UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21852
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, 2023
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.
Columbia Select
Small Cap Value Fund
Not FDIC or NCUA 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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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.
© 2023 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.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
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(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
May 31, 2023, Class A shares of Columbia Select Small Cap Value Fund returned -7.04% excluding sales charges. The Fund outperformed its benchmark, the Russell 2000 Value Index, which returned -11.50% for the same time
period.
Market overview
U.S. equities seesawed through
the 12-month period ending May 31, 2023, struggling to maintain positive momentum despite frequent rallies that brought major benchmarks above break-even. Although investors grappled with a variety of worries, market
trajectory both up and down was driven predominantly by cross currents centered on evolving expectations for inflation and the path of U.S. Federal Reserve (Fed) interest-rate hikes.
Coming into the period, investor
confidence had been shaken by persistent inflation that cast doubt on the Fed’s ability to restore price stability without causing a recession. Even though the Fed’s 75 basis point hike in mid-June 2022
had been widely expected and caused little immediate market reaction, its recommitment to fight inflation with more hikes sparked considerable anxiety. (A basis point is 1/100 of a percent.) That anxiety eventually
was proven to be well-grounded foresight. In total, the Fed ended up raising rates eight times during the 12 months ended May 31, 2023.
Despite the relatively steady pace
of hikes that began to unfold, sentiment occasionally improved as the period progressed. Positives included hints of so-called “peak inflation” and attractive valuations, as well as hopes that
China’s economy would reopen after an extended zero-COVID-19 lockdown that gummed up global trade and contributed to cost pressures affecting economies worldwide. Better-than-feared earnings results and guidance
helped sentiment, particularly from bellwethers like Alphabet and Microsoft, as well as retailers like Walmart and Target early in the period. But most of the upside was sparked by investors’ interpretation of
Fed Chair Powell’s remarks after the Federal Open Market Committee announced an anticipated 75 basis point rate hike at the end of July 2022. What many seemingly heard were hints that rate hikes would slow
in concert with softening economic growth. That takeaway evaporated a month later when Chair Powell spoke at a symposium in Jackson Hole, Wyoming and prioritized fighting inflation no matter how much pain the
economy might suffer. His inflation-fighting resolve was confirmed by an additional 75 basis point hike in September, along with a dot-plot showing no expectations for rate cuts until 2024.
Equities continued to deliver lumpy
results and briefly turned higher into the start of 2023 as investors yet again seemed comfortable with the notion of a softer landing based on better-than-expected earnings, as well as constructive inflation and
economic data. But that bout of optimism proved short-lived during February 2023, as a blowout January employment report and continued higher-for-longer messaging from the Fed, along with mixed earnings reports and
geopolitical uncertainties, weighed on sentiment. Then in March 2023, banking sector turmoil dominated headlines as two banks failed in quick succession. While intervention to guarantee uninsured deposits and to
provide emergency liquidity helped to limit any broader banking contagion, regional bank stocks still suffered. However, the bank crisis brought with it a rate reprieve and heightened expectations for a Fed pivot,
providing a tailwind for technology and other growth-oriented stocks with future earnings that are made currently more attractive by lower interest rates.
Even though the final rate hike of
the period on May 3 brought the target federal funds rate upper bound to 5.25% – a level not seen since mid-2006 – sentiment for high-growth stocks remained intact. Chipmaker NVIDIA was a well-publicized
beneficiary of the rosy outlook, and it was among a number of mega-cap stocks that received an additional super-charged boost from surging investor interest in artificial intelligence. But NVIDIA’s May
performance, which brought its year-to-date return to nearly 160%, also provided support for pessimistic investors focused on risks posed by narrow leadership underlying the market. That concern was well-founded,
considering that the chipmaker and six other stocks – Microsoft, Apple, Amazon, Tesla, Meta and Alphabet – account for roughly a quarter of the S&P 500 Index’s market capitalization and
collectively have produced more than 100% of the benchmark’s year-to-date performance in 2023.
Headwinds swirling throughout the
end of the period included protracted wrangling between the White House and Republican leaders in efforts to raise the debt ceiling and avoid default on U.S. Treasury obligations. Lingering fears of more turmoil
in the banking sector, dampened China reopening momentum and persistent signs of an imminent recession added heft to downside expectations. Better-than-expected first quarter 2023 earnings reports and upbeat guidance
helped offset some of these worries, as did resilient consumer spending and a last-minute agreement in principle on May 27 that would suspend the debt ceiling until January 2025.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
Against this backdrop, the
broad-market S&P 500 Index delivered a return of 2.92%. Within the index, the best performers were information technology, communication services and industrials. Real estate and materials stocks fared the
worst, dropping more than double digits. Growth stocks, as measured by the Russell 1000 Growth Index, significantly outperformed value stocks, as measured by the Russell 1000 Value Index. Small-cap stocks, as measured
by the Russell 2000 Index, and mid-cap stocks, represented by the Russell Midcap Index, each lost over 4.5%.
The Fund’s notable
contributors during the period
| • | Strong broad-based stock selection was the largest source of the Fund’s outperformance, particularly within the materials, consumer discretionary and information technology sectors. |
| • | Overall sector allocation also helped relative results. Overweights to information technology and industrials were especially beneficial, as was an underweight to financials. A modest cash allocation throughout the period also helped. |
| • | Top individual contributors during the period included Extreme Networks, Inc., Texas Roadhouse, Inc., O-I Glass, Inc., Radian Group, Inc. and ATI, Inc. |
| • | Extreme Networks provides software-driven networking solutions. Shares of the company rose on strong sales growth and increasing backlogs driven by strong and persistent demand, even in the face of an uncertain macro environment, as the company continues to move to cloud-delivered products and expand distribution. |
| • | Restaurant chain Texas Roadhouse was a strong performer despite ongoing labor and food inflation weighing on margins, factors that were offset by strong demand that helped the company gain share in the casual dining category. |
| • | Glass packaging maker O-I Glass rose on strong results and favorable guidance driven by increased pricing power and progress the company has made in divesting noncore assets and continuing to deleverage. |
| • | Specialty insurer Radian Group rebounded from worries over a potential slowdown in new business and rose as investors focused on strong results amid an environment of low defaults and high credit quality. |
| • | As was the case in the previous reporting period, specialty metals company ATI was a notable outperformer. The company, formerly known as Allegheny Technologies, reported strong results that beat consensus expectations and authorized a new share repurchase program as investors additionally focused on opportunities in global defense, medical, and energy applications. |
The Fund’s notable
detractors during the period
| • | Stock selection within the energy and communication services sectors detracted from relative performance during the period, as did an underweight within the utilities sector. |
| • | Top individual detractors from relative performance during the period included Pacific Premier Bancorp, Inc., iHeartMedia, Inc., Devon Energy Corp., Patterson-UTI Energy, Inc. and Lincoln National Corp. |
| • | While the portfolio is underweight regional banks, the bank failures that rocked the industry in the latter part of the period brought the group sharply lower, including California-based Pacific Premier Bancorp. |
| • | Mass media company iHeartMedia, which was a detractor in the previous period, continued to see pressure from a challenging ad market. |
| • | Two top performers from the previous period – exploration and production company Devon Energy and equipment and services provider Patterson-UTI Energy – fell in concert as the energy complex struggled with the decline in oil prices. |
| • | Insurer Lincoln National dropped after reporting a loss owing to a significant charge associated with their annual actuarial assumption review. |
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
| 6 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
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.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 7 |
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.
| 8 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
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, 2023, the total value of these securities amounted to $0, which represents less than 0.01% of total net assets. |
| (c) | 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 approved by the Fund’s Board of Trustees. At May 31, 2023, the total market value of these securities amounted to $0, which represents less than 0.01% of total net assets. Additional information on these securities is as follows: |
| Security | Acquisition Dates | Shares | Cost ($) | Value ($) |
| OmniAb, Inc. | 02/13/2015-02/27/2015 | 9,220 | — | — |
| OmniAb, Inc. | 02/13/2015-02/27/2015 | 9,220 | — | — |
| — | — |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (f) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.241% | ||||||||
| 7,014,016 | 57,763,304 | (63,512,239) | 154 | 1,265,235 | (2,109) | 207,495 | 1,265,868 | |
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
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. Representatives of Columbia Management Investment Advisers, LLC report to the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
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. Representatives of Columbia Management Investment Advisers, LLC report to 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, 2023:
| * | 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.
| 12 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $343,737,504) | $437,992,692 |
| Affiliated issuers (cost $1,265,081) | 1,265,235 |
| Receivable for: | |
| Capital shares sold | 204,498 |
| Dividends | 501,413 |
| Expense reimbursement due from Investment Manager | 350 |
| Prepaid expenses | 5,787 |
| Total assets | 439,969,975 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 211,192 |
| Management services fees | 10,610 |
| Distribution and/or service fees | 2,170 |
| Transfer agent fees | 41,099 |
| Compensation of board members | 108,902 |
| Other expenses | 31,169 |
| Total liabilities | 405,142 |
| Net assets applicable to outstanding capital stock | $439,564,833 |
| Represented by | |
| Paid in capital | 326,594,387 |
| Total distributable earnings (loss) | 112,970,446 |
| Total - representing net assets applicable to outstanding capital stock | $439,564,833 |
| Class A | |
| Net assets | $299,209,016 |
| Shares outstanding | 17,272,676 |
| Net asset value per share | $17.32 |
| 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) | $18.38 |
| Advisor Class | |
| Net assets | $2,657,817 |
| Shares outstanding | 126,687 |
| Net asset value per share | $20.98 |
| Class C | |
| Net assets | $2,487,553 |
| Shares outstanding | 228,517 |
| Net asset value per share | $10.89 |
| Institutional Class | |
| Net assets | $46,061,853 |
| Shares outstanding | 2,238,644 |
| Net asset value per share | $20.58 |
| Institutional 2 Class | |
| Net assets | $2,398,477 |
| Shares outstanding | 114,583 |
| Net asset value per share | $20.93 |
| Institutional 3 Class | |
| Net assets | $84,977,931 |
| Shares outstanding | 3,897,364 |
| Net asset value per share | $21.80 |
| Class R | |
| Net assets | $1,772,186 |
| Shares outstanding | 112,101 |
| Net asset value per share | $15.81 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 13 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $10,266,997 |
| Dividends — affiliated issuers | 207,495 |
| Foreign taxes withheld | (53,660) |
| Total income | 10,420,832 |
| Expenses: | |
| Management services fees | 4,199,119 |
| Distribution and/or service fees | |
| Class A | 820,654 |
| Class C | 33,624 |
| Class R | 8,796 |
| Transfer agent fees | |
| Class A | 422,013 |
| Advisor Class | 4,710 |
| Class C | 4,321 |
| Institutional Class | 61,268 |
| Institutional 2 Class | 2,089 |
| Institutional 3 Class | 6,035 |
| Class R | 2,359 |
| Compensation of board members | 22,625 |
| Custodian fees | 6,117 |
| Printing and postage fees | 54,526 |
| Registration fees | 129,900 |
| Accounting services fees | 30,090 |
| Legal fees | 18,824 |
| Compensation of chief compliance officer | 93 |
| Other | 18,743 |
| Total expenses | 5,845,906 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (130,337) |
| Expense reduction | (500) |
| Total net expenses | 5,715,069 |
| Net investment income | 4,705,763 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 33,669,817 |
| Investments — affiliated issuers | (2,109) |
| Net realized gain | 33,667,708 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (73,025,441) |
| Investments — affiliated issuers | 154 |
| Net change in unrealized appreciation (depreciation) | (73,025,287) |
| Net realized and unrealized loss | (39,357,579) |
| Net decrease in net assets resulting from operations | $(34,651,816) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $4,705,763 | $1,208,520 |
| Net realized gain | 33,667,708 | 13,916,690 |
| Net change in unrealized appreciation (depreciation) | (73,025,287) | (63,613,565) |
| Net decrease in net assets resulting from operations | (34,651,816) | (48,488,355) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (14,237,839) | (25,903,890) |
| Advisor Class | (129,440) | (200,508) |
| Class C | (188,057) | (451,603) |
| Institutional Class | (1,903,491) | (2,351,228) |
| Institutional 2 Class | (178,392) | (189,237) |
| Institutional 3 Class | (3,539,160) | (6,407,644) |
| Class R | (78,461) | (216,248) |
| Total distributions to shareholders | (20,254,840) | (35,720,358) |
| Increase (decrease) in net assets from capital stock activity | (30,370,772) | 8,016,141 |
| Total decrease in net assets | (85,277,428) | (76,192,572) |
| Net assets at beginning of year | 524,842,261 | 601,034,833 |
| Net assets at end of year | $439,564,833 | $524,842,261 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 15 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 321,236 | 5,887,121 | 507,534 | 10,965,300 |
| Distributions reinvested | 770,489 | 13,984,370 | 1,178,095 | 25,423,289 |
| Redemptions | (2,139,697) | (39,208,743) | (1,910,302) | (40,878,780) |
| Net decrease | (1,047,972) | (19,337,252) | (224,673) | (4,490,191) |
| Advisor Class | ||||
| Subscriptions | 130,036 | 2,926,104 | 49,707 | 1,274,991 |
