended 5/31/2017 | $13.91 | 16.37% | 0.78% | 0.78%(c) | 1.63% | 31% | $9,409 |
| Class C | |||||||
| Year Ended 5/31/2021 | $17.33 | 45.52% | 1.76% | 1.76%(c) | 0.52% | 27% | $13,359 |
| Year Ended 5/31/2020 | $11.99 | (0.03%) | 1.77% | 1.77%(c) | 0.89% | 15% | $18,031 |
| Year Ended 5/31/2019 | $12.62 | (0.06%) | 1.76% | 1.76%(c) | 0.74% | 23% | $23,646 |
| Year Ended 5/31/2018 | $13.99 | 6.96% | 1.76% | 1.76%(c) | 0.41% | 21% | $57,445 |
| Year Ended 5/31/2017 | $13.88 | 15.28% | 1.78% | 1.78%(c) | 0.64% | 31% | $66,229 |
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $17.36 | 47.04% | 0.76% | 0.76%(c) | 1.49% | 27% | $224,531 |
| Year Ended 5/31/2020 | $12.00 | 0.93% | 0.77% | 0.77%(c) | 1.89% | 15% | $134,233 |
| Year Ended 5/31/2019 | $12.65 | 0.96% | 0.77% | 0.77%(c) | 1.74% | 23% | $159,448 |
| Year Ended 5/31/2018 | $14.02 | 8.10% | 0.76% | 0.76%(c) | 1.42% | 21% | $193,314 |
| Year Ended 5/31/2017 | $13.90 | 16.38% | 0.79% | 0.79%(c) | 1.52% | 31% | $210,649 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2021 | $17.39 | 47.01% | 0.71% | 0.71% | 1.54% | 27% | $28,324 |
| Year Ended 5/31/2020 | $12.03 | 1.08% | 0.71% | 0.71% | 1.95% | 15% | $18,546 |
| Year Ended 5/31/2019 | $12.67 | 1.02% | 0.70% | 0.70% | 1.82% | 23% | $16,474 |
| Year Ended 5/31/2018 | $14.04 | 8.08% | 0.71% | 0.71% | 1.47% | 21% | $39,230 |
| Year Ended 5/31/2017 | $13.93 | 16.53% | 0.71% | 0.71% | 1.70% | 31% | $38,168 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
19 |
Financial Highlights (continued)
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $12.17 | 0.24 | 5.43 | 5.67 | (0.23) | — | (0.23) |
| Year Ended 5/31/2020 | $12.82 | 0.26 | (0.06) | 0.20 | (0.25) | (0.60) | (0.85) |
| Year Ended 5/31/2019 | $14.19 | 0.25 | (0.15) | 0.10 | (0.24) | (1.23) | (1.47) |
| Year Ended 5/31/2018 | $14.06 | 0.23 | 0.94 | 1.17 | (0.21) | (0.83) | (1.04) |
| Year Ended 5/31/2017 | $12.47 | 0.24 | 1.80 | 2.04 | (0.22) | (0.23) | (0.45) |
| Class R | |||||||
| Year Ended 5/31/2021 | $11.93 | 0.14 | 5.35 | 5.49 | (0.16) | — | (0.16) |
| Year Ended 5/31/2020 | $12.57 | 0.18 | (0.05) | 0.13 | (0.17) | (0.60) | (0.77) |
| Year Ended 5/31/2019 | $13.95 | 0.17 | (0.16) | 0.01 | (0.16) | (1.23) | (1.39) |
| Year Ended 5/31/2018 | $13.83 | 0.13 | 0.94 | 1.07 | (0.12) | (0.83) | (0.95) |
| Year Ended 5/31/2017 | $12.28 | 0.15 | 1.77 | 1.92 | (0.14) | (0.23) | (0.37) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | The benefits derived from expense reductions had an impact of less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Large Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $17.61 | 47.16% | 0.66% | 0.66% | 1.54% | 27% | $648,129 |
| Year Ended 5/31/2020 | $12.17 | 1.01% | 0.69% | 0.69% | 1.97% | 15% | $3,344 |
| Year Ended 5/31/2019 | $12.82 | 1.03% | 0.69% | 0.69% | 1.82% | 23% | $2,746 |
| Year Ended 5/31/2018 | $14.19 | 8.18% | 0.69% | 0.68% | 1.56% | 21% | $3,281 |
| Year Ended 5/31/2017 | $14.06 | 16.60% | 0.67% | 0.67% | 1.87% | 31% | $747 |
| Class R | |||||||
| Year Ended 5/31/2021 | $17.26 | 46.37% | 1.26% | 1.26%(c) | 1.00% | 27% | $3,161 |
| Year Ended 5/31/2020 | $11.93 | 0.45% | 1.27% | 1.27%(c) | 1.38% | 15% | $2,371 |
| Year Ended 5/31/2019 | $12.57 | 0.37% | 1.27% | 1.27%(c) | 1.24% | 23% | $3,574 |
| Year Ended 5/31/2018 | $13.95 | 7.61% | 1.26% | 1.26%(c) | 0.91% | 21% | $4,510 |
| Year Ended 5/31/2017 | $13.83 | 15.82% | 1.28% | 1.28%(c) | 1.15% | 31% | $5,689 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
21 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Columbia Large Cap Value Fund
(the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers each of the share classes listed in the Statement of Assets and Liabilities. Although all share classes generally have identical voting, dividend and liquidation
rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense and sales charge structure. Different share classes may have
different minimum initial investment amounts and pay different net investment income distribution amounts to the extent the expenses of distributing such share classes vary. Distributions to shareholders in a
liquidation will be proportional to the net asset value of each share class.
As described in the Fund’s
prospectus, Class A and Class C shares are offered to the general public for investment. Effective April 1, 2021, Class C shares automatically convert to Class A shares after 8 years. Prior to April 1, 2021, Class C
shares automatically converted to Class A shares after 10 years. Advisor Class, Institutional Class, Institutional 2 Class, Institutional 3 Class and Class R shares are available for purchase through authorized
investment professionals to omnibus retirement plans or to institutional investors and to certain other investors as also described in the Fund’s prospectus.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many
securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the
| 22 | Columbia Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Board of Trustees. Under the policy, the Fund may
utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets,
certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the
current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. For
convertible securities, premiums attributable to the conversion feature are not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
23 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid each calendar quarter. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.72% to 0.52% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021 was 0.64% of the Fund’s average
daily net assets.
| 24 | Columbia Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
For the year ended May 31, 2021,
the Fund engaged in purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers. Those
purchase and sale transactions complied with provisions of Rule 17a-7 under the 1940 Act and were $115,733,177 and $0, respectively.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 2 Class and Institutional 3 Class shares are subject to an
annual limitation of not more than 0.07% and 0.02%, respectively, of the average daily net assets attributable to each share class.
For the year ended May 31, 2021,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
|
Columbia Large Cap Value Fund | Annual Report 2021
|
25 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended May 31, 2021, these minimum account balance fees reduced total expenses of
the Fund by $80.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $593,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2021, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2021, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 322,165 |
| Class C | — | 1.00(b) | 284 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
| 26 | Columbia Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and re-characterization of distributions for investments. To the extent these differences were
permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Undistributed net
investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| (337,324) | 337,324 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 27,786,469 | — | 27,786,469 | 32,476,612 | 80,679,313 | 113,155,925 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 11,484,829 | 47,362,318 | — | 1,093,683,346 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 1,714,150,310 | 1,109,776,409 | (16,093,063) | 1,093,683,346 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $909,774,305 and $563,771,310, respectively, for the year ended May 31, 2021. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
| 28 | Columbia Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Note 9. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services 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, agreements and
counterparties, including credit products 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.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply
chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the
magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold.
The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established
healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The
disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting
|
Columbia Large Cap Value Fund | Annual Report 2021
|
29 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
different communities at different times with
varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to
continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, affiliated
shareholders of record owned 86.8% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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 or one or more of its affiliates that provides services to
the Fund.
| 30 | Columbia Large Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Large Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Large Cap Value Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2021 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the
financial highlights for each of the five years in the period ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian and transfer agent. We believe that our audits
provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Columbia Large Cap Value Fund | Annual Report 2021
|
31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Capital
gain dividend |
| 100.00% | 100.00% | $49,730,434 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 32 | Columbia Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Columbia Large Cap Value Fund | Annual Report 2021
|
33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 34 | Columbia Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Columbia Large Cap Value Fund | Annual Report 2021
|
35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 36 | Columbia Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
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Columbia Large Cap Value Fund | Annual Report 2021
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37 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 38 | Columbia Large Cap Value Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Columbia Large Cap Value Fund | Annual Report 2021
|
39 |
Columbia Large Cap Value Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN138_05_L01_(07/21)
Annual Report
May 31, 2021
May 31, 2021
Multi-Manager Value
Strategies Fund
Beginning on January 1, 2021, as
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports like this one are no longer sent by mail, unless you specifically
requested paper copies of the reports. Instead, the reports are made available on the Fund’s website (columbiathreadneedleus.com/investor/), and each time a report is posted you will be notified by mail and
provided with a website address to access the report.
If you have already elected to
receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically
at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, for Fund shares held directly with the Fund, by calling 800.345.6611 or by enrolling in “eDelivery” by logging
into your account at columbiathreadneedleus.com/investor/.
You may elect to receive all future
shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue receiving paper copies of your shareholder reports.
If you invest directly with the Fund, you can call 800.345.6611 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive paper reports will apply to all
Columbia Funds held in your account if you invest through a financial intermediary or all Columbia Funds held with the fund complex if you invest directly with the Fund.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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If you elect to receive the
shareholder report for Multi-Manager Value Strategies Fund (the Fund) in paper, mailed to you, the Fund mails one shareholder report to each shareholder address, unless such shareholder elects to receive shareholder
reports from the Fund electronically via e-mail or by having a paper notice mailed to you (Postcard Notice) that your Fund’s shareholder report is available at the Columbia funds’ website
(columbiathreadneedleus.com/investor/). If you would like more than one report in paper to be mailed to you, or would like to elect to receive reports via e-mail or access them through Postcard Notice, please call
shareholder services at 800.345.6611 and additional reports will be sent to you.
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by
calling 800.345.6611; contacting your financial intermediary; visiting columbiathreadneedleus.com/investor/; or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. The Fund’s
complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the
Fund, please visit columbiathreadneedleus.com/investor/ or call 800.345.6611. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 7 p.m. Eastern time.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Multi-Manager Value Strategies
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with growth of capital and income.
Portfolio management
Columbia Management Investment Advisers, LLC
Scott Davis
Michael Barclay, CFA
Diamond Hill Capital Management, Inc.
Charles Bath, CFA
Austin Hawley, CFA
Dimensional Fund Advisors LP
Jed Fogdall
Joel Schneider
Morningstar style boxTM
The Morningstar Style Box is based on a fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows
investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.
© 2021 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
All results shown assume
reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the redemption of Fund shares. Performance results reflect the
effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee waivers or expense reimbursement arrangements, performance
results would have been lower.