| Distributions reinvested | 5,717 | 125,532 | 7,565 | 195,996 |
| Redemptions | (155,651) | (3,413,211) | (65,444) | (1,694,723) |
| Net decrease | (19,898) | (361,575) | (8,172) | (223,736) |
| Class C | ||||
| Subscriptions | 25,729 | 301,660 | 78,662 | 1,121,908 |
| Distributions reinvested | 16,416 | 187,963 | 32,495 | 451,353 |
| Redemptions | (130,156) | (1,494,263) | (122,722) | (1,718,346) |
| Net decrease | (88,011) | (1,004,640) | (11,565) | (145,085) |
| Institutional Class | ||||
| Subscriptions | 874,526 | 19,159,499 | 1,067,433 | 26,463,504 |
| Distributions reinvested | 87,951 | 1,894,466 | 91,784 | 2,334,077 |
| Redemptions | (872,278) | (18,872,412) | (707,649) | (17,698,937) |
| Net increase | 90,199 | 2,181,553 | 451,568 | 11,098,644 |
| Institutional 2 Class | ||||
| Subscriptions | 129,707 | 2,795,414 | 63,596 | 1,652,752 |
| Distributions reinvested | 8,141 | 178,294 | 7,314 | 189,068 |
| Redemptions | (140,134) | (3,028,356) | (112,688) | (2,872,408) |
| Net decrease | (2,286) | (54,648) | (41,778) | (1,030,588) |
| Institutional 3 Class | ||||
| Subscriptions | 71,790 | 1,630,473 | 447,140 | 12,070,432 |
| Distributions reinvested | 144,097 | 3,286,854 | 217,810 | 5,852,565 |
| Redemptions | (698,740) | (16,349,545) | (537,418) | (14,359,466) |
| Net increase (decrease) | (482,853) | (11,432,218) | 127,532 | 3,563,531 |
| Class R | ||||
| Subscriptions | 28,516 | 472,538 | 34,423 | 686,829 |
| Distributions reinvested | 3,963 | 65,710 | 8,864 | 175,508 |
| Redemptions | (54,230) | (900,240) | (81,587) | (1,618,771) |
| Net decrease | (21,751) | (361,992) | (38,300) | (756,434) |
| Total net increase (decrease) | (1,572,572) | (30,370,772) | 254,612 | 8,016,141 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
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 ratios of expenses and net investment income are 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 5/31/2023 | $19.47 | 0.16 | (1.49) | (1.33) | (0.15) | (0.67) | (0.82) |
| Year Ended 5/31/2022 | $22.67 | 0.03 | (1.78) | (1.75) | (0.01) | (1.44) | (1.45) |
| 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) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $23.40 | 0.25 | (1.80) | (1.55) | (0.20) | (0.67) | (0.87) |
| Year Ended 5/31/2022 | $26.94 | 0.10 | (2.14) | (2.04) | (0.06) | (1.44) | (1.50) |
| 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) |
| Class C | |||||||
| Year Ended 5/31/2023 | $12.48 | 0.02 | (0.94) | (0.92) | — | (0.67) | (0.67) |
| Year Ended 5/31/2022 | $15.15 | (0.09) | (1.14) | (1.23) | — | (1.44) | (1.44) |
| 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) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $22.96 | 0.24 | (1.75) | (1.51) | (0.20) | (0.67) | (0.87) |
| Year Ended 5/31/2022 | $26.47 | 0.09 | (2.10) | (2.01) | (0.06) | (1.44) | (1.50) |
| 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) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $23.35 | 0.27 | (1.81) | (1.54) | (0.21) | (0.67) | (0.88) |
| Year Ended 5/31/2022 | $26.89 | 0.12 | (2.15) | (2.03) | (0.07) | (1.44) | (1.51) |
| 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) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
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 5/31/2023 | $17.32 | (7.04%) | 1.31% | 1.28%(c) | 0.88% | 11% | $299,209 |
| Year Ended 5/31/2022 | $19.47 | (8.35%) | 1.28% | 1.26%(c) | 0.12% | 7% | $356,657 |
| 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 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $20.98 | (6.79%) | 1.06% | 1.03%(c) | 1.11% | 11% | $2,658 |
| Year Ended 5/31/2022 | $23.40 | (8.13%) | 1.03% | 1.01%(c) | 0.37% | 7% | $3,430 |
| 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 |
| Class C | |||||||
| Year Ended 5/31/2023 | $10.89 | (7.65%) | 2.06% | 2.03%(c) | 0.15% | 11% | $2,488 |
| Year Ended 5/31/2022 | $12.48 | (9.08%) | 2.03% | 2.01%(c) | (0.62%) | 7% | $3,951 |
| 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 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $20.58 | (6.75%) | 1.06% | 1.03%(c) | 1.12% | 11% | $46,062 |
| Year Ended 5/31/2022 | $22.96 | (8.15%) | 1.03% | 1.01%(c) | 0.37% | 7% | $49,338 |
| 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 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $20.93 | (6.75%) | 0.99% | 0.96% | 1.23% | 11% | $2,398 |
| Year Ended 5/31/2022 | $23.35 | (8.10%) | 0.97% | 0.95% | 0.46% | 7% | $2,729 |
| 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 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 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 5/31/2023 | $24.28 | 0.29 | (1.88) | (1.59) | (0.22) | (0.67) | (0.89) |
| Year Ended 5/31/2022 | $27.90 | 0.13 | (2.23) | (2.10) | (0.08) | (1.44) | (1.52) |
| 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) |
| Class R | |||||||
| Year Ended 5/31/2023 | $17.84 | 0.11 | (1.36) | (1.25) | (0.11) | (0.67) | (0.78) |
| Year Ended 5/31/2022 | $20.94 | 0.00(d) | (1.64) | (1.64) | (0.02) | (1.44) | (1.46) |
| 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) |
| 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. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
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 5/31/2023 | $21.80 | (6.69%) | 0.93% | 0.91% | 1.25% | 11% | $84,978 |
| Year Ended 5/31/2022 | $24.28 | (8.05%) | 0.92% | 0.90% | 0.48% | 7% | $106,349 |
| 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 |
| Class R | |||||||
| Year Ended 5/31/2023 | $15.81 | (7.20%) | 1.54% | 1.51%(c) | 0.66% | 11% | $1,772 |
| Year Ended 5/31/2022 | $17.84 | (8.52%) | 1.39% | 1.38%(c) | 0.02% | 7% | $2,388 |
| 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 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 21 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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. Class C shares automatically convert to Class A shares after 8 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 price 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 ask 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 price 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 approved 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.
| 22 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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.
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.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 in 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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
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, 2023 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" in the Statement of Operations.
| 24 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, 2023,
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, 2023, 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. 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.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $2,113,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced. For Class R shares, the Fund currently pays the distribution fees up to the point where the Distributor’s expenses are fully recovered.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 56,695 |
| Class C | — | 1.00(b) | 278 |
| (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 classes’ 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, costs associated with shareholder meetings, 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.
| 26 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
At May 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses and trustees’ deferred compensation. 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, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 4,567,914 | 15,686,926 | 20,254,840 | 1,977,965 | 33,742,393 | 35,720,358 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 3,058,416 | 15,869,279 | — | 94,149,438 |
At May 31, 2023, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 345,108,489 | 133,795,599 | (39,646,161) | 94,149,438 |
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 $53,800,684 and $92,312,151, respectively, for the year ended May 31, 2023. 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.
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
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 one or more
industries or sectors, which makes them vulnerable to economic conditions that affect such industries or sectors. 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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause significant
| 28 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
Shareholder concentration risk
At May 31, 2023, affiliated
shareholders of record owned 73.7% 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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 Select Small Cap Value Fund | Annual Report 2023 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023
and the financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
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 2023 | 31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Qualified dividend income | Dividends received deduction | Capital gain dividend |
| 100.00% | 100.00% | $33,134,015 |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| 32 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 33 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| 34 | Columbia Select Small Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 35 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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 Select Small Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Select Small Cap Value Fund | Annual Report 2023 | 37 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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 Select Small Cap Value Fund | Annual Report 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN218_05_N01_(07/23)
Columbia Select
Large Cap Value Fund
Not FDIC or NCUA 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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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.
© 2023 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.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
May 31, 2023, Class A shares of Columbia Select Large Cap Value Fund returned -5.98% excluding sales charges. The Fund underperformed its benchmark, the Russell 1000 Value Index, which returned -4.55% for the same
time period. The broad-based S&P 500 Index returned 2.92%.
Market overview
U.S. equities seesawed through
the 12-month period ending May 31, 2023, struggling to maintain positive momentum despite frequent rallies that brought major benchmarks above break-even. Although investors grappled with a variety of worries, market
trajectory both up and down was driven predominantly by cross currents centered on evolving expectations for inflation and the path of U.S. Federal Reserve (Fed) interest-rate hikes.
Coming into the period, investor
confidence had been shaken by persistent inflation that cast doubt on the Fed’s ability to restore price stability without causing a recession. Even though the Fed’s 75 basis point hike in mid-June 2022
had been widely expected and caused little immediate market reaction, its recommitment to fight inflation with more hikes sparked considerable anxiety. (A basis point is 1/100 of a percent.) That anxiety eventually
was proven to be well-grounded foresight. In total, the Fed ended up raising rates eight times during the 12 months ended May 31, 2023.
Despite the relatively steady pace
of hikes that began to unfold, sentiment occasionally improved as the period progressed. Positives included hints of so-called “peak inflation” and attractive valuations, as well as hopes that
China’s economy would reopen after an extended zero-COVID-19 lockdown that gummed up global trade and contributed to cost pressures affecting economies worldwide. Better-than-feared earnings results and guidance
helped sentiment, particularly from bellwethers like Alphabet and Microsoft, as well as retailers like Walmart and Target early in the period. But most of the upside was sparked by investors’ interpretation of
Fed Chair Powell’s remarks after the Federal Open Market Committee announced an anticipated 75 basis point rate hike at the end of July 2022. What many seemingly heard were hints that rate hikes would slow
in concert with softening economic growth. That takeaway evaporated a month later when Chair Powell spoke at a symposium in Jackson Hole, Wyoming and prioritized fighting inflation no matter how much pain the
economy might suffer. His inflation-fighting resolve was confirmed by an additional 75 basis point hike in September, along with a dot-plot showing no expectations for rate cuts until 2024.
Equities continued to deliver lumpy
results and briefly turned higher into the start of 2023 as investors yet again seemed comfortable with the notion of a softer landing based on better-than-expected earnings, as well as constructive inflation and
economic data. But that bout of optimism proved short-lived during February 2023, as a blowout January employment report and continued higher-for-longer messaging from the Fed, along with mixed earnings reports and
geopolitical uncertainties, weighed on sentiment. Then in March 2023, banking sector turmoil dominated headlines as two banks failed in quick succession. While intervention to guarantee uninsured deposits and to
provide emergency liquidity helped to limit any broader banking contagion, regional bank stocks still suffered. However, the bank crisis brought with it a rate reprieve and heightened expectations for a Fed pivot,
providing a tailwind for technology and other growth-oriented stocks with future earnings that are made currently more attractive by lower interest rates.
Even though the final rate hike of
the period on May 3 brought the target federal funds rate upper bound to 5.25% – a level not seen since mid-2006 – sentiment for high-growth stocks remained intact. Chipmaker NVIDIA was a well-publicized
beneficiary of the rosy outlook, and it was among a number of mega-cap stocks that received an additional super-charged boost from surging investor interest in artificial intelligence. But NVIDIA’s May
performance, which brought its year-to-date return to nearly 160%, also provided support for pessimistic investors focused on risks posed by narrow leadership underlying the market. That concern was well-founded,
considering that the chipmaker and six other stocks – Microsoft, Apple, Amazon, Tesla, Meta and Alphabet – account for roughly a quarter of the S&P 500 Index’s market capitalization and
collectively have produced more than 100% of the benchmark’s year-to-date performance in 2023.
Headwinds swirling throughout the
end of the period included protracted wrangling between the White House and Republican leaders in efforts to raise the debt ceiling and avoid default on U.S. Treasury obligations. Lingering fears of more turmoil
in the banking sector, dampened China reopening momentum and persistent signs of an imminent recession added heft to downside expectations. Better-than-expected first quarter 2023 earnings reports and upbeat guidance
helped offset some of these worries, as did resilient consumer spending and a last-minute agreement in principle on May 27 that would suspend the debt ceiling until January 2025.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
Against this backdrop, the
broad-market S&P 500 Index delivered a return of 2.92%. Within the index, the best performers were information technology, communication services and industrials. Real estate and materials stocks fared the
worst, dropping more than double digits. Growth stocks, as measured by the Russell 1000 Growth Index, significantly outperformed value stocks, as measured by the Russell 1000 Value Index. Small-cap stocks, as measured
by the Russell 2000 Index, and mid-cap stocks, represented by the Russell Midcap Index, each lost over 4.5%.
The Fund’s most notable
detractors during the period
| • | The Fund’s underperformance of its benchmark during the period was driven primarily by overall stock selection, particularly within the industrials, health care and communication services sectors. These results more than offset strong stock selection within the utilities and energy sectors. |
| • | Significant individual detractors included telecom provider Verizon Communications, Inc., which fell primarily on competitive pressure; Southwest Airlines Co., which was beset by technology problems with its scheduling systems; and medical supplies provider Baxter International, Inc., which was hurt by cost and supply-chain pressures. |
The Fund’s most notable
contributors during the period
| • | Overall sector allocation was a positive for relative results, particularly the Fund’s longstanding overweight to the information technology sector as well as underweights to the real estate and financials sectors. Please note that sector variances are a byproduct of the portfolio’s longstanding bottom-up security selection process. |
| • | Top individual contributors included California electric utility PG&E Corp., which continued to execute and become a better company while delivering strong earnings growth (another milestone, in our view, came when the stock was added to the S&P 500 Index); subsea oil equipment and services provider TechnipFMC PLC, which rose on strong contract wins despite the general slowdown in energy; and data analytics provider Teradata Corp., which rose as investors appreciated its solid results in transitioning to a cloud-based platform despite an uneven macro environment. |
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.
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 2023 |
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 Large Cap Value Fund | Annual Report 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 Select Large Cap Value Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (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, 2023 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, 5.241% | ||||||||
| 68,145,830 | 456,626,021 | (451,206,711) | 9,503 | 73,574,643 | (15,956) | 3,073,421 | 73,611,449 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
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 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,797,351,870) | $2,250,582,817 |
| Affiliated issuers (cost $73,565,140) | 73,574,643 |
| Receivable for: | |
| Capital shares sold | 2,018,336 |
| Dividends | 5,455,121 |
| Foreign tax reclaims | 47,659 |
| Expense reimbursement due from Investment Manager | 17,859 |
| Prepaid expenses | 8,916 |
| Total assets | 2,331,705,351 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 13,982,588 |
| Capital shares purchased | 7,542,668 |
| Management services fees | 42,747 |
| Distribution and/or service fees | 4,012 |
| Transfer agent fees | 317,576 |
| Compensation of board members | 102,634 |
| Other expenses | 54,251 |
| Total liabilities | 22,046,476 |
| Net assets applicable to outstanding capital stock | $2,309,658,875 |
| Represented by | |
| Paid in capital | 1,853,790,823 |
| Total distributable earnings (loss) | 455,868,052 |
| Total - representing net assets applicable to outstanding capital stock | $2,309,658,875 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 11 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $316,268,538 |
| Shares outstanding | 11,204,057 |
| Net asset value per share | $28.23 |
| 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) | $29.95 |
| Advisor Class | |
| Net assets | $277,251,854 |
| Shares outstanding | 9,203,830 |
| Net asset value per share | $30.12 |
| Class C | |
| Net assets | $47,988,043 |
| Shares outstanding | 1,899,610 |
| Net asset value per share | $25.26 |
| Institutional Class | |
| Net assets | $1,270,104,139 |
| Shares outstanding | 42,866,286 |
| Net asset value per share | $29.63 |
| Institutional 2 Class | |
| Net assets | $218,820,333 |
| Shares outstanding | 7,381,892 |
| Net asset value per share | $29.64 |
| Institutional 3 Class | |
| Net assets | $142,580,155 |
| Shares outstanding | 4,715,400 |
| Net asset value per share | $30.24 |
| Class R | |
| Net assets | $36,645,813 |
| Shares outstanding | 1,325,662 |
| Net asset value per share | $27.64 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $54,439,423 |
| Dividends — affiliated issuers | 3,073,421 |
| Interfund lending | 1,062 |
| Foreign taxes withheld | (402,661) |
| Total income | 57,111,245 |
| Expenses: | |
| Management services fees | 15,527,963 |
| Distribution and/or service fees | |
| Class A | 828,781 |
| Class C | 527,104 |
| Class R | 188,596 |
| Transfer agent fees | |
| Class A | 450,203 |
| Advisor Class | 378,405 |
| Class C | 71,570 |
| Institutional Class | 1,744,230 |
| Institutional 2 Class | 113,116 |
| Institutional 3 Class | 8,711 |
| Class R | 51,185 |
| Compensation of board members | 52,403 |
| Custodian fees | 13,335 |
| Printing and postage fees | 121,456 |
| Registration fees | 260,623 |
| Accounting services fees | 30,090 |
| Legal fees | 43,165 |
| Compensation of chief compliance officer | 472 |
| Other | 42,696 |
| Total expenses | 20,454,104 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (6,557,512) |
| Fees waived by transfer agent | |
| Institutional 2 Class | (3,250) |
| Institutional 3 Class | (2,637) |
| Expense reduction | (440) |
| Total net expenses | 13,890,265 |
| Net investment income | 43,220,980 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 8,926,302 |
| Investments — affiliated issuers | (15,956) |
| Net realized gain | 8,910,346 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (192,762,928) |
| Investments — affiliated issuers | 9,503 |
| Net change in unrealized appreciation (depreciation) | (192,753,425) |
| Net realized and unrealized loss | (183,843,079) |
| Net decrease in net assets resulting from operations | $(140,622,099) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 13 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $43,220,980 | $33,584,637 |
| Net realized gain | 8,910,346 | 38,600,950 |
| Net change in unrealized appreciation (depreciation) | (192,753,425) | (38,442,095) |
| Net increase (decrease) in net assets resulting from operations | (140,622,099) | 33,743,492 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (4,641,037) | (18,325,995) |
| Advisor Class | (4,490,415) | (13,300,264) |
| Class C | (370,119) | (2,497,797) |
| Institutional Class | (20,431,294) | (62,299,783) |
| Institutional 2 Class | (4,021,634) | (7,212,872) |
| Institutional 3 Class | (2,072,441) | (9,507,787) |
| Class R | (442,836) | (1,705,831) |
| Total distributions to shareholders | (36,469,776) | (114,850,329) |
| Increase in net assets from capital stock activity | 189,465,036 | 649,934,837 |
| Total increase in net assets | 12,373,161 | 568,828,000 |
| Net assets at beginning of year | 2,297,285,714 | 1,728,457,714 |
| Net assets at end of year | $2,309,658,875 | $2,297,285,714 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 2,992,659 | 87,767,333 | 4,354,921 | 134,050,372 |
| Distributions reinvested | 100,921 | 3,020,565 | 390,889 | 11,679,757 |
| Redemptions | (3,118,453) | (91,693,443) | (2,161,879) | (66,685,107) |
| Net increase (decrease) | (24,873) | (905,545) | 2,583,931 | 79,045,022 |
| Advisor Class | ||||
| Subscriptions | 4,570,708 | 139,173,791 | 3,219,450 | 105,349,538 |
| Distributions reinvested | 136,558 | 4,356,204 | 398,853 | 12,687,523 |
| Redemptions | (2,854,693) | (88,937,384) | (2,242,707) | (73,676,416) |
| Net increase | 1,852,573 | 54,592,611 | 1,375,596 | 44,360,645 |
| Class C | ||||
| Subscriptions | 562,217 | 14,753,016 | 878,514 | 24,361,547 |
| Distributions reinvested | 10,957 | 294,512 | 73,467 | 1,971,851 |
| Redemptions | (748,697) | (19,596,336) | (314,442) | (8,677,966) |
| Net increase (decrease) | (175,523) | (4,548,808) | 637,539 | 17,655,432 |
| Institutional Class | ||||
| Subscriptions | 15,704,346 | 482,407,414 | 24,485,149 | 788,186,172 |
| Distributions reinvested | 496,801 | 15,589,619 | 1,499,157 | 46,923,619 |
| Redemptions | (14,716,124) | (449,490,720) | (12,153,756) | (389,305,336) |
| Net increase | 1,485,023 | 48,506,313 | 13,830,550 | 445,804,455 |
| Institutional 2 Class | ||||
| Subscriptions | 5,115,620 | 160,628,992 | 3,082,044 | 100,264,921 |
| Distributions reinvested | 128,009 | 4,016,933 | 230,277 | 7,207,675 |
| Redemptions | (3,412,112) | (103,272,932) | (1,796,410) | (58,036,116) |
| Net increase | 1,831,517 | 61,372,993 | 1,515,911 | 49,436,480 |
| Institutional 3 Class | ||||
| Subscriptions | 2,250,603 | 70,456,330 | 3,000,498 | 99,180,752 |
| Distributions reinvested | 39,952 | 1,278,860 | 203,825 | 6,504,042 |
| Redemptions | (1,353,118) | (41,972,593) | (3,322,737) | (107,238,483) |
| Net increase (decrease) | 937,437 | 29,762,597 | (118,414) | (1,553,689) |
| Class R | ||||
| Subscriptions | 375,167 | 10,788,779 | 736,352 | 22,388,901 |
| Distributions reinvested | 15,078 | 442,542 | 56,698 | 1,661,253 |
| Redemptions | (376,408) | (10,546,446) | (294,132) | (8,863,662) |
| Net increase | 13,837 | 684,875 | 498,918 | 15,186,492 |
| Total net increase | 5,919,991 | 189,465,036 | 20,324,031 | 649,934,837 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 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 ratios of expenses and net investment income are 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 5/31/2023 | $30.44 | 0.49 | (2.29) | (1.80) | (0.38) | (0.03) | (0.41) |
| Year Ended 5/31/2022 | $31.85 | 0.45 | (0.05) | 0.40 | (0.56) | (1.25) | (1.81) |
| Year Ended 5/31/2021 | $21.50 | 0.71(d) | 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) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $32.45 | 0.60 | (2.44) | (1.84) | (0.46) | (0.03) | (0.49) |
| Year Ended 5/31/2022 | $33.83 | 0.57 | (0.07) | 0.50 | (0.63) | (1.25) | (1.88) |
| Year Ended 5/31/2021 | $22.74 | 0.82(d) | 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) |
| Class C | |||||||
| Year Ended 5/31/2023 | $27.25 | 0.24 | (2.05) | (1.81) | (0.15) | (0.03) | (0.18) |
| Year Ended 5/31/2022 | $28.68 | 0.19 | (0.05) | 0.14 | (0.32) | (1.25) | (1.57) |
| Year Ended 5/31/2021 | $19.52 | 0.46(d) | 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) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $31.92 | 0.59 | (2.39) | (1.80) | (0.46) | (0.03) | (0.49) |
| Year Ended 5/31/2022 | $33.31 | 0.55 | (0.06) | 0.49 | (0.63) | (1.25) | (1.88) |
| Year Ended 5/31/2021 | $22.41 | 0.84(d) | 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) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $31.93 | 0.61 | (2.39) | (1.78) | (0.48) | (0.03) | (0.51) |
| Year Ended 5/31/2022 | $33.32 | 0.56 | (0.05) | 0.51 | (0.65) | (1.25) | (1.90) |
| Year Ended 5/31/2021 | $22.42 | 0.91(d) | 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) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
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 5/31/2023 | $28.23 | (5.98%) | 1.08% | 0.80%(c) | 1.67% | 7% | $316,269 |
| Year Ended 5/31/2022 | $30.44 | 1.35% | 1.08% | 0.79%(c) | 1.46% | 8% | $341,762 |
| Year Ended 5/31/2021 | $31.85 | 59.28% | 1.12% | 0.79%(c) | 2.74% | 29% | $275,301 |
| Year Ended 5/31/2020 | $21.50 | (0.98%) | 1.14%(e) | 0.80%(c),(e) | 1.70% | 18% | $187,746 |
| Year Ended 5/31/2019 | $23.28 | (5.09%) | 1.13% | 0.80%(c) | 1.64% | 21% | $218,458 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $30.12 | (5.76%) | 0.83% | 0.55%(c) | 1.93% | 7% | $277,252 |
| Year Ended 5/31/2022 | $32.45 | 1.60% | 0.83% | 0.54%(c) | 1.71% | 8% | $238,530 |
| Year Ended 5/31/2021 | $33.83 | 59.64% | 0.87% | 0.54%(c) | 2.99% | 29% | $202,134 |
| Year Ended 5/31/2020 | $22.74 | (0.70%) | 0.89%(e) | 0.55%(c),(e) | 1.96% | 18% | $133,966 |
| Year Ended 5/31/2019 | $24.52 | (4.87%) | 0.88% | 0.55%(c) | 1.89% | 21% | $148,935 |
| Class C | |||||||
| Year Ended 5/31/2023 | $25.26 | (6.68%) | 1.83% | 1.55%(c) | 0.91% | 7% | $47,988 |
| Year Ended 5/31/2022 | $27.25 | 0.59% | 1.83% | 1.54%(c) | 0.70% | 8% | $56,553 |
| Year Ended 5/31/2021 | $28.68 | 58.03% | 1.87% | 1.54%(c) | 1.97% | 29% | $41,236 |
| Year Ended 5/31/2020 | $19.52 | (1.68%) | 1.89%(e) | 1.55%(c),(e) | 0.94% | 18% | $32,781 |
| Year Ended 5/31/2019 | $21.26 | (5.80%) | 1.88% | 1.55%(c) | 0.87% | 21% | $48,824 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $29.63 | (5.73%) | 0.83% | 0.55%(c) | 1.92% | 7% | $1,270,104 |
| Year Ended 5/31/2022 | $31.92 | 1.59% | 0.83% | 0.54%(c) | 1.70% | 8% | $1,321,063 |
| Year Ended 5/31/2021 | $33.31 | 59.67% | 0.87% | 0.54%(c) | 3.06% | 29% | $917,729 |
| Year Ended 5/31/2020 | $22.41 | (0.71%) | 0.89%(e) | 0.55%(c),(e) | 1.97% | 18% | $441,521 |
| Year Ended 5/31/2019 | $24.19 | (4.86%) | 0.88% | 0.55%(c) | 1.89% | 21% | $428,080 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $29.64 | (5.67%) | 0.75% | 0.47% | 1.99% | 7% | $218,820 |
| Year Ended 5/31/2022 | $31.93 | 1.65% | 0.75% | 0.49% | 1.73% | 8% | $177,246 |
| 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 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 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 5/31/2023 | $32.56 | 0.64 | (2.44) | (1.80) | (0.49) | (0.03) | (0.52) |
| Year Ended 5/31/2022 | $33.94 | 0.60 | (0.06) | 0.54 | (0.67) | (1.25) | (1.92) |
| Year Ended 5/31/2021 | $22.81 | 0.88(d) | 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) |
| Class R | |||||||
| Year Ended 5/31/2023 | $29.81 | 0.40 | (2.24) | (1.84) | (0.30) | (0.03) | (0.33) |
| Year Ended 5/31/2022 | $31.24 | 0.37 | (0.05) | 0.32 | (0.50) | (1.25) | (1.75) |
| Year Ended 5/31/2021 | $21.12 | 0.67(d) | 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) |
| 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) | 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 |
| (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 2023 |
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 5/31/2023 | $30.24 | (5.61%) | 0.70% | 0.42% | 2.05% | 7% | $142,580 |
| Year Ended 5/31/2022 | $32.56 | 1.70% | 0.70% | 0.44% | 1.81% | 8% | $123,025 |
| 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 |
| Class R | |||||||
| Year Ended 5/31/2023 | $27.64 | (6.22%) | 1.33% | 1.05%(c) | 1.41% | 7% | $36,646 |
| Year Ended 5/31/2022 | $29.81 | 1.11% | 1.31% | 1.02%(c) | 1.23% | 8% | $39,107 |
| Year Ended 5/31/2021 | $31.24 | 58.97% | 1.32% | 0.99%(c) | 2.62% | 29% | $25,393 |
| Year Ended 5/31/2020 | $21.12 | (1.24%) | 1.39%(e) | 1.05%(c),(e) | 1.43% | 18% | $15,554 |
| Year Ended 5/31/2019 | $22.90 | (5.32%) | 1.38% | 1.05%(c) | 1.39% | 21% | $24,725 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 19 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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. Class C shares automatically convert to Class A shares after 8 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 price 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 ask 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 price 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 approved 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.