The performance information shown
represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial
intermediary, visiting columbiathreadneedleus.com/investor/ or calling 800.345.6611.
| * | Returns shown for periods prior to the inception date of the Fund’s Institutional Class shares include the returns of the Fund’s Class A shares for the period from April 20, 2012 (the inception date of the Fund) through January 2, 2017. Returns shown for periods prior to the inception date of the Fund’s Institutional 3 Class shares include the returns of the Fund’s Class A shares for the period from April 20, 2012 (the inception date of the Fund) through January 2, 2017, and of the Fund’s Institutional Class shares for the period from January 3, 2017 though the inception date of such share class, as applicable. Class A shares were offered prior to the Fund’s Institutional Class shares but have since been merged into the Fund’s Institutional Class shares. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investor/investment-products/mutual-funds/appended-performance for more information. |
The Fund’s performance prior
to October 1, 2016 reflects returns achieved pursuant to a different investment objective, principal investment strategies and/or management teams. If the Fund’s current investment objective, strategies and/or
management teams had been in place for the prior periods, results shown may have been different.
The Russell 1000 Value Index, an
unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values.
Indices are not available for
investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Fund performance may be significantly
negatively impacted by the economic impact of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted economies and capital markets around the world in ways that will likely continue and may change in
unforeseen ways for an indeterminate period. The COVID-19 pandemic may exacerbate pre-existing political, social and economic risks in certain countries and globally.
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Multi-Manager Value Strategies Fund | Annual Report 2021
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3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (April 20, 2012 — May 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Institutional Class shares of Multi-Manager Value Strategies Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on
Fund distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at May 31, 2021) | |
| Common Stocks | 98.9 |
| Money Market Funds | 1.1 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
Percentages indicated are based
upon total equity investments. The Fund’s portfolio composition is subject to change.
| 4 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
Columbia Management Investment
Advisers, LLC (CMIA) serves as the investment manager for the Fund and attempts to achieve the Fund’s objective by managing a portion of the Fund’s assets and selecting one or more subadvisers to manage
other sleeves independently of each other and CMIA. A portion of the Fund’s assets is subadvised by Dimensional Fund Advisors LP (DFA) and Diamond Hill Capital Management (Diamond Hill). As of May 31, 2021,
CMIA, DFA and Diamond Hill managed approximately 27.7%, 38.2% and 34.1% of the portfolio, respectively.
For the 12-month period that ended
May 31, 2021, the Fund’s Institutional Class shares returned 45.16%. The Fund outperformed its benchmark, the Russell 1000 Value Index, which returned 44.38% for the same time period.
Market overview
U.S. equities delivered
substantial gains for the 12 months ended May 31, 2021. Quick and unprecedented measures taken by policymakers and the U.S. Federal Reserve in the wake of the sharp COVID-19-driven market plunge in March 2020 spurred
markets to rally from the start of the period through the end, marked by some spikes in volatility on headlines around increasing COVID-19 cases and stalled talks on further stimulus. Market participants, however,
were cheered by expectations that the rollout of multiple COVID-19 vaccines would lead to a strong revival in economic activity. Passage of a fiscal stimulus package, together with the proposal of a $2 trillion
infrastructure bill in late March 2021, provided a further boost to the economic outlook.
While the rally during the first
half of the period was largely driven by outsize gains in faster growing market segments such as mega-cap technology stocks, the second half of the year saw a rotation into more economically-sensitive, value-oriented
market segments.
CMIA
Our portion of the Fund’s
portfolio measures its relative performance against the Russell 1000 Index instead of the Fund’s benchmark Russell 1000 Value Index. During the 12-month period that ended May 31, 2021, our portion of the
Fund’s portfolio underperformed the Russell 1000 Index.
The Fund’s notable
detractors during the period
| • | The Fund’s performance relative to Russell 1000 Index was driven primarily by stock selection within the health care, financials and communication services sectors. |
| • | Sector allocation was a secondary detractor, with our portion of the Fund’s overweight to the weak-performing utilities sector and underweight to the strong-performing consumer discretionary sector weighing on results versus the Russell 1000 Index. |
| • | Within the industrials sector, our portion of the Fund’s position in aerospace and defense company Lockheed Martin Corp. underperformed as investor sentiment favored more economically sensitive names and concerns over the defense spending policy of the new U.S. administration. |
| • | Within the health care sector: |
| ○ | Shares of Merck & Co., Inc. came under pressure during the period from investor concerns over potential regulatory changes and lower drug prices in the pharmaceutical industry, as well as anticipated changes in Merck’s management team. |
| ○ | An overweight position in Johnson & Johnson detracted from relative results. While shares delivered a strong absolute performance during the period, the health care sector overall was a weaker performing sector in the Russell 1000 Index during the period. |
| • | Within information technology: |
| ○ | Computer network equipment maker Cisco Systems, Inc. weighed on results as enterprise spending on networking was slow to recover during the period. |
| ○ | Chipmaker Intel Corporation was also among the Fund’s detractors. We exited the position in our portion of the Fund on news that delivery of its next generation chip would be delayed. |
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Multi-Manager Value Strategies Fund | Annual Report 2021
|
5 |
Manager Discussion of Fund Performance (continued)
| • | A lack of exposure to names such as Tesla and Alphabet weighed on results relative to the Russell 1000 Index in our portion of the Fund’s portfolio. Tesla alone accounted for nearly all the underperformance in consumer discretionary. Our portion of the Fund doesn’t own these companies as neither pay a dividend. |
The Fund’s notable
contributors during the period
| • | The Fund’s stock selection within the information technology sector and overweight allocation to the strong-performing financials and industrials sectors benefited results compared to the Russell 1000 Index during the period. |
| • | Fund positions in semiconductor capital equipment stocks Lam Research Corp. and KLA Corp. were notable contributors. |
| ○ | Lam Research makes equipment necessary to the manufacture of semiconductors, while KLA makes testing equipment that allows manufacturers to maximize chip yield. |
| ○ | Both Lam Research and KLA possess high profit margins, strong cash flow and balance sheets, producing high barriers to entry. Both stocks benefited during the period from the shortage of semiconductors, which has led to a ramp up in chip production. Importantly, we believe that the long-term trends of growing end markets for semiconductors and increasing chip complexity remain firmly in place. |
| • | Trane Technologies PLC, a top contributor during the period, specializes in climate control within the industrials sector. During the past several years, Trane has increased market share across both the residential and commercial segments. In addition, its business expanded due to COVID-19-driven initiatives to improve ventilation in schools and other buildings. |
| • | Within consumer discretionary, retailer Target Corp. was well positioned entering the pandemic and was a top contributor. Investments in e-commerce have produced competitive advantages leading to share gains that we believe will endure beyond the COVID-19 pandemic. |
| • | Within the financial sector, positions in Bank of America Corp. and JPMorgan Chase & Co. delivered strong gains. During the period, bank stocks benefited from the market’s rotation into value, a steepening of the yield curve, and the expectation of a strong economic recovery. |
DFA
Our portion of the Fund’s
portfolio is compared to the Russell 1000 Value Index, the Fund’s benchmark index. During the 12-month period that ended May 31, 2021, our portion of the Fund’s portfolio outperformed the Russell 1000
Value Index.
The Fund’s notable
contributors during the period
| • | The primary drivers of outperformance versus the Russell 1000 Value Index in our portion of the Fund’s portfolio were: |
| ○ | A greater emphasis on value stocks and mid cap stocks, as both size and value premiums were positive for the period |
| ○ | The exclusion of real estate investment trusts (REITs) and highly regulated utilities as both REITs and utilities underperformed during the period |
| • | Sector allocations and security selection are primarily a result of how the strategy is constructed along the dimensions of size, style, and profitability. That said: |
| ○ | Our portion of the portfolio was underweight, relative to the Russell 1000 Value Index, in the weak-performing utilities sector. The portfolio generally excludes highly regulated utilities from purchase because, while they tend to have low relative prices, their expected returns are lower than those of value stocks. |
| ○ | Stock selection within the financials and materials sectors contributed to results. |
| ○ | Having no exposure to Johnson & Johnson in our portion of the portfolio contributed to results versus the Russell 1000 Value Index as the company’s stock price underperformed during the period. |
| 6 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
| ○ | Our portion of the portfolio was underweight, relative to the Russell 1000 Value Index, in Verizon Communications Inc., which benefited relative results as Verizon underperformed. |
| ○ | An overweight position in JPMorgan Chase & Co. in our portion of the portfolio contributed to results, as the company’s stock price delivered a strong gain for the period. |
The Fund’s notable
detractors during the period
| • | Stock selection within the communication services sector detracted from results in our portion of the portfolio, relative to the Russell 1000 Value Index. |
| • | An overweight in Intel Corp., which returned in negative territory for the period, detracted from results versus the Russell 1000 Value Index. |
| • | An overweight in AT&T also detracted during the period, as the company underperformed the Russell 1000 Value Index by a significant degree. |
| • | An overweight in Pfizer also detracted from relative results as the pharmaceutical giant also underperformed the Russell 1000 Value Index during the period. |
Diamond Hill
Our portion of the Fund’s
portfolio is compared against the Russell 1000 Index instead of the Fund’s benchmark Russell 1000 Value Index. During the 12-month period that ended May 31, 2021, our portion of the Fund’s portfolio
outperformed the Russell 1000 Index.
The Fund’s notable
contributors during the period
| • | Security selection, along with an overweight position, in the financials sector had the largest impact on relative return. |
| ○ | Bank stocks broadly rallied in 2021 on optimism from vaccine rollouts, reopening of the economy, the prospect of rising rates, an improvement in credit and the possibility of increased mergers and acquisitions activity. |
| • | The Fund’s underweight position in the utilities sector and overweight position in the consumer discretionary sector also contributed to relative return. |
| • | While security selection in the industrials sector was additive, the Fund’s underweight position tempered its impact on relative return. |
| • | Security selection in the communication services sector produced a meaningful contribution to relative return in our portion of the portfolio. |
| • | Insurance firm American International Group, Inc., the largest holding in our portion of the Fund’s portfolio, continued to improve its underwriting margins. The company also benefited from strong premium growth in its commercial business and continued to make progress toward its planned separation into two companies – a property and casualty insurer and a life and retirements business. |
| • | Alternative asset manager KKR & Co., Inc. benefited from increased optimism around the opening up of the economy with the rollout of COVID-19 vaccines and exhibited an increasingly clearer growth profile in our opinion. |
| • | Charles Schwab Corp. benefited from its asset gathering efforts, expanded product suite and extended customer reach during the period. The continued growth of mobile trading technology has driven increased retail investor engagement. In addition, expectations for solid, relatively stable earnings growth and the potential for positive synergies from the TD Ameritrade acquisition drove multiples higher. |
The Fund’s notable
detractors during the period
| • | Security selection within the energy, materials sectors and consumer staples sectors detracted from relative performance during the period. |
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
7 |
Manager Discussion of Fund Performance (continued)
| • | An overweight to the consumer staples sector and an underweight to the materials sector also weighed on results versus the Russell 1000 Index. |
| • | Citigroup, Inc. underperformed during the third quarter of 2020 as investors were focused on the risk of additional regulatory scrutiny and the potential for incremental expense pressure. We subsequently eliminated Citigroup from our portion of the Fund during the fourth quarter of 2020 in favor of other banking and financial services opportunities that we believed to have better risk/reward profiles. |
| • | Biopharmaceutical company Gilead Sciences, Inc. continued to maintain its leadership in HIV treatment, although it had been through a period of tough comparisons due to patent expirations and disrupted demand due to the COVID-19 pandemic. The market’s high expectations for Gilead’s COVID-19 treatment drug Remdesivir were dashed, given its narrow therapeutic window and the emergence of effective vaccines. |
| • | The Fund quickly sold the shares it received of global generic company Viatris, Inc. when long-term Fund holding Pfizer, Inc. spun off its branded generic segment, Upjohn. Upjohn then merged with Mylan N.V. and the new company was renamed Viatris. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The Fund is managed by multiple advisers independently of one another, which may result in contradicting trades (i.e., with no net benefit to the Fund), while increasing transaction costs. Foreign investments subject the Fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent
financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Value securities may be unprofitable if the market fails to recognize their intrinsic worth or the portfolio manager misgauged that worth. Investments in a limited number of companies subject the Fund to greater risk of loss. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector. Investing in derivatives is a specialized activity that involves special risks, which may result in significant losses. See the Fund’s prospectus for more information on these and other risks.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 8 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur two types
of costs. There are shareholder transaction costs, which may include redemption fees. There are also ongoing fund costs, which generally include management fees, distribution and/or service fees, and other fund
expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to help you compare these costs with the ongoing costs of investing in other mutual
funds.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees. Therefore, the hypothetical calculations are useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
The Fund is offered only through
certain wrap fee programs sponsored and/or managed by Ameriprise Financial, Inc. or its affiliates. Participants in wrap fee programs pay other fees that are not included in the above table. Please refer to the wrap
program documents for information about the fees charged.