| 20 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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.
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.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 21 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 in 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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
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, 2023 was 0.67% 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" in the Statement of Operations.
| 22 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, prior to October 1, 2022, 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.
For the year ended May 31,
2023, 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 | 0.00 |
| 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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $440.
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.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $2,621,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 373,691 |
| Class C | — | 1.00(b) | 19,107 |
| (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 classes’ 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, costs associated with shareholder meetings, 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 commitment, prior to October 1, 2022, 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.
| 24 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, earnings and profits distributed to shareholders on the redemption of shares and
miscellaneous adjustments. 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 (loss) ($) | Paid in capital ($) |
| (1,806,658) | (1,136,342) | 2,943,000 |
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, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 33,865,020 | 2,604,756 | 36,469,776 | 43,115,087 | 71,735,242 | 114,850,329 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 18,328,233 | 11,527,996 | — | 426,110,984 |
At May 31, 2023, 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) ($) | Net unrealized appreciation ($) |
| 1,898,046,476 | 540,609,230 | (114,498,246) | 426,110,984 |
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 $377,698,508 and $165,503,079, respectively, for the year ended May 31, 2023. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 1,850,000 | 4.17 | 6 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
| 26 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Note 9. Significant
risks
Market 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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 Select Large Cap Value Fund | Annual Report 2023 | 27 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023
and the financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 28 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Qualified dividend income | Dividends received deduction | Capital gain dividend |
| 100.00% | 100.00% | $13,298,598 |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 29 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| 30 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| Columbia Select Large Cap Value Fund | Annual Report 2023 | 31 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| 32 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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 Select Large Cap Value Fund | Annual Report 2023 | 33 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 34 | Columbia Select Large Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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 Select Large Cap Value Fund | Annual Report 2023 | 35 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN216_05_N01_(07/23)
Columbia Quality
Income Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 7 | |
| 8 | |
| 21 | |
| 23 | |
| 24 | |
| 26 | |
| 30 | |
| 47 | |
| 48 | |
| 48 | |
| 54 |
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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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
| Columbia Quality Income Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Quality Income Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
At May 31, 2023, 63.24% 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 that ended
May 31, 2023, Class A shares of Columbia Quality Income Fund returned -7.78% excluding sales charges. The Fund’s benchmark, the Bloomberg U.S. Mortgage-Backed Securities Index, returned -2.68% for the same
period.
Market overview
Entering the period, against the
backdrop of historically high inflation, the U.S. Federal Reserve (Fed) had ended its program of bond purchases designed to keep longer term borrowing costs low and embarked upon a series of sharp increases in its
benchmark overnight lending rate. The central bank would bring the federal funds target rate to a range of 4.25% to 4.50% by the end of 2022, its highest level since the fall of 2007. U.S. consumer price inflation
peaked at 9.1% in June of 2022 before beginning to recede modestly over the remainder of the year. Treasury yields moved higher and risk sentiment waned on the Fed’s tightening of policy, weighing broadly on
bond market returns.
With signs of inflation moderating,
markets began to anticipate an end to the Fed’s rate hiking cycle entering 2023. At its February 1 meeting, the Fed raised short-term rates by a relatively incremental 25 basis points. (A basis point is 1/100 of
a percent.) March saw the failure of a pair of U.S. banks and the collapse of Credit Suisse in Europe raise the prospect of a financial crisis, leading Treasury yields to plummet as investors factored in increased
recession risks. On March 23, the Fed increased the federal funds target rate by another quarter point, a move that was generally received as a signal that the central bank believed the financial system remained on
stable footing. The Fed implemented another 25 basis point increase in early May, bringing the federal funds target rate to the 5.00%-5.25% range. However, the market increasingly viewed a pause in the Fed’s
rate hiking cycle as likely, absent monthly inflation data surprising on the upside.
Treasury yields finished the period
higher with the 10-year bond ending May 2023 at 3.64%, an increase of 79 basis points relative to its starting point of 2.85% 12 months earlier. Spreads for agency residential mortgage-backed securities (MBS) ended
the period at historically attractive levels relative to Treasuries, as the sector was negatively impacted by the Fed’s efforts to reduce its balance sheet after several years of being a major bond buyer.
The Fund’s portfolio turnover
rate for the reporting period increased from the previous year. The increased turnover, which is more in line with years prior to the previous year, was due primarily to increased trading by the Fund’s in agency
MBS acquired or sold in the "to be announced" (TBA) market.
The Fund’s notable
detractors during the period
| • | The Fund’s positioning over the period with respect to overall portfolio duration and corresponding interest rate sensitivity was, by a wide margin, the leading detractor from performance relative to the benchmark. Specifically, the Fund’s above-benchmark duration stance constrained returns as Treasury yields finished the period higher. |
| • | The Fund’s allocation to commercial MBS weighed on performance, as higher borrowing costs negatively impacted commercial real estate profitability and pressured spreads wider for the sector, most notably with respect to office properties. |
The Fund’s notable
contributors during the period
| • | The Fund’s positioning within non-agency MBS contributed positively to performance versus the benchmark. Fundamentals for the sector held up better than for most other credit-oriented areas of the market, supported by continued relative strength in the housing market despite higher borrowing costs given the rise in Treasury yields. |
| Columbia Quality Income Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | The Fund’s positioning within pass-through agency MBS contributed positively to performance versus the benchmark. In terms of selection, the Fund was underweight the current, lower-coupon mortgage pools that were most negatively impacted as the Fed moved to end its bond purchase program. The Fund increased its allocation to the agency MBS sector as valuations became notably attractive relative to historical levels. |
| • | Within asset-backed securities, a focus on the higher end of the capital structure allowed the Fund to earn attractive income while benefiting from relative price stability as investors valued a degree of protection against a potential recession. |
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 negative 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, 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. 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 Quality Income Fund | Annual Report 2023 |
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 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Quality Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Quality Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Quality Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 15 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
At May 31, 2023,
securities and/or cash totaling $47,135,146 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | 1,825 | 09/2023 | USD | 375,636,330 | — | (591,914) |
| U.S. Treasury 5-Year Note | 1,500 | 09/2023 | USD | 163,617,188 | 677,362 | — |
| U.S. Treasury 5-Year Note | 824 | 09/2023 | USD | 89,880,375 | — | (170,511) |
| U.S. Treasury Ultra Bond | 186 | 09/2023 | USD | 25,458,750 | 352,766 | — |
| Total | 1,030,128 | (762,425) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Long Bond | (16) | 09/2023 | USD | (2,053,500) | — | (18,281) |
| U.S. Treasury 10-Year Note | (4,895) | 09/2023 | USD | (560,324,531) | — | (1,966,778) |
| Total | — | (1,985,059) | ||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Quality Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| Call option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 90,000,000 | 90,000,000 | 2.75 | 06/26/2023 | 2,922,749 | 52,830 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 33,990,000 | 33,990,000 | 2.75 | 07/11/2023 | 1,189,650 | 47,304 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 150,000,000 | 150,000,000 | 2.00 | 08/03/2023 | 2,527,500 | 47,670 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 50,000,000 | 50,000,000 | 3.50 | 10/27/2023 | 1,900,000 | 1,682,260 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 40,000,000 | 40,000,000 | 3.50 | 10/27/2023 | 1,420,000 | 1,345,808 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 68,970,000 | 68,970,000 | 3.30 | 11/14/2023 | 2,207,040 | 1,800,124 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 185,000,000 | 185,000,000 | 3.30 | 11/30/2023 | 4,902,500 | 5,107,091 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 75,000,000 | 75,000,000 | 3.00 | 11/30/2023 | 2,306,250 | 1,288,597 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 55,000,000 | 55,000,000 | 3.00 | 12/01/2023 | 1,897,500 | 950,274 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay SOFR | Morgan Stanley | USD | 75,000,000 | 75,000,000 | 3.00 | 01/10/2024 | 2,561,250 | 1,492,200 |
| Total | 23,834,439 | 13,814,158 | ||||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| 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 | 16.577 | USD | 10,000,000 | (3,277,607) | 5,833 | — | (1,183,578) | — | (2,088,196) |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 16.577 | USD | 10,000,000 | (3,277,606) | 5,833 | — | (1,673,234) | — | (1,598,539) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 16.577 | USD | 10,000,000 | (3,277,607) | 5,833 | — | (1,539,866) | — | (1,731,908) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 16.577 | USD | 20,000,000 | (6,555,214) | 11,667 | — | (3,659,968) | — | (2,883,579) |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 70.861 | USD | 5,000,000 | (1,066,084) | 2,917 | — | (262,653) | — | (800,514) |
| Total | (17,454,118) | 32,083 | — | (8,319,299) | — | (9,102,736) | |||||||
* 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.
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, 2023, the total value of these securities amounted to $585,570,937, which represents 41.69% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of May 31, 2023. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | 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, 2023. |
| (e) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (f) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (g) | Represents a security purchased on a when-issued basis. |
| (h) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2023, the total value of these securities amounted to $13,378,750, which represents 0.95% of total net assets. |
| (i) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (j) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.241% | ||||||||
| 50,324,422 | 865,114,736 | (876,450,461) | (2,059) | 38,986,638 | 16,716 | 2,264,224 | 39,006,141 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Quality Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| FHLMC | Federal Home Loan Mortgage Corporation |
| 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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 208,670,205 | 2,953,987 | 211,624,192 |
| Commercial Mortgage-Backed Securities - Agency | — | 42,943,321 | — | 42,943,321 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 106,893,830 | — | 106,893,830 |
| Residential Mortgage-Backed Securities - Agency | — | 1,240,577,696 | — | 1,240,577,696 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 242,059,983 | 35,560,637 | 277,620,620 |
| Call Option Contracts Purchased | — | 13,814,158 | — | 13,814,158 |
| Put Option Contracts Purchased | — | 983,920 | — | 983,920 |
| Money Market Funds | 38,986,638 | — | — | 38,986,638 |
| Total Investments in Securities | 38,986,638 | 1,855,943,113 | 38,514,624 | 1,933,444,375 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 19 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 1,030,128 | — | — | 1,030,128 |
| Liability | ||||
| Futures Contracts | (2,747,484) | — | — | (2,747,484) |
| Call Option Contracts Written | — | (1,071) | — | (1,071) |
| Put Option Contracts Written | — | (3,226,966) | — | (3,226,966) |
| Swap Contracts | — | (9,102,736) | — | (9,102,736) |
| Total | 37,269,282 | 1,843,612,340 | 38,514,624 | 1,919,396,246 |
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.