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Multi-Manager Value Strategies Fund | Annual Report 2021
|
9 |
Portfolio of Investments
May 31, 2021
May 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
| Common Stocks 98.6% | ||
| Issuer | Shares | Value ($) |
| Communication Services 9.0% | ||
| Diversified Telecommunication Services 1.9% | ||
| AT&T, Inc. | 1,601,978 | 47,146,213 |
| Lumen Technologies, Inc. | 379,310 | 5,249,650 |
| Verizon Communications, Inc. | 738,779 | 41,733,626 |
| Total | 94,129,489 | |
| Entertainment 2.1% | ||
| Activision Blizzard, Inc. | 18,152 | 1,765,282 |
| Liberty Media Group LLC, Class A(a) | 2,700 | 108,108 |
| Liberty Media Group LLC, Class C(a) | 21,151 | 944,392 |
| Madison Square Garden Entertainment Corp.(a) | 1,307 | 116,624 |
| Walt Disney Co. (The)(a) | 475,648 | 84,974,515 |
| Zynga, Inc., Class A(a) | 1,763,572 | 19,117,121 |
| Total | 107,026,042 | |
| Interactive Media & Services 0.8% | ||
| Facebook, Inc., Class A(a) | 123,073 | 40,457,787 |
| Twitter, Inc.(a) | 27,485 | 1,594,130 |
| Zillow Group, Inc., Class C(a) | 10,447 | 1,225,642 |
| Total | 43,277,559 | |
| Media 3.9% | ||
| Altice U.S.A., Inc., Class A(a) | 1,939 | 69,920 |
| Charter Communications, Inc., Class A(a) | 67,321 | 46,756,454 |
| Comcast Corp., Class A | 1,972,472 | 113,101,545 |
| Discovery, Inc., Class A(a) | 58,636 | 1,882,802 |
| Discovery, Inc., Class C(a) | 115,995 | 3,485,650 |
| DISH Network Corp., Class A(a) | 70,159 | 3,053,320 |
| Fox Corp., Class A | 112,187 | 4,190,184 |
| Fox Corp., Class B | 88,573 | 3,213,428 |
| Interpublic Group of Companies, Inc. (The) | 134,846 | 4,542,962 |
| Liberty Broadband Corp., Class A(a) | 2,117 | 343,081 |
| Liberty Broadband Corp., Class C(a) | 24,459 | 4,067,287 |
| Liberty SiriusXM Group, Class A(a) | 13,066 | 570,462 |
| Liberty SiriusXM Group, Class C(a) | 38,786 | 1,687,579 |
| News Corp., Class A | 41,973 | 1,132,851 |
| News Corp., Class B | 22,496 | 577,922 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| ViacomCBS, Inc., Class A | 5,695 | 265,045 |
| ViacomCBS, Inc., Class B | 201,837 | 8,561,926 |
| Total | 197,502,418 | |
| Wireless Telecommunication Services 0.3% | ||
| T-Mobile USA, Inc.(a) | 99,627 | 14,092,239 |
| Total Communication Services | 456,027,747 | |
| Consumer Discretionary 8.8% | ||
| Auto Components 0.7% | ||
| Aptiv PLC(a) | 8,949 | 1,346,109 |
| Autoliv, Inc. | 21,747 | 2,305,834 |
| BorgWarner, Inc. | 502,620 | 25,779,380 |
| Gentex Corp. | 62,682 | 2,225,211 |
| Lear Corp. | 20,783 | 4,018,601 |
| Veoneer, Inc.(a) | 1,815 | 42,961 |
| Total | 35,718,096 | |
| Automobiles 1.3% | ||
| Ford Motor Co.(a) | 585,395 | 8,505,789 |
| General Motors Co.(a) | 977,619 | 57,982,583 |
| Harley-Davidson, Inc. | 15,987 | 774,890 |
| Total | 67,263,262 | |
| Distributors 0.2% | ||
| Genuine Parts Co. | 14,649 | 1,920,777 |
| LKQ Corp.(a) | 105,221 | 5,362,062 |
| Total | 7,282,839 | |
| Diversified Consumer Services 0.0% | ||
| Service Corp. International | 21,171 | 1,122,486 |
| Hotels, Restaurants & Leisure 1.1% | ||
| Aramark | 45,023 | 1,681,609 |
| Booking Holdings, Inc.(a) | 13,529 | 31,949,410 |
| Carnival Corp.(a) | 139,454 | 4,122,260 |
| Darden Restaurants, Inc. | 550 | 78,777 |
| Expedia Group, Inc.(a) | 448 | 79,274 |
| Hyatt Hotels Corp., Class A(a) | 5,864 | 457,861 |
| McDonald’s Corp. | 45,687 | 10,685,732 |
| MGM Resorts International | 82,729 | 3,546,592 |
| Norwegian Cruise Line Holdings Ltd.(a) | 26,257 | 837,598 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Royal Caribbean Cruises Ltd.(a) | 31,724 | 2,958,898 |
| Wynn Resorts Ltd.(a) | 610 | 80,441 |
| Total | 56,478,452 | |
| Household Durables 1.7% | ||
| D.R. Horton, Inc. | 126,147 | 12,020,548 |
| Garmin Ltd. | 39,742 | 5,652,902 |
| Lennar Corp., Class A | 95,096 | 9,415,455 |
| Lennar Corp., Class B | 6,679 | 523,032 |
| Mohawk Industries, Inc.(a) | 20,238 | 4,263,742 |
| Newell Brands, Inc. | 134,972 | 3,872,347 |
| NVR, Inc.(a) | 8,350 | 40,808,371 |
| PulteGroup, Inc. | 82,663 | 4,777,095 |
| Toll Brothers, Inc. | 10,681 | 696,828 |
| Whirlpool Corp. | 20,193 | 4,787,558 |
| Total | 86,817,878 | |
| Internet & Direct Marketing Retail 0.4% | ||
| eBay, Inc. | 322,749 | 19,648,959 |
| Leisure Products 0.1% | ||
| Hasbro, Inc. | 47,375 | 4,546,579 |
| Multiline Retail 1.0% | ||
| Dollar Tree, Inc.(a) | 83,861 | 8,176,448 |
| Kohl’s Corp. | 24,082 | 1,336,310 |
| Target Corp. | 179,057 | 40,631,614 |
| Total | 50,144,372 | |
| Specialty Retail 1.2% | ||
| Advance Auto Parts, Inc. | 20,257 | 3,843,360 |
| Best Buy Co., Inc. | 58,724 | 6,826,078 |
| CarMax, Inc.(a) | 56,195 | 6,473,102 |
| Gap, Inc. (The) | 43,104 | 1,441,829 |
| Home Depot, Inc. (The) | 102,526 | 32,696,567 |
| Lithia Motors, Inc., Class A | 6,032 | 2,123,204 |
| TJX Companies, Inc. (The) | 96,025 | 6,485,528 |
| Total | 59,889,668 | |
| Textiles, Apparel & Luxury Goods 1.1% | ||
| Capri Holdings Ltd.(a) | 5,000 | 283,550 |
| Hanesbrands, Inc. | 1,091,133 | 21,320,739 |
| PVH Corp.(a) | 15,238 | 1,749,627 |
| Ralph Lauren Corp.(a) | 7,853 | 974,400 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Skechers U.S.A., Inc., Class A(a) | 1,000 | 47,500 |
| Tapestry, Inc.(a) | 18,622 | 835,941 |
| VF Corp. | 397,258 | 31,669,408 |
| Total | 56,881,165 | |
| Total Consumer Discretionary | 445,793,756 | |
| Consumer Staples 7.5% | ||
| Beverages 1.8% | ||
| Coca-Cola Co. (The) | 281,380 | 15,557,500 |
| Constellation Brands, Inc., Class A | 36,143 | 8,664,200 |
| Keurig Dr. Pepper, Inc. | 97,118 | 3,589,481 |
| Molson Coors Beverage Co., Class B(a) | 36,887 | 2,151,250 |
| PepsiCo, Inc. | 428,196 | 63,347,316 |
| Total | 93,309,747 | |
| Food & Staples Retailing 0.9% | ||
| Kroger Co. (The) | 185,793 | 6,870,625 |
| U.S. Foods Holding Corp.(a) | 45,739 | 1,781,077 |
| Walgreens Boots Alliance, Inc. | 250,022 | 13,166,159 |
| Walmart, Inc. | 161,112 | 22,882,737 |
| Total | 44,700,598 | |
| Food Products 2.8% | ||
| Archer-Daniels-Midland Co. | 510,662 | 33,974,343 |
| Bunge Ltd. | 49,798 | 4,323,462 |
| ConAgra Foods, Inc. | 106,671 | 4,064,165 |
| Darling Ingredients, Inc.(a) | 23,906 | 1,636,605 |
| General Mills, Inc. | 20,700 | 1,301,202 |
| Hershey Co. (The) | 40,471 | 7,003,506 |
| Hormel Foods Corp. | 1,624 | 78,829 |
| Ingredion, Inc. | 7,765 | 737,131 |
| JM Smucker Co. (The) | 30,369 | 4,047,884 |
| Kraft Heinz Co. (The) | 96,169 | 4,192,007 |
| Mondelez International, Inc., Class A | 1,116,498 | 70,931,118 |
| Pilgrim’s Pride Corp.(a) | 1,716 | 41,253 |
| Post Holdings, Inc.(a) | 15,143 | 1,749,471 |
| Tyson Foods, Inc., Class A | 93,436 | 7,428,162 |
| Total | 141,509,138 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
11 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Household Products 1.7% | ||
| Kimberly-Clark Corp. | 128,171 | 16,742,978 |
| Procter & Gamble Co. (The) | 525,270 | 70,832,660 |
| Spectrum Brands Holdings, Inc. | 670 | 59,556 |
| Total | 87,635,194 | |
| Personal Products 0.0% | ||
| Coty, Inc., Class A(a) | 10,944 | 97,511 |
| Tobacco 0.3% | ||
| Philip Morris International, Inc. | 140,748 | 13,572,330 |
| Total Consumer Staples | 380,824,518 | |
| Energy 5.3% | ||
| Energy Equipment & Services 0.4% | ||
| Baker Hughes Co. | 158,071 | 3,856,932 |
| Halliburton Co. | 286,581 | 6,433,743 |
| NOV, Inc.(a) | 9,646 | 155,494 |
| Schlumberger NV | 296,679 | 9,294,953 |
| Technip Energies NV, ADR(a) | 6,562 | 98,660 |
| TechnipFMC PLC(a) | 48,738 | 418,659 |
| Total | 20,258,441 | |
| Oil, Gas & Consumable Fuels 4.9% | ||
| APA Corp. | 15,233 | 316,846 |
| Cabot Oil & Gas Corp. | 129,410 | 2,122,324 |
| Chevron Corp. | 718,103 | 74,531,910 |
| Cimarex Energy Co. | 573 | 38,821 |
| ConocoPhillips Co. | 395,608 | 22,051,190 |
| Continental Resources, Inc. | 73,254 | 2,385,883 |
| Devon Energy Corp. | 155,140 | 4,120,518 |
| Diamondback Energy, Inc. | 18,208 | 1,457,915 |
| EOG Resources, Inc. | 274,134 | 22,023,925 |
| Exxon Mobil Corp. | 747,455 | 43,628,948 |
| Hess Corp. | 102,157 | 8,562,800 |
| HollyFrontier Corp. | 28,219 | 916,271 |
| Kinder Morgan, Inc. | 290,212 | 5,322,488 |
| Marathon Oil Corp. | 47,942 | 580,578 |
| Marathon Petroleum Corp. | 111,632 | 6,898,858 |
| Murphy Oil Corp. | 2,493 | 54,073 |
| Occidental Petroleum Corp. | 321,946 | 8,357,718 |
| ONEOK, Inc. | 126,455 | 6,669,237 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Phillips 66 | 131,536 | 11,077,962 |
| Pioneer Natural Resources Co. | 29,116 | 4,431,164 |
| Targa Resources Corp. | 30,478 | 1,184,375 |
| Valero Energy Corp. | 92,642 | 7,448,417 |
| Williams Companies, Inc. (The) | 432,723 | 11,397,924 |
| Total | 245,580,145 | |
| Total Energy | 265,838,586 | |
| Financials 22.1% | ||
| Banks 8.7% | ||
| Bank of America Corp. | 2,676,777 | 113,468,577 |
| CIT Group, Inc. | 1,264 | 66,967 |
| Citigroup, Inc. | 242,343 | 19,074,818 |
| Citizens Financial Group, Inc. | 45,602 | 2,275,540 |
| Comerica, Inc. | 33,110 | 2,598,804 |
| East West Bancorp, Inc. | 32,773 | 2,450,765 |
| Fifth Third Bancorp | 149,775 | 6,311,518 |
| First Horizon Corp. | 7,895 | 150,558 |
| First Republic Bank | 136,952 | 26,218,091 |
| Huntington Bancshares, Inc. | 321,505 | 5,099,069 |
| JPMorgan Chase & Co. | 703,513 | 115,544,975 |
| KeyCorp | 156,749 | 3,611,497 |
| M&T Bank Corp. | 24,152 | 3,880,985 |
| PacWest Bancorp | 1,197 | 54,068 |
| People’s United Financial, Inc. | 26,140 | 494,307 |
| PNC Financial Services Group, Inc. (The) | 155,150 | 30,204,602 |
| Prosperity Bancshares, Inc. | 809 | 60,877 |
| Regions Financial Corp. | 203,115 | 4,754,922 |
| SVB Financial Group(a) | 132 | 76,941 |
| Synovus Financial Corp. | 3,517 | 172,755 |
| Truist Financial Corp. | 697,645 | 43,100,508 |
| U.S. Bancorp | 456,974 | 27,774,880 |
| Wells Fargo & Co. | 660,554 | 30,861,083 |
| Zions Bancorp | 35,661 | 2,064,059 |
| Total | 440,371,166 | |
| Capital Markets 5.0% | ||
| Bank of New York Mellon Corp. (The) | 181,275 | 9,440,802 |
| BlackRock, Inc. | 15,338 | 13,452,040 |
| Charles Schwab Corp. (The) | 498,452 | 36,810,680 |
| CME Group, Inc. | 72,172 | 15,788,347 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Franklin Resources, Inc. | 100,218 | 3,428,458 |
| Goldman Sachs Group, Inc. (The) | 57,090 | 21,238,622 |
| Invesco Ltd. | 33,148 | 945,712 |
| Janus Henderson Group PLC | 4,217 | 162,397 |
| Jefferies Financial Group, Inc. | 15,054 | 483,685 |
| KKR & Co., Inc., Class A | 927,041 | 51,626,913 |
| Morgan Stanley | 591,284 | 53,777,280 |
| Northern Trust Corp. | 183,598 | 22,250,242 |
| Raymond James Financial, Inc. | 16,948 | 2,247,135 |
| State Street Corp. | 70,492 | 6,131,394 |
| T. Rowe Price Group, Inc. | 80,941 | 15,488,060 |
| Total | 253,271,767 | |
| Consumer Finance 0.4% | ||
| Ally Financial, Inc. | 104,256 | 5,703,846 |
| Capital One Financial Corp. | 59,812 | 9,616,573 |
| Discover Financial Services | 659 | 77,274 |
| Santander Consumer U.S.A. Holdings, Inc. | 37,213 | 1,410,373 |
| Synchrony Financial | 78,860 | 3,738,753 |
| Total | 20,546,819 | |
| Diversified Financial Services 1.8% | ||
| Berkshire Hathaway, Inc., Class B(a) | 300,870 | 87,083,813 |
| Equitable Holdings, Inc. | 46,718 | 1,483,296 |
| Voya Financial, Inc. | 10,144 | 664,635 |
| Total | 89,231,744 | |
| Insurance 6.2% | ||
| Aflac, Inc. | 152,724 | 8,656,396 |
| Alleghany Corp.(a) | 1,324 | 948,739 |
| Allstate Corp. (The) | 230,173 | 31,443,934 |
| American Financial Group, Inc. | 13,132 | 1,747,344 |
| American International Group, Inc. | 1,511,331 | 79,858,730 |
| Arch Capital Group Ltd.(a) | 57,962 | 2,312,104 |
| Assurant, Inc. | 7,430 | 1,197,345 |
| Athene Holding Ltd., Class A(a) | 14,395 | 901,559 |
| Axis Capital Holdings Ltd. | 3,614 | 193,855 |
| Chubb Ltd. | 146,178 | 24,848,798 |
| Cincinnati Financial Corp. | 14,444 | 1,757,979 |
| CNA Financial Corp. | 3,492 | 166,953 |
| Everest Re Group Ltd. | 4,525 | 1,176,319 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Fidelity National Financial, Inc. | 80,283 | 3,772,498 |
| Globe Life, Inc. | 34,379 | 3,624,234 |
| Hartford Financial Services Group, Inc. (The) | 629,646 | 41,147,366 |
| Lincoln National Corp. | 25,274 | 1,763,872 |
| Loews Corp. | 38,397 | 2,241,617 |
| Markel Corp.(a) | 666 | 816,176 |
| Marsh & McLennan Companies, Inc. | 352,479 | 48,765,470 |
| MetLife, Inc. | 475,754 | 31,095,281 |
| Old Republic International Corp. | 32,763 | 860,356 |
| Principal Financial Group, Inc. | 54,334 | 3,552,900 |
| Prudential Financial, Inc. | 47,067 | 5,034,757 |
| Reinsurance Group of America, Inc. | 8,100 | 1,020,843 |
| RenaissanceRe Holdings Ltd. | 4,218 | 650,078 |
| Travelers Companies, Inc. (The) | 80,185 | 12,805,545 |
| Unum Group | 20,599 | 637,951 |
| Willis Towers Watson PLC | 289 | 75,533 |
| WR Berkley Corp. | 20,100 | 1,567,599 |
| Total | 314,642,131 | |
| Thrifts & Mortgage Finance 0.0% | ||
| New York Community Bancorp, Inc. | 35,013 | 419,106 |
| Total Financials | 1,118,482,733 | |
| Health Care 13.2% | ||
| Biotechnology 1.1% | ||
| AbbVie, Inc. | 185,758 | 21,027,806 |
| Alexion Pharmaceuticals, Inc.(a) | 39,266 | 6,932,412 |
| Biogen, Inc.(a) | 15,228 | 4,073,185 |
| Gilead Sciences, Inc. | 382,740 | 25,302,941 |
| Horizon Therapeutics PLC(a) | 2,619 | 240,057 |
| Regeneron Pharmaceuticals, Inc.(a) | 148 | 74,360 |
| United Therapeutics Corp.(a) | 824 | 153,182 |
| Total | 57,803,943 | |
| Health Care Equipment & Supplies 4.0% | ||
| Abbott Laboratories | 624,801 | 72,883,037 |
| Baxter International, Inc. | 2,297 | 188,630 |
| Becton Dickinson and Co. | 71,683 | 17,339,401 |
| Boston Scientific Corp.(a) | 41,966 | 1,785,653 |
| Cooper Companies, Inc. (The) | 602 | 236,857 |
| Danaher Corp. | 55,861 | 14,308,237 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
13 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Dentsply Sirona, Inc. | 25,186 | 1,685,447 |
| Envista Holdings Corp.(a) | 20,877 | 911,072 |
| Medtronic PLC | 684,467 | 86,646,677 |
| STERIS PLC | 18,871 | 3,601,719 |
| Zimmer Biomet Holdings, Inc. | 23,887 | 4,020,899 |
| Total | 203,607,629 | |
| Health Care Providers & Services 3.6% | ||
| Anthem, Inc. | 43,806 | 17,444,425 |
| Cardinal Health, Inc. | 1,362 | 76,367 |
| Centene Corp.(a) | 54,179 | 3,987,574 |
| Cigna Corp. | 61,633 | 15,953,702 |
| CVS Health Corp. | 242,766 | 20,984,693 |
| DaVita, Inc.(a) | 39,208 | 4,707,705 |
| Henry Schein, Inc.(a) | 40,439 | 3,074,982 |
| Humana, Inc. | 103,883 | 45,469,589 |
| Laboratory Corp. of America Holdings(a) | 34,080 | 9,354,278 |
| McKesson Corp. | 15,989 | 3,076,124 |
| Quest Diagnostics, Inc. | 44,222 | 5,822,711 |
| UnitedHealth Group, Inc. | 109,892 | 45,266,713 |
| Universal Health Services, Inc., Class B | 26,871 | 4,289,418 |
| Total | 179,508,281 | |
| Health Care Technology 0.1% | ||
| Change Healthcare, Inc.(a) | 12,961 | 303,806 |
| Teladoc Health, Inc.(a) | 14,468 | 2,178,591 |
| Total | 2,482,397 | |
| Life Sciences Tools & Services 0.5% | ||
| Bio-Rad Laboratories, Inc., Class A(a) | 2,854 | 1,719,164 |
| IQVIA Holdings, Inc.(a) | 12,355 | 2,967,177 |
| PerkinElmer, Inc. | 8,807 | 1,277,631 |
| Syneos Health, Inc.(a) | 23,952 | 2,105,381 |
| Thermo Fisher Scientific, Inc. | 33,548 | 15,750,786 |
| Total | 23,820,139 | |
| Pharmaceuticals 3.9% | ||
| Bristol-Myers Squibb Co. | 446,149 | 29,320,912 |
| Elanco Animal Health, Inc.(a) | 54,384 | 1,956,736 |
| Eli Lilly & Co. | 108,167 | 21,605,277 |
| Jazz Pharmaceuticals PLC(a) | 19,458 | 3,466,054 |
| Johnson & Johnson | 264,559 | 44,776,611 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Merck & Co., Inc. | 261,603 | 19,853,052 |
| Perrigo Co. PLC | 15,360 | 708,710 |
| Pfizer, Inc. | 1,907,073 | 73,860,937 |
| Viatris, Inc. | 261,264 | 3,981,663 |
| Total | 199,529,952 | |
| Total Health Care | 666,752,341 | |
| Industrials 11.8% | ||
| Aerospace & Defense 1.9% | ||
| General Dynamics Corp. | 50,962 | 9,678,193 |
| Howmet Aerospace, Inc.(a) | 134,860 | 4,784,833 |
| Huntington Ingalls Industries, Inc. | 300 | 64,863 |
| L3Harris Technologies, Inc. | 127,116 | 27,718,915 |
| Lockheed Martin Corp. | 68,710 | 26,260,962 |
| Northrop Grumman Corp. | 23,922 | 8,752,342 |
| Raytheon Technologies Corp. | 143,203 | 12,703,538 |
| Teledyne Technologies, Inc.(a) | 352 | 147,654 |
| Textron, Inc. | 69,891 | 4,785,437 |
| Total | 94,896,737 | |
| Air Freight & Logistics 0.7% | ||
| FedEx Corp. | 44,772 | 14,094,673 |
| United Parcel Service, Inc., Class B | 70,046 | 15,031,871 |
| XPO Logistics, Inc.(a) | 35,334 | 5,191,625 |
| Total | 34,318,169 | |
| Airlines 0.3% | ||
| Alaska Air Group, Inc.(a) | 13,240 | 916,208 |
| Delta Air Lines, Inc.(a) | 59,850 | 2,853,648 |
| JetBlue Airways Corp.(a) | 43,204 | 868,400 |
| Southwest Airlines Co.(a) | 79,425 | 4,881,461 |
| United Airlines Holdings, Inc.(a) | 60,564 | 3,533,909 |
| Total | 13,053,626 | |
| Building Products 1.4% | ||
| Builders FirstSource, Inc.(a) | 47,279 | 2,105,807 |
| Carrier Global Corp. | 601,433 | 27,623,818 |
| Fortune Brands Home & Security, Inc. | 26,407 | 2,724,146 |
| Johnson Controls International PLC | 102,845 | 6,843,306 |
| Owens Corning | 26,387 | 2,814,174 |
| Trane Technologies PLC | 165,836 | 30,911,830 |
| Total | 73,023,081 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Commercial Services & Supplies 0.5% | ||
| Republic Services, Inc. | 103,448 | 11,294,452 |
| Waste Management, Inc. | 113,701 | 15,995,457 |
| Total | 27,289,909 | |
| Construction & Engineering 0.1% | ||
| AECOM(a) | 36,137 | 2,349,266 |
| Arcosa, Inc. | 4,509 | 286,322 |
| Quanta Services, Inc. | 48,008 | 4,577,563 |
| Total | 7,213,151 | |
| Electrical Equipment 0.7% | ||
| Acuity Brands, Inc. | 34 | 6,316 |
| AMETEK, Inc. | 27,669 | 3,738,082 |
| Eaton Corp. PLC | 171,354 | 24,889,168 |
| Emerson Electric Co. | 8,624 | 825,231 |
| Hubbell, Inc. | 9,093 | 1,733,490 |
| nVent Electric PLC | 3,199 | 104,095 |
| Sensata Technologies Holding(a) | 54,177 | 3,219,739 |
| Sunrun, Inc.(a) | 22,764 | 1,018,006 |
| Total | 35,534,127 | |
| Industrial Conglomerates 1.2% | ||
| Carlisle Companies, Inc. | 14,492 | 2,787,101 |
| General Electric Co. | 505,222 | 7,103,421 |
| Honeywell International, Inc. | 212,437 | 49,053,828 |
| Roper Technologies, Inc. | 1,093 | 491,861 |
| Total | 59,436,211 | |
| Machinery 3.5% | ||
| AGCO Corp. | 21,789 | 3,014,944 |
| Caterpillar, Inc. | 95,504 | 23,024,104 |