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 05/31/2022 ($) | Increase (decrease) in accrued discounts/ premiums ($) | Realized gain (loss) ($) | Change in unrealized appreciation (depreciation)(a) ($) | Purchases ($) | Sales ($) | Transfers into Level 3 ($) | Transfers out of Level 3 ($) | Balance as of 05/31/2023 ($) | |
| Asset-Backed Securities — Non-Agency | 2,468,000 | (740,792) | 1,712,581 | (1,609,347) | 3,464,720 | (2,341,175) | - | - | 2,953,987 |
| Residential Mortgage-Backed Securities — Non-Agency | 68,153,339 | 78,569 | 84,427 | (197,478) | 13,181,875 | (45,740,095) | - | - | 35,560,637 |
| Total | 70,621,339 | (662,223) | 1,797,008 | (1,806,825) | 16,646,595 | (48,081,270) | - | - | 38,514,624 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at May 31, 2023 was $(277,707), which is comprised of Asset-Backed Securities — Non-Agency of $(1,070) and Residential Mortgage-Backed Securities —
Non-Agency of $(276,637).
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 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 accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Columbia Quality Income Fund | Annual Report 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,041,920,963) | $1,879,659,659 |
| Affiliated issuers (cost $38,988,697) | 38,986,638 |
| Option contracts purchased (cost $25,374,439) | 14,798,078 |
| Cash collateral held at broker for: | |
| Swap contracts | 6,296,000 |
| Option contracts written | 1,190,000 |
| TBA | 15,921,000 |
| Other(a) | 13,180,000 |
| Receivable for: | |
| Investments sold | 1,904 |
| Capital shares sold | 4,251,946 |
| Dividends | 194,856 |
| Interest | 6,055,732 |
| Variation margin for futures contracts | 1,592,698 |
| Expense reimbursement due from Investment Manager | 565 |
| Prepaid expenses | 11,127 |
| Total assets | 1,982,140,203 |
| Liabilities | |
| Option contracts written, at value (premiums received $3,605,125) | 3,228,037 |
| Due to custodian | 38,769 |
| Unrealized depreciation on swap contracts | 9,102,736 |
| Upfront receipts on swap contracts | 8,319,299 |
| Payable for: | |
| Investments purchased | 4,902,500 |
| Investments purchased on a delayed delivery basis | 543,154,895 |
| Capital shares purchased | 2,314,368 |
| Distributions to shareholders | 4,049,127 |
| Variation margin for futures contracts | 2,154,562 |
| Management services fees | 18,798 |
| Distribution and/or service fees | 1,924 |
| Transfer agent fees | 84,026 |
| Compensation of board members | 183,642 |
| Other expenses | 59,250 |
| Total liabilities | 577,611,933 |
| Net assets applicable to outstanding capital stock | $1,404,528,270 |
| Represented by | |
| Paid in capital | 1,811,930,883 |
| Total distributable earnings (loss) | (407,402,613) |
| Total - representing net assets applicable to outstanding capital stock | $1,404,528,270 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 21 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $252,442,081 |
| Shares outstanding | 14,109,754 |
| Net asset value per share | $17.89 |
| 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) | $18.44 |
| Advisor Class | |
| Net assets | $20,432,226 |
| Shares outstanding | 1,142,655 |
| Net asset value per share | $17.88 |
| Class C | |
| Net assets | $6,736,517 |
| Shares outstanding | 375,897 |
| Net asset value per share | $17.92 |
| Institutional Class | |
| Net assets | $291,133,912 |
| Shares outstanding | 16,282,443 |
| Net asset value per share | $17.88 |
| Institutional 2 Class | |
| Net assets | $18,400,461 |
| Shares outstanding | 1,029,102 |
| Net asset value per share | $17.88 |
| Institutional 3 Class | |
| Net assets | $813,449,064 |
| Shares outstanding | 45,676,117 |
| Net asset value per share | $17.81 |
| Class R | |
| Net assets | $1,934,009 |
| Shares outstanding | 108,179 |
| Net asset value per share | $17.88 |
| (a) | Includes collateral related to option contracts written and swap contracts. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia Quality Income Fund | Annual Report 2023 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $2,264,224 |
| Interest | 59,059,220 |
| Interfund lending | 2,597 |
| Total income | 61,326,041 |
| Expenses: | |
| Management services fees | 7,391,344 |
| Distribution and/or service fees | |
| Class A | 698,976 |
| Class C | 90,060 |
| Class R | 11,222 |
| Transfer agent fees | |
| Class A | 447,751 |
| Advisor Class | 40,636 |
| Class C | 14,345 |
| Institutional Class | 445,162 |
| Institutional 2 Class | 12,049 |
| Institutional 3 Class | 54,135 |
| Class R | 3,585 |
| Compensation of board members | 39,177 |
| Custodian fees | 33,488 |
| Printing and postage fees | 62,042 |
| Registration fees | 129,733 |
| Accounting services fees | 50,490 |
| Legal fees | 32,493 |
| Interest on collateral | 308,958 |
| Compensation of chief compliance officer | 288 |
| Other | 35,155 |
| Total expenses | 9,901,089 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (150,409) |
| Fees waived by transfer agent | |
| Institutional 2 Class | (573) |
| Expense reduction | (3,838) |
| Total net expenses | 9,746,269 |
| Net investment income | 51,579,772 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (45,519,429) |
| Investments — affiliated issuers | 16,716 |
| Futures contracts | (53,097,921) |
| Option contracts purchased | 1,405,305 |
| Option contracts written | (11,922,830) |
| Swap contracts | 1,203,575 |
| Net realized loss | (107,914,584) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (46,291,418) |
| Investments — affiliated issuers | (2,059) |
| Futures contracts | (2,086,032) |
| Option contracts purchased | (20,548,159) |
| Option contracts written | 13,348,848 |
| Swap contracts | (11,011,999) |
| Net change in unrealized appreciation (depreciation) | (66,590,819) |
| Net realized and unrealized loss | (174,505,403) |
| Net decrease in net assets resulting from operations | $(122,925,631) |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 23 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $51,579,772 | $50,609,909 |
| Net realized loss | (107,914,584) | (97,561,435) |
| Net change in unrealized appreciation (depreciation) | (66,590,819) | (180,617,511) |
| Net decrease in net assets resulting from operations | (122,925,631) | (227,569,037) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (9,074,287) | (6,748,034) |
| Advisor Class | (880,873) | (1,139,219) |
| Class C | (219,813) | (167,123) |
| Institutional Class | (9,686,621) | (9,277,490) |
| Institutional 2 Class | (748,007) | (732,645) |
| Institutional 3 Class | (32,489,042) | (25,074,485) |
| Class R | (66,598) | (68,666) |
| Total distributions to shareholders | (53,165,241) | (43,207,662) |
| Decrease in net assets from capital stock activity | (137,560,068) | (284,593,108) |
| Total decrease in net assets | (313,650,940) | (555,369,807) |
| Net assets at beginning of year | 1,718,179,210 | 2,273,549,017 |
| Net assets at end of year | $1,404,528,270 | $1,718,179,210 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia Quality Income Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 1,237,581 | 22,888,404 | 1,984,813 | 43,861,129 |
| Distributions reinvested | 377,554 | 6,899,532 | 237,245 | 5,181,270 |
| Redemptions | (3,656,607) | (67,159,893) | (4,849,505) | (106,035,059) |
| Net decrease | (2,041,472) | (37,371,957) | (2,627,447) | (56,992,660) |
| Advisor Class | ||||
| Subscriptions | 172,987 | 3,219,521 | 1,072,876 | 24,027,547 |
| Distributions reinvested | 44,442 | 813,510 | 48,850 | 1,069,711 |
| Redemptions | (756,211) | (14,014,640) | (2,179,374) | (46,789,753) |
| Net decrease | (538,782) | (9,981,609) | (1,057,648) | (21,692,495) |
| Class C | ||||
| Subscriptions | 39,114 | 699,440 | 193,529 | 4,361,303 |
| Distributions reinvested | 10,502 | 192,292 | 6,913 | 151,525 |
| Redemptions | (316,090) | (5,841,171) | (337,886) | (7,365,751) |
| Net decrease | (266,474) | (4,949,439) | (137,444) | (2,852,923) |
| Institutional Class | ||||
| Subscriptions | 8,082,005 | 145,972,237 | 4,371,659 | 97,210,740 |
| Distributions reinvested | 487,810 | 8,896,781 | 323,956 | 7,078,900 |
| Redemptions | (8,867,877) | (165,802,392) | (10,864,871) | (234,639,662) |
| Net decrease | (298,062) | (10,933,374) | (6,169,256) | (130,350,022) |
| Institutional 2 Class | ||||
| Subscriptions | 325,675 | 6,196,472 | 520,816 | 11,500,378 |
| Distributions reinvested | 40,916 | 746,854 | 33,348 | 731,318 |
| Redemptions | (570,581) | (10,584,594) | (1,119,144) | (24,603,407) |
| Net decrease | (203,990) | (3,641,268) | (564,980) | (12,371,711) |
| Institutional 3 Class | ||||
| Subscriptions | 13,451,351 | 246,359,545 | 7,256,559 | 159,522,579 |
| Distributions reinvested | 1,726,527 | 31,403,957 | 1,097,694 | 23,824,955 |
| Redemptions | (19,004,495) | (347,832,471) | (11,505,626) | (241,592,634) |
| Net decrease | (3,826,617) | (70,068,969) | (3,151,373) | (58,245,100) |
| Class R | ||||
| Subscriptions | 4,998 | 90,915 | 14,878 | 331,816 |
| Distributions reinvested | 3,621 | 66,162 | 3,134 | 68,664 |
| Redemptions | (41,610) | (770,529) | (116,899) | (2,488,677) |
| Net decrease | (32,991) | (613,452) | (98,887) | (2,088,197) |
| Total net decrease | (7,208,388) | (137,560,068) | (13,807,035) | (284,593,108) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 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 ratios of expenses and net investment income are 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 5/31/2023 | $20.05 | 0.58 | (2.14) | (1.56) | (0.60) | — | (0.60) |
| Year Ended 5/31/2022 | $22.86 | 0.46 | (2.89) | (2.43) | (0.38) | — | (0.38) |
| Year Ended 5/31/2021(e) | $22.20 | 0.61 | 1.00 | 1.61 | (0.68) | (0.27) | (0.95) |
| Year Ended 5/31/2020(e) | $22.10 | 0.56 | 0.06 | 0.62 | (0.52) | — | (0.52) |
| Year Ended 5/31/2019(e) | $21.35 | 0.64 | 0.63 | 1.27 | (0.52) | — | (0.52) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $20.04 | 0.63 | (2.14) | (1.51) | (0.65) | — | (0.65) |
| Year Ended 5/31/2022 | $22.84 | 0.51 | (2.87) | (2.36) | (0.44) | — | (0.44) |
| Year Ended 5/31/2021(e) | $22.19 | 0.67 | 0.99 | 1.66 | (0.74) | (0.27) | (1.01) |
| Year Ended 5/31/2020(e) | $22.09 | 0.64 | 0.06 | 0.70 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(e) | $21.34 | 0.68 | 0.67 | 1.35 | (0.60) | — | (0.60) |
| Class C | |||||||
| Year Ended 5/31/2023 | $20.08 | 0.44 | (2.13) | (1.69) | (0.47) | — | (0.47) |
| Year Ended 5/31/2022 | $22.90 | 0.29 | (2.89) | (2.60) | (0.22) | — | (0.22) |
| Year Ended 5/31/2021(e) | $22.24 | 0.44 | 1.00 | 1.44 | (0.51) | (0.27) | (0.78) |
| Year Ended 5/31/2020(e) | $22.14 | 0.40 | 0.06 | 0.46 | (0.36) | — | (0.36) |
| Year Ended 5/31/2019(e) | $21.39 | 0.48 | 0.63 | 1.11 | (0.36) | — | (0.36) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $20.04 | 0.63 | (2.14) | (1.51) | (0.65) | — | (0.65) |
| Year Ended 5/31/2022 | $22.84 | 0.51 | (2.87) | (2.36) | (0.44) | — | (0.44) |
| Year Ended 5/31/2021(e) | $22.19 | 0.66 | 1.00 | 1.66 | (0.74) | (0.27) | (1.01) |
| Year Ended 5/31/2020(e) | $22.09 | 0.64 | 0.06 | 0.70 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(e) | $21.34 | 0.68 | 0.67 | 1.35 | (0.60) | — | (0.60) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $20.04 | 0.64 | (2.13) | (1.49) | (0.67) | — | (0.67) |
| Year Ended 5/31/2022 | $22.84 | 0.53 | (2.88) | (2.35) | (0.45) | — | (0.45) |
| Year Ended 5/31/2021(e) | $22.19 | 0.68 | 1.00 | 1.68 | (0.76) | (0.27) | (1.03) |
| Year Ended 5/31/2020(e) | $22.09 | 0.64 | 0.06 | 0.70 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(e) | $21.35 | 0.72 | 0.62 | 1.34 | (0.60) | — | (0.60) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 26 | Columbia Quality Income Fund | Annual Report 2023 |
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 5/31/2023 | $17.89 | (7.78%) | 0.95%(c) | 0.93%(c),(d) | 3.14% | 341% | $252,442 |
| Year Ended 5/31/2022 | $20.05 | (10.74%) | 0.89%(c) | 0.89%(c),(d) | 2.06% | 207% | $323,845 |
| Year Ended 5/31/2021(e) | $22.86 | 7.36% | 0.91%(c) | 0.90%(c),(d) | 2.69% | 319% | $429,196 |
| Year Ended 5/31/2020(e) | $22.20 | 2.81% | 0.92%(c) | 0.90%(c),(d) | 2.61% | 326% | $421,105 |
| Year Ended 5/31/2019(e) | $22.10 | 6.12% | 0.93%(c) | 0.92%(c),(d) | 2.96% | 302% | $453,821 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $17.88 | (7.56%) | 0.70%(c) | 0.68%(c),(d) | 3.37% | 341% | $20,432 |
| Year Ended 5/31/2022 | $20.04 | (10.49%) | 0.64%(c) | 0.64%(c),(d) | 2.30% | 207% | $33,695 |
| Year Ended 5/31/2021(e) | $22.84 | 7.53% | 0.66%(c) | 0.65%(c),(d) | 2.94% | 319% | $62,560 |
| Year Ended 5/31/2020(e) | $22.19 | 3.25% | 0.67%(c) | 0.65%(c),(d) | 2.87% | 326% | $99,749 |
| Year Ended 5/31/2019(e) | $22.09 | 6.21% | 0.68%(c) | 0.67%(c),(d) | 3.22% | 302% | $90,690 |
| Class C | |||||||
| Year Ended 5/31/2023 | $17.92 | (8.45%) | 1.69%(c) | 1.68%(c),(d) | 2.36% | 341% | $6,737 |
| Year Ended 5/31/2022 | $20.08 | (11.44%) | 1.64%(c) | 1.64%(c),(d) | 1.31% | 207% | $12,902 |