| Cummins, Inc. | 80,577 | 20,730,851 |
| Deere & Co. | 85,437 | 30,851,301 |
| Dover Corp. | 15,740 | 2,368,870 |
| Fortive Corp. | 46,945 | 3,404,451 |
| Ingersoll Rand, Inc.(a) | 48,131 | 2,389,223 |
| Middleby Corp. (The)(a) | 4,033 | 662,541 |
| Oshkosh Corp. | 13,550 | 1,781,012 |
| Otis Worldwide Corp. | 62,282 | 4,878,549 |
| PACCAR, Inc. | 103,776 | 9,501,731 |
| Parker-Hannifin Corp. | 157,259 | 48,459,361 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Pentair PLC | 54,690 | 3,771,969 |
| Snap-On, Inc. | 18,739 | 4,771,324 |
| Stanley Black & Decker, Inc. | 53,715 | 11,645,412 |
| Westinghouse Air Brake Technologies Corp. | 43,867 | 3,630,433 |
| Xylem, Inc. | 4,949 | 584,576 |
| Total | 175,470,652 | |
| Professional Services 0.3% | ||
| CACI International, Inc., Class A(a) | 388 | 98,925 |
| IHS Markit Ltd. | 4,494 | 473,263 |
| Jacobs Engineering Group, Inc. | 24,042 | 3,415,887 |
| Leidos Holdings, Inc. | 49,204 | 5,055,711 |
| ManpowerGroup, Inc. | 7,269 | 879,476 |
| Nielsen Holdings PLC | 97,496 | 2,652,866 |
| Total | 12,576,128 | |
| Road & Rail 1.1% | ||
| AMERCO | 5,483 | 3,152,944 |
| Kansas City Southern | 31,372 | 9,338,817 |
| Knight-Swift Transportation Holdings, Inc. | 7,748 | 369,812 |
| Norfolk Southern Corp. | 46,043 | 12,933,479 |
| Union Pacific Corp. | 142,198 | 31,956,157 |
| Total | 57,751,209 | |
| Trading Companies & Distributors 0.1% | ||
| United Rentals, Inc.(a) | 15,790 | 5,273,228 |
| Total Industrials | 595,836,228 | |
| Information Technology 11.6% | ||
| Communications Equipment 0.7% | ||
| Ciena Corp.(a) | 5,259 | 278,043 |
| Cisco Systems, Inc. | 593,567 | 31,399,694 |
| F5 Networks, Inc.(a) | 1,218 | 225,854 |
| Juniper Networks, Inc. | 45,526 | 1,198,700 |
| Total | 33,102,291 | |
| Electronic Equipment, Instruments & Components 0.8% | ||
| Arrow Electronics, Inc.(a) | 17,455 | 2,100,360 |
| Avnet, Inc. | 1,118 | 49,259 |
| Corning, Inc. | 256,625 | 11,196,549 |
| Flex Ltd.(a) | 172,578 | 3,153,000 |
| II-VI, Inc.(a) | 28,627 | 1,928,601 |
| IPG Photonics Corp.(a) | 2,685 | 561,863 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
15 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Software 1.1% | ||
| Citrix Systems, Inc. | 15,687 | 1,803,377 |
| Dolby Laboratories, Inc., Class A | 15,093 | 1,472,171 |
| Microsoft Corp. | 188,138 | 46,974,296 |
| NortonLifeLock, Inc. | 2,942 | 81,376 |
| SS&C Technologies Holdings, Inc. | 73,425 | 5,423,905 |
| Total | 55,755,125 | |
| Technology Hardware, Storage & Peripherals 0.3% | ||
| Dell Technologies, Inc.(a) | 764 | 75,361 |
| Hewlett Packard Enterprise Co. | 401,247 | 6,403,902 |
| HP, Inc. | 42,384 | 1,238,884 |
| Western Digital Corp.(a) | 105,826 | 7,961,290 |
| Xerox Holdings Corp. | 3,170 | 74,337 |
| Total | 15,753,774 | |
| Total Information Technology | 587,819,910 | |
| Materials 5.2% | ||
| Chemicals 2.7% | ||
| Air Products & Chemicals, Inc. | 15,127 | 4,532,957 |
| Albemarle Corp. | 27,261 | 4,554,768 |
| Celanese Corp., Class A | 3,262 | 539,698 |
| CF Industries Holdings, Inc. | 73,957 | 3,932,294 |
| Corteva, Inc. | 80,469 | 3,661,339 |
| Dow, Inc. | 158,738 | 10,860,854 |
| DuPont de Nemours, Inc. | 16,891 | 1,428,810 |
| Eastman Chemical Co. | 46,835 | 5,873,109 |
| Huntsman Corp. | 16,423 | 466,085 |
| International Flavors & Fragrances, Inc. | 24,739 | 3,504,774 |
| Linde PLC | 194,321 | 58,412,892 |
| LyondellBasell Industries NV, Class A | 106,249 | 11,965,762 |
| Mosaic Co. (The) | 56,878 | 2,055,571 |
| PPG Industries, Inc. | 1,793 | 322,238 |
| Sherwin-Williams Co. (The) | 70,977 | 20,124,109 |
| Valvoline, Inc. | 35,216 | 1,162,128 |
| Westlake Chemical Corp. | 19,870 | 2,004,287 |
| Total | 135,401,675 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Construction Materials 0.3% | ||
| Martin Marietta Materials, Inc. | 18,726 | 6,809,710 |
| Vulcan Materials Co. | 37,635 | 6,899,248 |
| Total | 13,708,958 | |
| Containers & Packaging 0.8% | ||
| Amcor PLC | 446,698 | 5,271,036 |
| Avery Dennison Corp. | 37,773 | 8,330,080 |
| Ball Corp. | 5,081 | 417,455 |
| Berry Global Group, Inc.(a) | 875 | 59,684 |
| International Paper Co. | 135,904 | 8,575,542 |
| Packaging Corp. of America | 67,817 | 10,080,997 |
| Sonoco Products Co. | 102,361 | 6,911,415 |
| WestRock Co. | 69,219 | 4,036,852 |
| Total | 43,683,061 | |
| Metals & Mining 1.4% | ||
| Arconic Corp.(a) | 20,914 | 756,459 |
| Freeport-McMoRan, Inc. | 1,016,719 | 43,434,236 |
| Newmont Corp. | 93,793 | 6,891,910 |
| Nucor Corp. | 100,960 | 10,352,439 |
| Reliance Steel & Aluminum Co. | 20,889 | 3,510,814 |
| Royal Gold, Inc. | 3,882 | 480,475 |
| Southern Copper Corp. | 1,007 | 70,228 |
| Steel Dynamics, Inc. | 71,770 | 4,480,601 |
| Total | 69,977,162 | |
| Total Materials | 262,770,856 | |
| Real Estate 2.2% | ||
| Equity Real Estate Investment Trusts (REITS) 1.9% | ||
| AvalonBay Communities, Inc. | 34,972 | 7,237,106 |
| Crown Castle International Corp. | 41,909 | 7,941,755 |
| Digital Realty Trust, Inc. | 88,136 | 13,357,892 |
| Extra Space Storage, Inc. | 54,679 | 8,191,461 |
| Public Storage | 78,234 | 22,099,540 |
| SBA Communications Corp. | 47,288 | 14,097,499 |
| Weyerhaeuser Co. | 627,172 | 23,807,449 |
| Total | 96,732,702 | |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Real Estate Management & Development 0.3% | ||
| CBRE Group, Inc., Class A(a) | 95,094 | 8,347,351 |
| Howard Hughes Corporation(a) | 723 | 76,515 |
| Jones Lang LaSalle, Inc.(a) | 14,090 | 2,849,703 |
| Total | 11,273,569 | |
| Total Real Estate | 108,006,271 | |
| Utilities 1.9% | ||
| Electric Utilities 0.9% | ||
| American Electric Power Co., Inc. | 98,928 | 8,507,808 |
| Duke Energy Corp. | 32,651 | 3,272,283 |
| Eversource Energy | 90,577 | 7,353,947 |
| NextEra Energy, Inc. | 142,478 | 10,432,239 |
| NRG Energy, Inc. | 40,158 | 1,291,080 |
| Pinnacle West Capital Corp. | 36,263 | 3,067,124 |
| Xcel Energy, Inc. | 133,103 | 9,434,341 |
| Total | 43,358,822 | |
| Independent Power and Renewable Electricity Producers 0.0% | ||
| Vistra Corp. | 71,947 | 1,163,383 |
| Multi-Utilities 1.0% | ||
| Ameren Corp. | 100,727 | 8,481,213 |
| CMS Energy Corp. | 104,324 | 6,545,288 |
| Dominion Energy, Inc. | 283,210 | 21,563,610 |
| DTE Energy Co. | 46,293 | 6,387,971 |
| MDU Resources Group, Inc. | 11,170 | 375,982 |
| WEC Energy Group, Inc. | 101,446 | 9,526,794 |
| Total | 52,880,858 | |
| Total Utilities | 97,403,063 | |
|
Total Common Stocks
(Cost $3,489,403,678) |
4,985,556,009 | |
| Money Market Funds 1.2% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.042%(b),(c) | 57,952,944 | 57,947,148 |
|
Total Money Market Funds
(Cost $57,947,148) |
57,947,148 | |
|
Total Investments in Securities
(Cost: $3,547,350,826) |
5,043,503,157 | |
| Other Assets & Liabilities, Net | 12,217,301 | |
| Net Assets | 5,055,720,458 | |
The accompanying Notes to Financial
Statements are an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
17 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at May 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2021 are as follows: |
| Affiliated issuers |
Beginning
of period($) |
Purchases($) | Sales($) |
Net change in
unrealized appreciation (depreciation)($) |
End of
period($) |
Realized gain
(loss)($) |
Dividends($) |
End of
period shares |
| Columbia Short-Term Cash Fund, 0.042% | ||||||||
| 77,637,462 | 853,519,167 | (873,205,478) | (4,003) | 57,947,148 | (9,343) | 106,116 | 57,952,944 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Portfolio of Investments (continued)
May 31, 2021
May 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 456,027,747 | — | — | 456,027,747 |
| Consumer Discretionary | 445,793,756 | — | — | 445,793,756 |
| Consumer Staples | 380,824,518 | — | — | 380,824,518 |
| Energy | 265,739,926 | 98,660 | — | 265,838,586 |
| Financials | 1,118,482,733 | — | — | 1,118,482,733 |
| Health Care | 666,752,341 | — | — | 666,752,341 |
| Industrials | 595,836,228 | — | — | 595,836,228 |
| Information Technology | 587,819,910 | — | — | 587,819,910 |
| Materials | 262,770,856 | — | — | 262,770,856 |
| Real Estate | 108,006,271 | — | — | 108,006,271 |
| Utilities | 97,403,063 | — | — | 97,403,063 |
| Total Common Stocks | 4,985,457,349 | 98,660 | — | 4,985,556,009 |
| Money Market Funds | 57,947,148 | — | — | 57,947,148 |
| Total Investments in Securities | 5,043,404,497 | 98,660 | — | 5,043,503,157 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
19 |
Statement of Assets and Liabilities
May 31, 2021
May 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $3,489,403,678) | $4,985,556,009 |
| Affiliated issuers (cost $57,947,148) | 57,947,148 |
| Receivable for: | |
| Investments sold | 2,364,745 |
| Capital shares sold | 7,523,122 |
| Dividends | 9,042,459 |
| Foreign tax reclaims | 172,507 |
| Prepaid expenses | 47,368 |
| Total assets | 5,062,653,358 |
| Liabilities | |
| Due to custodian | 40,548 |
| Payable for: | |
| Investments purchased | 1,832,641 |
| Capital shares purchased | 4,417,655 |
| Management services fees | 81,845 |
| Transfer agent fees | 285,482 |
| Compensation of board members | 141,801 |
| Other expenses | 132,928 |
| Total liabilities | 6,932,900 |
| Net assets applicable to outstanding capital stock | $5,055,720,458 |
| Represented by | |
| Paid in capital | 3,305,171,666 |
| Total distributable earnings (loss) | 1,750,548,792 |
| Total - representing net assets applicable to outstanding capital stock | $5,055,720,458 |
| Institutional Class | |
| Net assets | $5,055,717,401 |
| Shares outstanding | 286,046,300 |
| Net asset value per share | $17.67 |
| Institutional 3 Class | |
| Net assets | $3,057 |
| Shares outstanding | 173 |
| Net asset value per share(a) | $17.69 |
| (a) | Net asset value per share rounds to this amount due to fractional shares outstanding. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Statement of Operations
Year Ended May 31, 2021
Year Ended May 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $89,648,623 |
| Dividends — affiliated issuers | 106,116 |
| Interfund lending | 152 |
| Total income | 89,754,891 |
| Expenses: | |
| Management services fees | 25,398,786 |
| Transfer agent fees | |
| Institutional Class | 3,860,534 |
| Compensation of board members | 104,204 |
| Custodian fees | 27,235 |
| Printing and postage fees | 246,826 |
| Registration fees | 134,202 |
| Audit fees | 44,580 |
| Legal fees | 48,317 |
| Interest on interfund lending | 67 |
| Compensation of chief compliance officer | 815 |
| Other | 206,518 |
| Total expenses | 30,072,084 |
| Net investment income | 59,682,807 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 341,494,921 |
| Investments — affiliated issuers | (9,343) |
| Futures contracts | 686,321 |
| Net realized gain | 342,171,899 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 1,214,927,241 |
| Investments — affiliated issuers | (4,003) |
| Foreign currency translations | 11,664 |
| Net change in unrealized appreciation (depreciation) | 1,214,934,902 |
| Net realized and unrealized gain | 1,557,106,801 |
| Net increase in net assets resulting from operations | $1,616,789,608 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
21 |
Statement of Changes in Net Assets
|
Year Ended
May 31, 2021 |
Year Ended
May 31, 2020 (a) |
|
| Operations | ||
| Net investment income | $59,682,807 | $55,021,443 |
| Net realized gain (loss) | 342,171,899 | (5,204,247) |
| Net change in unrealized appreciation (depreciation) | 1,214,934,902 | 29,349,066 |
| Net increase in net assets resulting from operations | 1,616,789,608 | 79,166,262 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | — | (209,539) |
| Institutional Class | (101,861,244) | (116,433,005) |
| Institutional 3 Class | (65) | (10) |
| Total distributions to shareholders | (101,861,309) | (116,642,554) |
| Increase (decrease) in net assets from capital stock activity | (48,361,524) | 770,692,927 |
| Total increase in net assets | 1,466,566,775 | 733,216,635 |
| Net assets at beginning of year | 3,589,153,683 | 2,855,937,048 |
| Net assets at end of year | $5,055,720,458 | $3,589,153,683 |
| Year Ended | Year Ended | |||
| May 31, 2021 | May 31, 2020 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | — | — | 85 | 2,042 |
| Distributions reinvested | — | — | 14,654 | 209,423 |
| Redemptions | — | — | (516,499) | (7,587,747) |
| Net decrease | — | — | (501,760) | (7,376,282) |
| Institutional Class | ||||
| Subscriptions | 79,038,197 | 1,204,384,240 | 107,193,486 | 1,324,596,542 |
| Distributions reinvested | 7,038,500 | 101,861,244 | 8,553,659 | 116,433,005 |
| Redemptions | (87,676,084) | (1,354,607,008) | (50,171,340) | (662,962,838) |
| Net increase (decrease) | (1,599,387) | (48,361,524) | 65,575,805 | 778,066,709 |
| Institutional 3 Class | ||||
| Subscriptions | — | — | 173 | 2,500 |
| Net increase | — | — | 173 | 2,500 |
| Total net increase (decrease) | (1,599,387) | (48,361,524) | 65,074,218 | 770,692,927 |
| (a) | Institutional 3 Class shares are based on operations from December 18, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total
return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain
derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
|
Net asset value,
beginning of period |
Net
investment income |
Net
realized and unrealized gain (loss) |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from net realized gains |
Total
distributions to shareholders |
|
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $12.48 | 0.21 | 5.34 | 5.55 | (0.21) | (0.15) | (0.36) |
| Year Ended 5/31/2020 | $12.83 | 0.24 | (0.06)(d) | 0.18 | (0.23) | (0.30) | (0.53) |
| Year Ended 5/31/2019 | $13.64 | 0.21 | (0.02)(d) | 0.19 | (0.20) | (0.80) | (1.00) |
| Year Ended 5/31/2018 | $12.97 | 0.20 | 1.15 | 1.35 | (0.20) | (0.48) | (0.68) |
| Year Ended 5/31/2017(f) | $12.34 | 0.07 | 0.60 | 0.67 | (0.04) | — | (0.04) |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $12.50 | 0.22 | 5.34 | 5.56 | (0.22) | (0.15) | (0.37) |
| Year Ended 5/31/2020(h) | $14.47 | 0.11 | (2.02)(d) | (1.91) | (0.06) | — | (0.06) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | Calculation of the net gain (loss) per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized gain (loss) presented in the Statement of Operations due to the timing of subscriptions and redemptions of Fund shares in relation to fluctuations in the market value of the portfolio. |
| (e) | Ratios include line of credit interest expense which is less than 0.01%. |
| (f) | Institutional Class shares commenced operations on January 3, 2017. Per share data and total return reflect activity from that date. |
| (g) | Annualized. |
| (h) | Institutional 3 Class shares commenced operations on December 18, 2019. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Financial Highlights (continued)
|
Net
asset value, end of period |
Total
return |
Total gross
expense ratio to average net assets(a) |
Total net
expense ratio to average net assets(a),(b) |
Net investment
income ratio to average net assets |
Portfolio
turnover |
Net
assets, end of period (000’s) |
|
| Institutional Class | |||||||
| Year Ended 5/31/2021 | $17.67 | 45.16% | 0.71%(c) | 0.71%(c) | 1.41% | 29% | $5,055,717 |
| Year Ended 5/31/2020 | $12.48 | 1.07% | 0.76% | 0.74% | 1.78% | 19% | $3,589,152 |
| Year Ended 5/31/2019 | $12.83 | 1.62% | 0.77% | 0.77% | 1.59% | 20% | $2,849,432 |
| Year Ended 5/31/2018 | $13.64 | 10.41% | 0.78%(e) | 0.78%(e) | 1.46% | 21% | $3,137,590 |
| Year Ended 5/31/2017(f) | $12.97 | 5.39% | 0.82%(g) | 0.82%(g) | 1.43%(g) | 97% | $2,471,575 |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2021 | $17.69 | 45.20% | 0.63%(c) | 0.63%(c) | 1.49% | 29% | $3 |
| Year Ended 5/31/2020(h) | $12.50 | (13.14%) | 0.66%(g) | 0.64%(g) | 1.84%(g) | 19% | $2 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
25 |
Notes to Financial Statements
May 31, 2021
May 31, 2021
Note 1. Organization
Multi-Manager Value Strategies
Fund (the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund is offered only through certain wrap fee programs sponsored and/or managed by Ameriprise Financial, Inc. (Ameriprise Financial) or its affiliates. The Fund offers each of
the share classes listed in the Statement of Assets and Liabilities which are not subject to any front-end sales charge or contingent deferred sales charge.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available, the
securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many
securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events
that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the
Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities
markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably
reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
| 26 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the
clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
27 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Master Agreement, the Fund may, under certain
circumstances, offset with the counterparty certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master
Agreement typically permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a
particular jurisdiction may impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
| 28 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended May 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category |
Futures
contracts ($) |
| Equity risk | 686,321 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2021:
| Derivative instrument |
Average notional
amounts ($)* |
| Futures contracts — long | 5,356,544 |
| * | Based on the ending daily outstanding amounts for the year ended May 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
29 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its ordinary income, capital gain net income and certain other
amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to shareholders
Distributions from net investment
income, if any, are declared and paid each calendar quarter. Net realized capital gains, if any, are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of their portion of the Fund. The management services fee is an annual fee
that is equal to a percentage of the Fund’s daily net assets that declines from 0.72% to 0.52% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2021
was 0.60% of the Fund’s average daily net assets.