| Year Ended 5/31/2021(e) | $22.90 | 6.54% | 1.66%(c) | 1.65%(c),(d) | 1.94% | 319% | $17,854 |
| Year Ended 5/31/2020(e) | $22.24 | 2.23% | 1.67%(c) | 1.66%(c),(d) | 1.86% | 326% | $21,452 |
| Year Ended 5/31/2019(e) | $22.14 | 5.14% | 1.68%(c) | 1.67%(c),(d) | 2.20% | 302% | $22,792 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $17.88 | (7.56%) | 0.70%(c) | 0.68%(c),(d) | 3.40% | 341% | $291,134 |
| Year Ended 5/31/2022 | $20.04 | (10.49%) | 0.64%(c) | 0.64%(c),(d) | 2.30% | 207% | $332,225 |
| Year Ended 5/31/2021(e) | $22.84 | 7.53% | 0.66%(c) | 0.65%(c),(d) | 2.93% | 319% | $519,577 |
| Year Ended 5/31/2020(e) | $22.19 | 3.25% | 0.67%(c) | 0.65%(c),(d) | 2.86% | 326% | $522,050 |
| Year Ended 5/31/2019(e) | $22.09 | 6.41% | 0.68%(c) | 0.67%(c),(d) | 3.23% | 302% | $603,089 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $17.88 | (7.47%) | 0.60%(c) | 0.59%(c) | 3.49% | 341% | $18,400 |
| Year Ended 5/31/2022 | $20.04 | (10.41%) | 0.56%(c) | 0.56%(c) | 2.37% | 207% | $24,711 |
| Year Ended 5/31/2021(e) | $22.84 | 7.62% | 0.57%(c) | 0.56%(c) | 2.99% | 319% | $41,073 |
| Year Ended 5/31/2020(e) | $22.19 | 3.35% | 0.58%(c) | 0.56%(c) | 2.96% | 326% | $30,795 |
| Year Ended 5/31/2019(e) | $22.09 | 6.32% | 0.58%(c) | 0.56%(c) | 3.34% | 302% | $37,589 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 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 | Distributions from net realized gains | Total distributions to shareholders | |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2023 | $19.96 | 0.65 | (2.13) | (1.48) | (0.67) | — | (0.67) |
| Year Ended 5/31/2022 | $22.75 | 0.54 | (2.87) | (2.33) | (0.46) | — | (0.46) |
| Year Ended 5/31/2021(e) | $22.10 | 0.69 | 0.99 | 1.68 | (0.76) | (0.27) | (1.03) |
| Year Ended 5/31/2020(e) | $22.00 | 0.68 | 0.06 | 0.74 | (0.64) | — | (0.64) |
| Year Ended 5/31/2019(e) | $21.25 | 0.72 | 0.63 | 1.35 | (0.60) | — | (0.60) |
| Class R | |||||||
| Year Ended 5/31/2023 | $20.04 | 0.53 | (2.13) | (1.60) | (0.56) | — | (0.56) |
| Year Ended 5/31/2022 | $22.84 | 0.40 | (2.87) | (2.47) | (0.33) | — | (0.33) |
| Year Ended 5/31/2021(e) | $22.18 | 0.54 | 1.01 | 1.55 | (0.62) | (0.27) | (0.89) |
| Year Ended 5/31/2020(e) | $22.08 | 0.52 | 0.06 | 0.58 | (0.48) | — | (0.48) |
| Year Ended 5/31/2019(e) | $21.33 | 0.60 | 0.63 | 1.23 | (0.48) | — | (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) | 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: |
| Class | 5/31/2023 | 5/31/2022 | 5/31/2021 | 5/31/2020 | 5/31/2019 |
| Class A | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Advisor Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Class C | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Institutional Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Institutional 2 Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Institutional 3 Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Class R | 0.02% | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | 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. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 28 | Columbia Quality Income Fund | Annual Report 2023 |
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 5/31/2023 | $17.81 | (7.42%) | 0.54%(c) | 0.54%(c) | 3.54% | 341% | $813,449 |
| Year Ended 5/31/2022 | $19.96 | (10.38%) | 0.51%(c) | 0.51%(c) | 2.45% | 207% | $987,973 |
| Year Ended 5/31/2021(e) | $22.75 | 7.64% | 0.52%(c) | 0.52%(c) | 3.05% | 319% | $1,197,807 |
| Year Ended 5/31/2020(e) | $22.10 | 3.40% | 0.53%(c) | 0.51%(c) | 3.01% | 326% | $729,991 |
| Year Ended 5/31/2019(e) | $22.00 | 6.58% | 0.52%(c) | 0.51%(c) | 3.37% | 302% | $692,552 |
| Class R | |||||||
| Year Ended 5/31/2023 | $17.88 | (8.02%) | 1.20%(c) | 1.18%(c),(d) | 2.88% | 341% | $1,934 |
| Year Ended 5/31/2022 | $20.04 | (10.94%) | 1.14%(c) | 1.14%(c),(d) | 1.79% | 207% | $2,828 |
| Year Ended 5/31/2021(e) | $22.84 | 7.00% | 1.16%(c) | 1.15%(c),(d) | 2.40% | 319% | $5,482 |
| Year Ended 5/31/2020(e) | $22.18 | 2.74% | 1.17%(c) | 1.15%(c),(d) | 2.36% | 326% | $2,711 |
| Year Ended 5/31/2019(e) | $22.08 | 5.87% | 1.19%(c) | 1.17%(c),(d) | 2.76% | 302% | $1,454 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Quality Income Fund | Annual Report 2023 | 29 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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.
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. Class C shares automatically convert to Class A shares after 8 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
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.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
| 30 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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, failure of the clearinghouse or CCP may pose additional counterparty credit risk. 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 and such shortfall is remedied by the CCP or otherwise, 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 instruments’ 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 Quality Income Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 or receive interest income on cash collateral pledged to the broker. 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 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 hedge certain Fund investment exposures, 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.
| 32 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 are entered into bilaterally 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 Quality Income Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 bilateral counterparty, FCM or CCP, as applicable, 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.
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 payment or receipt 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.
| 34 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 1,030,128* |
| Interest rate risk | Investments, at value — Option contracts purchased | 14,798,078 |
| Total | 15,828,206 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 9,102,736* |
| Credit risk | Upfront receipts on swap contracts | 8,319,299 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 2,747,484* |
| Interest rate risk | Option contracts written, at value | 3,228,037 |
| Total | 23,397,556 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin for futures and centrally cleared swaps, if any, is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended May 31, 2023:
| Columbia Quality Income Fund | Annual Report 2023 | 35 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 331,992,134 |
| Futures contracts — short | 316,267,127 |
| Credit default swap contracts — sell protection | 67,875,000 |
| Derivative instrument | Average value ($)* |
| Option contracts purchased | 15,945,622 |
| Option contracts written | (4,350,547) |
| * | Based on the ending quarterly outstanding amounts for the year ended May 31, 2023. |
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. These transactions may increase the Fund’s portfolio turnover rate. 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. 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. All cash proceeds will be invested
| 36 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing
transactions.
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 in 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 in 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, 2023:
| Citi ($) (a) | Citi ($) (a) | JPMorgan ($) (a) | JPMorgan ($) (a) | Morgan Stanley ($) | Total ($) | |
| Assets | ||||||
| Call option contracts purchased | 12,321,958 | - | - | - | 1,492,200 | 13,814,158 |
| Put option contracts purchased | - | - | - | - | 983,920 | 983,920 |
| Total assets | 12,321,958 | - | - | - | 2,476,120 | 14,798,078 |
| Liabilities | ||||||
| Call option contracts written | 651 | - | - | - | 420 | 1,071 |
| Put option contracts written | 677,513 | - | 645,250 | - | 1,904,203 | 3,226,966 |
| OTC credit default swap contracts (b) | - | 3,271,774 | - | 3,271,773 | 10,878,488 | 17,422,035 |
| Total liabilities | 678,164 | 3,271,774 | 645,250 | 3,271,773 | 12,783,111 | 20,650,072 |
| Total financial and derivative net assets | 11,643,794 | (3,271,774) | (645,250) | (3,271,773) | (10,306,991) | (5,851,994) |
| Total collateral received (pledged) (c) | 5,976,000 | (3,146,000) | (645,250) | (3,150,000) | (10,306,991) | (11,272,241) |
| Net amount (d) | 5,667,794 | (125,774) | - | (121,773) | - | 5,420,247 |
| (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) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (d) | 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.
| Columbia Quality Income Fund | Annual Report 2023 | 37 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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.
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
| 38 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, prior to October 1, 2022, Institutional 2 Class shares were 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.
| Columbia Quality Income Fund | Annual Report 2023 | 39 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
For the year ended May 31,
2023, 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 | 0.16 |
| Advisor Class | 0.16 |
| Class C | 0.16 |
| Institutional Class | 0.16 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.16 |
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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $3,838.
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 $410,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.50 - 1.00(a) | 24,016 |
| Class C | — | 1.00(b) | 2,249 |
| (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.
| 40 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 classes’ 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, costs associated with shareholder meetings, 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 commitment, prior to October 1, 2022, 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 that 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, derivative investments, tax straddles, principal and/or interest from fixed income securities, capital loss carryforwards,
trustees’ deferred compensation, distributions and miscellaneous adjustments. 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 (loss) ($) | Paid in capital ($) |
| 14,160 | (14,160) | — |
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.
| Columbia Quality Income Fund | Annual Report 2023 | 41 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 53,165,241 | — | 53,165,241 | 43,207,662 | — | 43,207,662 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 5,071,314 | — | (218,139,017) | (190,104,988) |
At May 31, 2023, 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) ($) | Net unrealized (depreciation) ($) |
| 2,101,181,935 | 8,811,879 | (198,916,867) | (190,104,988) |
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, 2023, 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,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (127,608,531) | (90,530,486) | (218,139,017) | — |
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 $6,357,997,936 and $6,423,803,301, respectively, for the year ended May 31, 2023, of which $6,198,392,448 and
$6,107,459,742, 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.
| 42 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 6,350,000 | 4.28 | 4 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
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,
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 Quality Income Fund | Annual Report 2023 | 43 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise. Actions by
governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise 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.
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 Fund’s
net asset value 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 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.
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. The U.K.
Financial Conduct Authority and the ICE Benchmark Administration have announced that a majority of U.S. dollar LIBOR settings will cease publication after June 30, 2023. A subset of non-U.S. dollar LIBOR settings is
continuing to be published on a “synthetic” basis and it is possible that a subset of U.S. dollar LIBOR settings will also be published after June 30, 2023 on a “synthetic” basis. Any such
publications are, or would be considered, non-representative of the underlying market. Markets are slowly developing in response to the elimination of LIBOR. 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 more settled. Alternatives to LIBOR have been established or are in development in most major currencies, including the Secured Overnight Financing
Rate (SOFR), which the U.S. Federal Reserve is promoting as the alternative reference rate to U.S. dollar LIBOR.