Subadvisory agreements
The Investment Manager has entered
into Subadvisory Agreements with Diamond Hill Capital Management, Inc. and Dimensional Fund Advisors LP, each of which subadvises a portion of the assets of the Fund. New investments in the Fund, net of redemptions,
are allocated in accordance with the Investment Manager’s determination, subject to the oversight of the Fund’s Board of Trustees. Each subadviser’s proportionate share of investments in the Fund
will vary due to market fluctuations. The Investment Manager compensates each subadviser to manage the investment of the Fund’s assets.
| 30 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transfer agency fees
Under a Transfer and Dividend
Disbursing Agent Agreement, Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, is responsible for
providing transfer agency services to the Fund. The Transfer Agent has contracted with DST Asset Manager Solutions, Inc. (DST) to serve as sub-transfer agent. The Transfer Agent pays the fees of DST for services as
sub-transfer agent and DST is not entitled to reimbursement for such fees from the Fund (with the exception of out-of-pocket fees).
The Fund pays the Transfer Agent a
monthly transfer agency fee based on the number or the average value of accounts, depending on the type of account. In addition, the Fund pays the Transfer Agent a fee for shareholder services based on the number of
accounts or on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts up to the lesser of the amount charged by the financial intermediary or a cap established by the
Board of Trustees from time to time.
The Transfer Agent also receives
compensation from the Fund for various shareholder services and reimbursements for certain out-of-pocket fees. Total transfer agency fees for Institutional 3 Class shares are subject to an annual limitation of not
more than 0.02% of the average daily net assets attributable to Institutional 3 Class. In addition, effective October 1, 2020 through September 30, 2021, Institutional 3 Class shares are subject to a contractual
transfer agency fee annual limitation of not more than 0.01% of the average daily net assets attributable to that share class.
For the year ended May 31,
2021, the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Effective rate (%) | |
| Institutional Class | 0.09 |
| Institutional 3 Class | 0.01 |
Distribution and service fees
The Fund has an agreement with
Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder services. The Fund
does not pay the Distributor a fee for the distribution services it provides to the Fund.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
31 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
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) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, 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 following annual rate(s) as a percentage of the class’ average daily net assets:
|
Fee rate(s) contractual
September 30, 2021 |
|
| Institutional Class | 0.74% |
| Institutional 3 Class | 0.64 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments 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 Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Reflected in the contractual cap commitments, effective October 1, 2020 through September 30, 2021, is the Transfer Agent’s contractual agreement
to limit total transfer agency fees to an annual rate of not more than 0.01% for Institutional 3 Class of the average daily net assets attributable to Institutional 3 Class, unless sooner terminated at the sole
discretion of the Board of Trustees. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future
periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At May 31, 2021, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, corporate actions, re-characterization of distributions for investments, earnings and profits
distributed to shareholders on the redemption of shares and deemed distributions. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets.
Temporary differences do not require reclassifications.
The following reclassifications
were made:
|
Undistributed net
investment income ($) |
Accumulated
net realized gain ($) |
Paid in
capital ($) |
| (1,031,647) | (21,874,692) | 22,906,339 |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2021 | Year Ended May 31, 2020 | ||||
|
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
Ordinary
income ($) |
Long-term
capital gains ($) |
Total ($) |
| 59,463,569 | 42,397,740 | 101,861,309 | 52,373,226 | 64,269,328 | 116,642,554 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| 32 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
At May 31, 2021, the components of
distributable earnings on a tax basis were as follows:
|
Undistributed
ordinary income ($) |
Undistributed
long-term capital gains ($) |
Capital loss
carryforwards ($) |
Net unrealized
appreciation ($) |
| 46,660,177 | 221,076,595 | — | 1,482,937,877 |
At May 31, 2021, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
|
Federal
tax cost ($) |
Gross unrealized
appreciation ($) |
Gross unrealized
(depreciation) ($) |
Net unrealized
appreciation ($) |
| 3,560,565,280 | 1,543,484,140 | (60,546,263) | 1,482,937,877 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,183,943,649 and $1,259,118,801, respectively, for the year ended May 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended May 31, 2021 was as follows:
| Borrower or lender |
Average loan
balance ($) |
Weighted average
interest rate (%) |
Number of days
with outstanding loans |
| Borrower | 1,700,000 | 0.66 | 2 |
| Lender | 3,900,000 | 0.70 | 2 |
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
33 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
Interest income earned and
interest expense incurred by the Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to a December 1, 2020 amendment, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an
affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i)
the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.25%. Each borrowing under the credit facility matures no later than 60 days after the
date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the
Statement of Operations. This agreement expires annually in December unless extended or renewed. Prior to the December 1, 2020 amendment, the Fund had access to a revolving credit facility with a syndicate of banks
led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. which permitted collective borrowings up to $1 billion. Interest was charged to each participating fund based on its borrowings at a rate equal
to the higher of (i) the federal funds effective rate, (ii) the one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2021.
Note 9. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services 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, agreements and
counterparties, including credit products 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.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund’s performance may
also be significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. The COVID-19 public health crisis has become a pandemic that has resulted in, and may continue to
result in, significant global economic and societal disruption and market volatility due to disruptions in market
| 34 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
access, resource availability, facilities
operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in
human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other
third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may
arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market
countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political,
social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the
Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At May 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. 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 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. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (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 Fund. Further, although we believe
proceedings are not 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, 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
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
35 |
Notes to Financial Statements (continued)
May 31, 2021
May 31, 2021
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 or one or more of its affiliates that provides services to
the Fund.
| 36 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Multi-Manager Value Strategies Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Multi-Manager Value Strategies Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of May 31, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes,
and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Fund as of May 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the financial
highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not
received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 22, 2021
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
37 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2021. Shareholders will be notified in early 2022 of the amounts for use in preparing 2021 income tax returns.
|
Qualified
dividend income |
Dividends
received deduction |
Capital
gain dividend |
| 89.11% | 85.04% | $296,508,074 |
Qualified dividend income. For
taxable, non-corporate shareholders, the percentage of ordinary income distributed during the fiscal year that represents qualified dividend income subject to reduced tax rates.
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and 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 Fund’s Trustees as
of the printing of this report, 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, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
George S. Batejan
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1953 |
Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 170 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 38 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Kathleen Blatz
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2006 | Attorney; specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018 | 170 | Trustee, BlueCross BlueShield of Minnesota since 2009 (Chair of the Business Development Committee - 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; Director, Robina Foundation, 2009-2020 (Chair, 2014-2020) |
|
Pamela G. Carlton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, 1982-1991, Morgan Stanley; Attorney at Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 170 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee) since 2019 |
|
Janet Langford Carrig
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1957 |
Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 168 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
|
J. Kevin Connaughton
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2020(a) | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 168 | Director, The Autism Project since March 2015; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
|
Olive M. Darragh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1962 |
Trustee since 2020(a) | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 168 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
39 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Patricia M. Flynn
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1950 |
Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 170 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2019; Board of Directors, The MA Business Roundtable, 2003-2019 |
|
Brian J. Gallagher
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1954 |
Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 170 | Trustee, Catholic Schools Foundation since 2004 |
|
Douglas A. Hacker
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1955 |
Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 168 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
|
Nancy T. Lukitsh
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1956 |
Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 168 | |
|
David M. Moffett
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 168 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 40 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Catherine James Paglia
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1952 |
Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, Columbia ETF Trust I and Columbia ETF Trust II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 170 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
|
Anthony M. Santomero
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1946 |
Trustee since 2008 | Richard K. Mellon Professor Emeritus of Finance, The Wharton School, University of Pennsylvania, since 2002; Senior Advisor, McKinsey & Company (consulting), 2006-2008; President, Federal Reserve Bank of Philadelphia, 2000-2006; Professor of Finance, The Wharton School, University of Pennsylvania, 1972-2002 | 170 | Trustee, Penn Mutual Life Insurance Company since March 2008; Director, RenaissanceRe Holdings Ltd. since May 2008; former Director, Citigroup Inc. and Citibank, N.A., 2009-2019; former Trustee, BofA Funds Series Trust (11 funds), 2008-2011 |
|
Minor M. Shaw
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1947 |
Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 170 | Director, BlueCross BlueShield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation |
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
41 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
|
Name,
address, year of birth |
Position held
with the Columbia Funds and length of service |
Principal occupation(s)
during 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 |
|
Natalie A. Trunow
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1967 |
Trustee since 2020(a) | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services) since January 2016; Non-executive Member of the Investment Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services) since August 2018; Advisor, Paradigm Asset Management since November 2016; Director of Investments, Casey Family Programs, April 2016-September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008 - January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 168 | Director, Health Services for Children with Special Needs, Inc.; Director, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions); Independent Director, Investment Committee, Sarona Asset Management |
|
Sandra Yeager
c/o Columbia Management Investment Advisers, LLC 290 Congress Street Mail Drop BX32 05228 Boston, MA 02210 1964 |
Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 170 | Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I, Columbia ETF Trust II, Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Gallagher, Petersen and Santomero and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as a director of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| (a) | J. Kevin Connaughton was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective March 1, 2016. Natalie A. Trunow was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective September 1, 2016. Olive M. Darragh was appointed a consultant to the Independent Trustees of CFST I and CFVIT effective June 10, 2019. Shareholders of the Funds elected Mr. Connaughton and Mses. Darragh and Trunow as Trustees of CFST, CFST I, CFST II, Columbia ETF Trust I, Columbia ETF Trust II, and CFVST II, effective January 1, 2021, and of CFVIT, effective July 1, 2020. |
Interested trustee affiliated with
Investment Manager*
|
Name,
address, year of birth |
Position held with the Columbia 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 |
|
Christopher O. Petersen
c/o Columbia Management Investment Advisers, LLC 5228 Ameriprise Financial Center Minneapolis, MN 55474 1970 |
Trustee since 2020(a) | 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 | 170 | 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. |
| (a) | Mr. Petersen serves as the Senior Vice President and Assistant Secretary of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611, visiting columbiathreadneedleus.com/investor/ or contacting your
financial intermediary.
| 42 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s other officers are:
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 Fund as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is Senior Vice President and Assistant Secretary, the Fund’s 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 |
|
Daniel J. Beckman
290 Congress Street Boston, MA 02210 1962 |
President and Principal Executive Officer (2021) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. |
|
Michael G. Clarke
290 Congress Street Boston, MA 02210 1969 |
Chief Financial Officer and Principal Financial Officer (2009) and Senior Vice President (2019) | Vice President, Head of North American Operations, and Co-Head of Global Operations, Columbia Management Investment Advisers, LLC, since June 2019 (previously Vice President – Accounting and Tax, May 2010 – May 2019); senior officer of Columbia Funds and affiliated funds since 2002. |
|
Joseph Beranek
5890 Ameriprise Financial Center Minneapolis, MN 55474 1965 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) (2019) and Principal Financial Officer (2020), CFST, CFST I, CFST II, CFVIT and CFVST II; Assistant Treasurer, Columbia ETF Trust I and Columbia ETF Trust II | Vice President – Mutual Fund Accounting and Financial Reporting, Columbia Management Investment Advisers, LLC, since December 2018 and March 2017, respectively (previously Vice President – Pricing and Corporate Actions, May 2010 - March 2017). |
|
Marybeth Pilat
290 Congress Street Boston, MA 02210 1968 |
Treasurer and Chief Accounting Officer (Principal Accounting Officer) and Principal Financial Officer (2020) for Columbia ETF Trust I and Columbia ETF Trust II; Assistant Treasurer, CFST, CFST I, CFST II, CFVIT and CFVST II | Vice President – Product Pricing and Administration, Columbia Management Investment Advisers, LLC, since May 2017; Director - Fund Administration, Calvert Investments, August 2015 – March 2017; Vice President - Fund Administration, Legg Mason, May 2015 - July 2015; Vice President - Fund Administration, Columbia Management Investment Advisers, LLC, May 2010 - April 2015. |
|
William F. Truscott
290 Congress Street Boston, MA 02210 1960 |
Senior Vice President (2001) | Formerly, Trustee of Columbia Funds Complex until January 1, 2021; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012; Chairman of the Board and President, Columbia Management Investment Advisers, LLC since July 2004 and February 2012, respectively; Chairman of the Board and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since November 2008 and February 2012, respectively; Chairman of the Board and Director, Threadneedle Asset Management Holdings, Sàrl since March 2013 and December 2008, respectively; senior executive of various entities affiliated with Columbia Threadneedle. |
|
Paul B. Goucher
485 Lexington Avenue New York, NY 10017 1968 |
Senior Vice President (2011) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively); Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC since March 2015 (previously Vice President and Assistant Secretary, May 2010 – March 2015). |
|
Thomas P. McGuire
290 Congress Street Boston, MA 02210 1972 |
Senior Vice President and Chief Compliance Officer (2012) | Vice President – Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Columbia Acorn/Wanger Funds since December 2015; Chief Compliance Officer, Ameriprise Certificate Company September 2010 – September 2020. |
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
43 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
|
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 |
|
Colin Moore
290 Congress Street Boston, MA 02210 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. |
|
Ryan C. Larrenaga
290 Congress Street Boston, MA 02210 1970 |
Senior Vice President (2017), Chief Legal Officer (2017), and Secretary (2015) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since August 2018 (previously Vice President and Group Counsel, August 2011 - August 2018); Chief Legal Officer, Columbia Acorn/Wanger Funds, since September 2020; officer of Columbia Funds and affiliated funds since 2005. |
|
Michael E. DeFao
290 Congress Street Boston, MA 02210 1968 |
Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
|
Lyn Kephart-Strong
5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 |
Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period January 1, 2020,
through December 31, 2020, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
| 44 | Multi-Manager Value Strategies Fund | Annual Report 2021 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on December 22, 2020, shareholders of Columbia Funds Series Trust II elected each of the seventeen nominees for the trustees to the Board of Trustees of Columbia Funds Series Trust II, each to hold
office until he or she dies, retires, resigns or is removed or, if sooner, until the election and qualification of his or her successor, as follows:
|
Multi-Manager Value Strategies Fund | Annual Report 2021
|
45 |
Multi-Manager Value Strategies Fund
P.O. Box 219104
Kansas City, MO 64121-9104
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus and summary prospectus, which contains this and other important information about the Fund, go to
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
columbiathreadneedleus.com/investor/. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved.
© 2021 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN116_05_L01_(07/21)
Item 2. Code of Ethics.
(a)The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b)During the period covered by this report, there were not any amendments to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item.
(c)During the period covered by this report, there were no waivers, including any implicit waivers, from a provision of the code of ethics to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party that relates to one or more of the items set forth in paragraph (b) of this Item.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that David M. Moffett, Brian J. Gallagher, J. Kevin Connaughton, and Sandra L. Yeager, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Moffett, Mr. Gallagher, Mr. Connaughton, and Ms. Yeager are each independent trustees, as defined in paragraph (a)(2) of this item's instructions.
Item 4. Principal Accountant Fees and Services.
Fee information below is disclosed for the eleven series of the registrant whose reports to stockholders are included in this annual filing. Fiscal Year 2020 also includes fees for one fund that merged during the period.
(a)Audit Fees. Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended May 31, 2021 and May 31, 2020 are approximately as follows:
20212020
$379,400 $394,000
Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
(b)Audit-Related Fees. Aggregate Audit-Related Fees billed to the registrant by the principal accountant for professional services rendered during the fiscal years ended May 31, 2021 and May 31, 2020 are approximately as follows:
|
2021 |
2020 |
|
$7,200 |
$21,700 |
Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above.
During the fiscal years ended May 31, 2021 and May 31, 2020, there were no Audit- Related Fees billed by the registrant's principal accountant to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for an engagement that related directly to the operations and financial reporting of the registrant.
(c)Tax Fees. Aggregate Tax Fees billed by the principal accountant to the registrant for professional services rendered during the fiscal years ended May 31, 2021 and May 31,
2020 are approximately as follows:
|
2021 |
2020 |
|
$0 |
$0 |
Tax Fees, if any, include amounts for the review of annual tax returns, the review of required shareholder distribution calculations and typically include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning.
During the fiscal years ended May 31, 2021 and May 31, 2020, there were no Tax Fees billed by the registrant's principal accountant to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for an engagement that related directly to the operations and financial reporting of the registrant.
(d)All Other Fees. Aggregate All Other Fees billed by the principal accountant to the registrant for professional services rendered during the fiscal years ended May 31, 2021 and May 31, 2020 are approximately as follows:
|
2021 |
2020 |
|
$0 |
$0 |
All Other Fees, if any, include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above.
Aggregate All Other Fees billed by the registrant's principal accountant to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for an engagement that related directly to the operations and financial reporting of the registrant during the fiscal years ended May 31,
2021 and May 31, 2020 are approximately as follows:
2021 2020
$520,000 $520,000
In fiscal years 2021 and 2020, All Other Fees primarily consists of fees billed for internal control examinations of the registrant's transfer agent and investment adviser.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The registrant's Audit Committee is required to pre-approve the engagement of the
registrant's independent auditors to provide audit and non-audit services to the registrant and non-audit services to its investment adviser (excluding any sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser (the "Adviser") or any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund (a "Control Affiliate") if the engagement relates directly to the operations and financial reporting of the registrant.
The Audit Committee has adopted a Policy for Engagement of Independent Auditors for Audit and Non-Audit Services (the "Policy"). The Policy sets forth the understanding of the Audit Committee regarding the engagement of the registrant's independent accountants to provide (i) audit and permissible audit-related, tax and other services to the registrant ("Fund Services"); (ii) non-audit services to the registrant's Adviser and any Control Affiliates, that relates directly to the operations and financial reporting of a Fund ("Fund-related Adviser Services"); and (iii) certain other audit and non-audit services to the registrant's Adviser and its Control Affiliates. A service will require specific pre-approval by the Audit Committee if it is to be provided by the Fund's independent auditor; provided, however, that pre-approval of non-audit services to the Fund, the Adviser or Control Affiliates may be waived if certain de minimis requirements set forth in the SEC's rules are met.
Under the Policy, the Audit Committee may delegate pre-approval authority to any pre- designated member or members who are independent board members. The member(s) to whom such authority is delegated must report, for informational purposes only, any pre- approval decisions to the Audit Committee at its next regular meeting. The Audit Committee's responsibilities with respect to the pre-approval of services performed by the independent auditor may not be delegated to management.
On an annual basis, at a regularly scheduled Audit Committee meeting, the Fund's Treasurer or other Fund officer shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to specific pre- approval. This schedule will provide a description of each type of service that is subject to specific pre-approval, along with total projected fees for each service. The pre- approval will generally cover a one-year period. The Audit Committee will review and approve the types of services and the projected fees for the next one-year period and may add to, or subtract from, the list of pre-approved services from time to time, based on subsequent determinations. This specific approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform and the projected fees for each service.
The Fund's Treasurer or other Fund officer shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services provided since the last such report was rendered, including a description of the services, by category, with forecasted fees for the annual reporting period, proposed changes requiring specific pre-approval and a description of services provided by the independent auditor, by category, with actual fees during the current reporting period.
*****
(e)(2) None, or 0%, of the Audit-Related Fees, Tax Fees and All Other Fees paid by the Fund or affiliated entities relating directly to the operations and financial reporting of the Registrant disclosed above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X (which permits audit committee approval after the start of the engagement with respect to services other than audit, review or attest services, if certain conditions are satisfied).
(f)Not applicable.
(g)The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal years ended May 31, 2021 and May 31,
2020 are approximately as follows:
20212020
$527,200 $541,700
(h)The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments
(a)The registrant's "Schedule I – Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR.
(b)Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a)The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b)There was no change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
|
authorized. |
|
|
||
|
(registrant) |
|
Columbia Funds Series Trust II |
|
|
|
By (Signature and Title) |
/s/ Daniel J. Beckman |
|
||
|
|
|
|
Daniel J. Beckman, President and Principal Executive Officer |
|
|
Date |
|
July 22, 2021 |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
By (Signature and Title) |
/s/ Daniel J. Beckman |
|||
|
|
|
Daniel J. Beckman, President and Principal Executive Officer |
||
|
Date |
|
July 22, 2021 |
|
|
|
By (Signature and Title) |
/s/ Michael G. Clarke |
|||
|
|
|
Michael G. Clarke, Chief Financial Officer, Principal Financial Officer |
||
|
|
|
and Senior Vice President |
||
|
Date |
|
July 22, 2021 |
|
|
|
By (Signature and Title) |
/s/ Joseph Beranek |
|||
|
|
|
Joseph Beranek, Treasurer, Chief Accounting Officer and Principal |
||
|
|
|
Financial Officer |
||
|
Date |
|
July 22, 2021 |
|
|