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 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
| 44 | Columbia Quality Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Fund’s ability to price or value
hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
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, 2023, affiliated
shareholders of record owned 71.8% 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.
| Columbia Quality Income Fund | Annual Report 2023 | 45 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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.
| 46 | Columbia Quality Income Fund | Annual Report 2023 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023 and the
financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
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 2023 | 47 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Section 163(j) Interest Dividends | |
| 99.01% |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| 48 | Columbia Quality Income Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Columbia Quality Income Fund | Annual Report 2023 | 49 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| 50 | Columbia Quality Income Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Columbia Quality Income Fund | Annual Report 2023 | 51 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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.
| 52 | Columbia Quality Income Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Quality Income Fund | Annual Report 2023 | 53 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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.
| 54 | Columbia Quality Income Fund | Annual Report 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN236_05_N01_(07/23)
Columbia High Yield
Bond Fund
Not FDIC or NCUA 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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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
| Columbia High Yield Bond Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia High Yield Bond Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
At May 31, 2023, 34.92% 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 that ended
May 31, 2023, Class A shares of Columbia High Yield Bond Fund returned -0.68% excluding sales charges. The Fund underperformed its benchmark, the ICE BofA U.S. Cash Pay High Yield Constrained Index, which returned
-0.14% for the same time period.
Market overview
High-yield bonds produced roughly
flat returns in the 12-month period that ended May 31, 2023, with the contribution from income offset by declining prices. High inflation, rising interest rates and turmoil in the U.S. regional banking sector in March
2023 contributed to elevated market volatility over the course of the period. Yield spreads ultimately ended the period wider, adding to the adverse effect of rising U.S. Treasury yields. Despite the uncertain market
environment, lower quality issues outperformed higher quality BB rated securities.
Defaults rose but stayed below the
long-term average, indicating that fundamentals remained sound despite worries about slowing economic growth. Supply and demand conditions had a largely neutral effect on market performance. While asset outflows were
high, the impact was cushioned by low net new issuance and elevated rising star activity (issues upgraded from high yield to investment grade).
In terms of portfolio activity, we
sought to take advantage of idiosyncratic ideas, attractive risk-adjusted opportunities in the new-issue market and dislocations caused by periods of market volatility. These efforts resulted in increased allocations
to the chemicals, insurance brokerage and media content sectors. Our sales of rising stars helped create sources of cash to fund these additions, as did our reductions of certain positions in the healthcare services
and wireline telecommunications sectors.
We maintained a generally defensive
risk profile relative to the market, with a yield at or below that of the benchmark. While the Fund was overweight in CCC rated issues, we maintained a cautious approach to the category rather than reaching for yield.
In addition, we kept duration (interest rate sensitivity) in line with that of the benchmark in order to minimize relative interest-rate risk. We retained the conservative positioning through the close of the period,
particularly as it related to the highest-yielding CCC rated bonds and certain consumer-oriented sectors. However, with slightly above-average cash levels and an allocation to investment-grade bonds, we had the
ability to capitalize on market sell-offs and attractive idiosyncratic opportunities. As always, we believe individual security selection is the key driver of relative performance.
The Fund’s most notable
detractors during the period
| • | Selection in the cable and satellite TV sector, primarily an overweight in an issuer that underperformed due to company-specific factors, was the largest detractor to Fund performance during the period. |
| • | Selections within packaging detracted as well. The shortfall was driven by a mix of overweight allocations to underperforming issuers, as well as the robust performance for issuers in which the Fund was underweight or held no position. |
| • | An underweight in the recreation and travel sector, which outperformed due to strong demand trends, also hurt results. |
The Fund’s most notable
contributors during the period
| • | Security selection in the support-services sector was the largest contributor. With support-services being somewhat of a collection of companies that do not fit within other sectors, there was no underlying theme to the contribution. Instead, the strong fundamental performance of several overweight positions was the key driver of results. |
| Columbia High Yield Bond Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | An underweight in media content was also positive, as was selection in the category thanks to zero weightings in a number of individual securities that lagged. The sector, which continued to face secular headwinds from declining linear television viewership, was among the worst performing areas in high yield during the period. |
| • | Selection in specialty retail was positive and primarily driven by zero weightings in underperforming issuers. |
| • | The Fund’s lack of a position in the banking sector further aided results. |
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 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 2023 |
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 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia High Yield Bond Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia High Yield Bond Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia High Yield Bond Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 15 |
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, 2023, the total value of these securities amounted to $1,017,608,831, which represents 79.82% of total net assets. |
| (b) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | Represents a security in default. |
| (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, 2023 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, 2023. |
| (h) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia High Yield Bond Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Notes to Portfolio of Investments (continued)
| (i) | 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, 2023 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, 5.241% | ||||||||
| 58,145,865 | 360,684,994 | (393,616,618) | (3,014) | 25,211,227 | (7,330) | 1,331,123 | 25,223,839 | |
Abbreviation Legend
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing 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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Convertible Bonds | — | 10,595,271 | — | 10,595,271 |
| Corporate Bonds & Notes | — | 1,172,644,190 | — | 1,172,644,190 |
| Foreign Government Obligations | — | 5,844,590 | — | 5,844,590 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Senior Loans | — | 40,438,500 | — | 40,438,500 |
| Money Market Funds | 25,211,227 | — | — | 25,211,227 |
| Total Investments in Securities | 25,211,227 | 1,229,522,551 | — | 1,254,733,778 |
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.
| 18 | Columbia High Yield Bond Fund | Annual Report 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,369,828,990) | $1,229,522,551 |
| Affiliated issuers (cost $25,222,812) | 25,211,227 |
| Cash | 43,362 |
| Receivable for: | |
| Investments sold | 8,285,253 |
| Capital shares sold | 6,159,214 |
| Dividends | 133,730 |
| Interest | 18,884,322 |
| Foreign tax reclaims | 12,326 |
| Expense reimbursement due from Investment Manager | 1,695 |
| Prepaid expenses | 10,401 |
| Total assets | 1,288,264,081 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 5,221,000 |
| Capital shares purchased | 1,773,731 |
| Distributions to shareholders | 6,064,107 |
| Management services fees | 22,118 |
| Distribution and/or service fees | 3,550 |
| Transfer agent fees | 103,795 |
| Compensation of board members | 185,617 |
| Other expenses | 51,627 |
| Total liabilities | 13,425,545 |
| Net assets applicable to outstanding capital stock | $1,274,838,536 |
| Represented by | |
| Paid in capital | 1,480,314,374 |
| Total distributable earnings (loss) | (205,475,838) |
| Total - representing net assets applicable to outstanding capital stock | $1,274,838,536 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 19 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $454,105,783 |
| Shares outstanding | 43,983,167 |
| Net asset value per share | $10.32 |
| 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) | $10.83 |
| Advisor Class | |
| Net assets | $90,530,757 |
| Shares outstanding | 8,718,111 |
| Net asset value per share | $10.38 |
| Class C | |
| Net assets | $10,072,133 |
| Shares outstanding | 981,602 |
| Net asset value per share | $10.26 |
| Institutional Class | |
| Net assets | $135,506,856 |
| Shares outstanding | 13,135,248 |
| Net asset value per share | $10.32 |
| Institutional 2 Class | |
| Net assets | $37,596,124 |
| Shares outstanding | 3,654,150 |
| Net asset value per share | $10.29 |
| Institutional 3 Class | |
| Net assets | $534,874,496 |
| Shares outstanding | 51,897,544 |
| Net asset value per share | $10.31 |
| Class R | |
| Net assets | $12,152,387 |
| Shares outstanding | 1,173,481 |
| Net asset value per share | $10.36 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Columbia High Yield Bond Fund | Annual Report 2023 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $143,507 |
| Dividends — affiliated issuers | 1,331,123 |
| Interest | 81,985,689 |
| Interfund lending | 3,429 |
| Total income | 83,463,748 |
| Expenses: | |
| Management services fees | 8,611,302 |
| Distribution and/or service fees | |
| Class A | 1,204,318 |
| Class C | 119,621 |
| Class R | 65,514 |
| Transfer agent fees | |
| Class A | 668,204 |
| Advisor Class | 126,927 |
| Class C | 16,567 |
| Institutional Class | 201,072 |
| Institutional 2 Class | 22,180 |
| Institutional 3 Class | 36,903 |
| Class R | 18,175 |
| Compensation of board members | 36,933 |
| Custodian fees | 20,301 |
| Printing and postage fees | 77,051 |
| Registration fees | 130,549 |
| Accounting services fees | 40,290 |
| Legal fees | 30,637 |
| Compensation of chief compliance officer | 260 |
| Other | 32,366 |
| Total expenses | 11,459,170 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (573,353) |
| Fees waived by transfer agent | |
| Institutional 3 Class | (13,204) |
| Expense reduction | (1,520) |
| Total net expenses | 10,871,093 |
| Net investment income | 72,592,655 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (60,314,831) |
| Investments — affiliated issuers | (7,330) |
| Net realized loss | (60,322,161) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (26,341,453) |
| Investments — affiliated issuers | (3,014) |
| Net change in unrealized appreciation (depreciation) | (26,344,467) |
| Net realized and unrealized loss | (86,666,628) |
| Net decrease in net assets resulting from operations | $(14,073,973) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 21 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $72,592,655 | $74,484,263 |
| Net realized gain (loss) | (60,322,161) | 18,622,436 |
| Net change in unrealized appreciation (depreciation) | (26,344,467) | (170,625,643) |
| Net decrease in net assets resulting from operations | (14,073,973) | (77,518,944) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (25,156,486) | (26,900,181) |
| Advisor Class | (5,005,852) | (4,891,897) |
| Class C | (533,331) | (630,748) |
| Institutional Class | (7,920,009) | (9,121,949) |
| Institutional 2 Class | (2,083,113) | (3,075,117) |
| Institutional 3 Class | (32,349,800) | (36,819,268) |
| Class R | (651,113) | (665,906) |
| Total distributions to shareholders | (73,699,704) | (82,105,066) |
| Decrease in net assets from capital stock activity | (179,067,192) | (115,305,465) |
| Total decrease in net assets | (266,840,869) | (274,929,475) |
| Net assets at beginning of year | 1,541,679,405 | 1,816,608,880 |
| Net assets at end of year | $1,274,838,536 | $1,541,679,405 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Columbia High Yield Bond Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 10,120,058 | 104,911,041 | 10,827,069 | 128,054,269 |
| Distributions reinvested | 2,346,188 | 24,278,141 | 2,204,155 | 25,955,268 |
| Redemptions | (16,974,689) | (176,159,377) | (16,690,545) | (196,638,272) |
| Net decrease | (4,508,443) | (46,970,195) | (3,659,321) | (42,628,735) |
| Advisor Class | ||||
| Subscriptions | 1,505,296 | 15,708,991 | 1,828,617 | 21,812,220 |
| Distributions reinvested | 475,039 | 4,945,830 | 408,710 | 4,833,407 |
| Redemptions | (2,061,542) | (21,531,589) | (1,869,692) | (22,072,873) |
| Net increase (decrease) | (81,207) | (876,768) | 367,635 | 4,572,754 |
| Class C | ||||
| Subscriptions | 126,217 | 1,302,566 | 198,211 | 2,338,402 |
| Distributions reinvested | 50,490 | 519,167 | 52,647 | 616,414 |
| Redemptions | (503,624) | (5,190,192) | (445,364) | (5,183,343) |
| Net decrease | (326,917) | (3,368,459) | (194,506) | (2,228,527) |
| Institutional Class | ||||
| Subscriptions | 3,313,174 | 34,471,305 | 5,608,078 | 65,644,478 |
| Distributions reinvested | 708,035 | 7,321,819 | 733,909 | 8,626,894 |
| Redemptions | (7,108,124) | (73,555,820) | (6,061,963) | (70,700,133) |
| Net increase (decrease) | (3,086,915) | (31,762,696) | 280,024 | 3,571,239 |
| Institutional 2 Class | ||||
| Subscriptions | 2,053,283 | 21,497,765 | 1,833,656 | 21,408,900 |
| Distributions reinvested | 201,065 | 2,073,252 | 256,601 | 3,030,537 |
| Redemptions | (2,002,323) | (20,389,129) | (5,554,423) | (64,914,775) |
| Net increase (decrease) | 252,025 | 3,181,888 | (3,464,166) | (40,475,338) |
| Institutional 3 Class | ||||
| Subscriptions | 2,675,967 | 27,935,680 | 5,482,439 | 63,837,305 |
| Distributions reinvested | 3,029,583 | 31,301,260 | 3,022,342 | 35,510,537 |
| Redemptions | (15,180,244) | (157,017,568) | (12,051,510) | (137,909,489) |
| Net decrease | (9,474,694) | (97,780,628) | (3,546,729) | (38,561,647) |
| Class R | ||||
| Subscriptions | 166,229 | 1,730,267 | 568,721 | 6,746,419 |
| Distributions reinvested | 62,322 | 646,985 | 55,393 | 653,095 |
| Redemptions | (371,081) | (3,867,586) | (592,042) | (6,954,725) |
| Net increase (decrease) | (142,530) | (1,490,334) | 32,072 | 444,789 |
| Total net decrease | (17,368,681) | (179,067,192) | (10,184,991) | (115,305,465) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 23 |
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 ratios of expenses and net investment income are 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 5/31/2023 | $10.95 | 0.53 | (0.62) | (0.09) | (0.54) | — | (0.54) |
| Year Ended 5/31/2022 | $12.03 | 0.48 | (1.03) | (0.55) | (0.49) | (0.04) | (0.53) |
| Year Ended 5/31/2021(d) | $11.19 | 0.52 | 0.85 | 1.37 | (0.53) | — | (0.53) |
| Year Ended 5/31/2020(d) | $11.44 | 0.56 | (0.25) | 0.31 | (0.56) | — | (0.56) |
| Year Ended 5/31/2019(d) | $11.39 | 0.56 | 0.05 | 0.61 | (0.56) | — | (0.56) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $11.01 | 0.56 | (0.62) | (0.06) | (0.57) | — | (0.57) |
| Year Ended 5/31/2022 | $12.10 | 0.51 | (1.04) | (0.53) | (0.52) | (0.04) | (0.56) |
| Year Ended 5/31/2021(d) | $11.26 | 0.55 | 0.85 | 1.40 | (0.56) | — | (0.56) |
| Year Ended 5/31/2020(d) | $11.50 | 0.60 | (0.24) | 0.36 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(d) | $11.46 | 0.60 | 0.04 | 0.64 | (0.60) | — | (0.60) |
| Class C | |||||||
| Year Ended 5/31/2023 | $10.88 | 0.45 | (0.61) | (0.16) | (0.46) | — | (0.46) |
| Year Ended 5/31/2022 | $11.96 | 0.39 | (1.03) | (0.64) | (0.40) | (0.04) | (0.44) |
| Year Ended 5/31/2021(d) | $11.13 | 0.43 | 0.84 | 1.27 | (0.44) | — | (0.44) |
| Year Ended 5/31/2020(d) | $11.36 | 0.48 | (0.23) | 0.25 | (0.48) | — | (0.48) |
| Year Ended 5/31/2019(d) | $11.32 | 0.48 | 0.04 | 0.52 | (0.48) | — | (0.48) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $10.94 | 0.56 | (0.61) | (0.05) | (0.57) | — | (0.57) |
| Year Ended 5/31/2022 | $12.02 | 0.51 | (1.03) | (0.52) | (0.52) | (0.04) | (0.56) |
| Year Ended 5/31/2021(d) | $11.19 | 0.54 | 0.85 | 1.39 | (0.56) | — | (0.56) |
| Year Ended 5/31/2020(d) | $11.43 | 0.60 | (0.24) | 0.36 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(d) | $11.38 | 0.60 | 0.05 | 0.65 | (0.60) | — | (0.60) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $10.91 | 0.57 | (0.62) | (0.05) | (0.57) | — | (0.57) |
| Year Ended 5/31/2022 | $11.99 | 0.52 | (1.03) | (0.51) | (0.53) | (0.04) | (0.57) |
| Year Ended 5/31/2021(d) | $11.16 | 0.55 | 0.85 | 1.40 | (0.57) | — | (0.57) |
| Year Ended 5/31/2020(d) | $11.39 | 0.60 | (0.23) | 0.37 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(d) | $11.35 | 0.60 | 0.04 | 0.64 | (0.60) | — | (0.60) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia High Yield Bond Fund | Annual Report 2023 |
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 5/31/2023 | $10.32 | (0.68%) | 1.05% | 1.00%(c) | 5.14% | 30% | $454,106 |
| Year Ended 5/31/2022 | $10.95 | (4.78%) | 1.02% | 1.00%(c) | 4.03% | 47% | $530,844 |
| Year Ended 5/31/2021(d) | $12.03 | 12.35% | 1.03% | 1.01%(c) | 4.39% | 58% | $627,451 |
| Year Ended 5/31/2020(d) | $11.19 | 2.82% | 1.04% | 1.03%(c) | 4.86% | 59% | $617,031 |
| Year Ended 5/31/2019(d) | $11.44 | 5.47% | 1.04% | 1.04%(c) | 4.93% | 41% | $692,138 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $10.38 | (0.40%) | 0.80% | 0.75%(c) | 5.40% | 30% | $90,531 |
| Year Ended 5/31/2022 | $11.01 | (4.58%) | 0.77% | 0.75%(c) | 4.29% | 47% | $96,886 |
| Year Ended 5/31/2021(d) | $12.10 | 12.89% | 0.78% | 0.76%(c) | 4.63% | 58% | $102,028 |
| Year Ended 5/31/2020(d) | $11.26 | 3.08% | 0.79% | 0.78%(c) | 5.11% | 59% | $98,512 |
| Year Ended 5/31/2019(d) | $11.50 | 5.36% | 0.79% | 0.79%(c) | 5.17% | 41% | $88,582 |
| Class C | |||||||
| Year Ended 5/31/2023 | $10.26 | (1.37%) | 1.80% | 1.75%(c) | 4.37% | 30% | $10,072 |
| Year Ended 5/31/2022 | $10.88 | (5.54%) | 1.77% | 1.75%(c) | 3.28% | 47% | $14,237 |
| Year Ended 5/31/2021(d) | $11.96 | 11.66% | 1.78% | 1.76%(c) | 3.65% | 58% | $17,974 |
| Year Ended 5/31/2020(d) | $11.13 | 2.03% | 1.79% | 1.78%(c) | 4.12% | 59% | $26,532 |
| Year Ended 5/31/2019(d) | $11.36 | 4.68% | 1.79% | 1.79%(c) | 4.17% | 41% | $34,097 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $10.32 | (0.34%) | 0.80% | 0.75%(c) | 5.38% | 30% | $135,507 |
| Year Ended 5/31/2022 | $10.94 | (4.55%) | 0.77% | 0.75%(c) | 4.28% | 47% | $177,452 |
| Year Ended 5/31/2021(d) | $12.02 | 12.54% | 0.78% | 0.76%(c) | 4.63% | 58% | $191,648 |
| Year Ended 5/31/2020(d) | $11.19 | 3.07% | 0.79% | 0.78%(c) | 5.11% | 59% | $171,521 |
| Year Ended 5/31/2019(d) | $11.43 | 5.73% | 0.79% | 0.79%(c) | 5.17% | 41% | $174,135 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $10.29 | (0.29%) | 0.72% | 0.68% | 5.46% | 30% | $37,596 |
| Year Ended 5/31/2022 | $10.91 | (4.51%) | 0.70% | 0.68% | 4.30% | 47% | $37,114 |
| Year Ended 5/31/2021(d) | $11.99 | 12.74% | 0.71% | 0.69% | 4.70% | 58% | $82,319 |
| Year Ended 5/31/2020(d) | $11.16 | 3.14% | 0.72% | 0.71% | 5.15% | 59% | $95,933 |
| Year Ended 5/31/2019(d) | $11.39 | 5.82% | 0.71% | 0.71% | 5.23% | 41% | $77,805 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 25 |
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 5/31/2023 | $10.93 | 0.57 | (0.61) | (0.04) | (0.58) | — | (0.58) |
| Year Ended 5/31/2022 | $12.01 | 0.52 | (1.03) | (0.51) | (0.53) | (0.04) | (0.57) |
| Year Ended 5/31/2021(d) | $11.17 | 0.55 | 0.86 | 1.41 | (0.57) | — | (0.57) |
| Year Ended 5/31/2020(d) | $11.41 | 0.60 | (0.24) | 0.36 | (0.60) | — | (0.60) |
| Year Ended 5/31/2019(d) | $11.37 | 0.60 | 0.04 | 0.64 | (0.60) | — | (0.60) |
| Class R | |||||||
| Year Ended 5/31/2023 | $10.98 | 0.51 | (0.61) | (0.10) | (0.52) | — | (0.52) |
| Year Ended 5/31/2022 | $12.07 | 0.45 | (1.04) | (0.59) | (0.46) | (0.04) | (0.50) |
| Year Ended 5/31/2021(d) | $11.23 | 0.49 | 0.85 | 1.34 | (0.50) | — | (0.50) |
| Year Ended 5/31/2020(d) | $11.47 | 0.52 | (0.24) | 0.28 | (0.52) | — | (0.52) |
| Year Ended 5/31/2019(d) | $11.43 | 0.52 | 0.04 | 0.56 | (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) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (d) | 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. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 26 | Columbia High Yield Bond Fund | Annual Report 2023 |
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 5/31/2023 | $10.31 | (0.23%) | 0.67% | 0.63% | 5.50% | 30% | $534,874 |
| Year Ended 5/31/2022 | $10.93 | (4.44%) | 0.65% | 0.63% | 4.40% | 47% | $670,696 |
| Year Ended 5/31/2021(d) | $12.01 | 12.99% | 0.67% | 0.64% | 4.70% | 58% | $779,695 |
| Year Ended 5/31/2020(d) | $11.17 | 3.19% | 0.66% | 0.66% | 5.23% | 59% | $323,763 |
| Year Ended 5/31/2019(d) | $11.41 | 5.87% | 0.66% | 0.66% | 5.29% | 41% | $385,410 |
| Class R | |||||||
| Year Ended 5/31/2023 | $10.36 | (0.82%) | 1.30% | 1.25%(c) | 4.89% | 30% | $12,152 |
| Year Ended 5/31/2022 | $10.98 | (5.07%) | 1.27% | 1.25%(c) | 3.79% | 47% | $14,451 |
| Year Ended 5/31/2021(d) | $12.07 | 12.05% | 1.28% | 1.26%(c) | 4.13% | 58% | $15,494 |
| Year Ended 5/31/2020(d) | $11.23 | 2.57% | 1.29% | 1.28%(c) | 4.61% | 59% | $13,930 |
| Year Ended 5/31/2019(d) | $11.47 | 5.21% | 1.29% | 1.29%(c) | 4.68% | 41% | $19,019 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia High Yield Bond Fund | Annual Report 2023 | 27 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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.
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. Class C shares automatically convert to Class A shares after 8 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 based on prices obtained from pricing services, which are intended to reflect 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.
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
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.
| 28 | Columbia High Yield Bond Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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 recorded on the ex-dividend date.
| Columbia High Yield Bond Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
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 in 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.
| 30 | Columbia High Yield Bond Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
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, 2023 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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to
| Columbia High Yield Bond Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
serve as sub-transfer agent. Prior to January 1,
2023, SS&C GIDS was known as DST Asset Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, prior to October 1, 2022, 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 that share class.
For the year ended May 31,
2023, 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 | 0.00 |
| 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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $1,520.
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 $6,096,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
| 32 | Columbia High Yield Bond Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 4.75 | 0.50 - 1.00(a) | 94,163 |
| Class C | — | 1.00(b) | 1,749 |
| (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 classes’ average daily net assets:
| Fee rate(s) contractual September 30, 2023 | |
| Class A | 1.00% |
| Advisor Class | 0.75 |
| Class C | 1.75 |
| Institutional Class | 0.75 |
| Institutional 2 Class | 0.68 |
| Institutional 3 Class | 0.63 |
| Class R | 1.25 |
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, costs associated with shareholder meetings, 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 commitment, prior to October 1, 2022, is the Transfer Agent’s
contractual agreement to limit total transfer agency fees to an annual rate of not more than 0.00% for Institutional 3 Class of the average daily net assets attributable to that 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, principal and/or interest from fixed income securities, defaulted securities/troubled debt, capital loss carryforwards,
trustees’ deferred compensation and 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.
| Columbia High Yield Bond Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 835,005 | (835,005) | — |
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, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 73,699,704 | — | 73,699,704 | 82,105,066 | — | 82,105,066 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 6,845,892 | — | (64,053,128) | (142,021,628) |
At May 31, 2023, 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) ($) | Net unrealized (depreciation) ($) |
| 1,396,755,406 | 2,778,184 | (144,799,812) | (142,021,628) |
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, 2023, 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,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (19,383,845) | (44,669,283) | (64,053,128) | — |
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 $389,284,505 and $535,792,991, respectively, for the year ended May 31, 2023. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
| 34 | Columbia High Yield Bond Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 2,977,778 | 4.34 | 9 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
| Columbia High Yield Bond Fund | Annual Report 2023 | 35 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise. Actions by
governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise 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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market
| 36 | Columbia High Yield Bond Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
disruption caused by the Russian military action,
and any counter-measures or responses thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or
purchaser preferences, cyberattacks and espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include
reduced market liquidity, distress in credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in
certain international markets and/or issuers. These developments and other related events could negatively impact Fund performance.
Shareholder concentration risk
At May 31, 2023, affiliated
shareholders of record owned 65.3% 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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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 High Yield Bond Fund | Annual Report 2023 | 37 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023 and the
financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 by correspondence with the custodian, transfer agent, brokers and agent banks. We
believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 38 | Columbia High Yield Bond Fund | Annual Report 2023 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Section 163(j) Interest Dividends | |
| 99.90% |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Columbia High Yield Bond Fund | Annual Report 2023 | 39 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| 40 | Columbia High Yield Bond Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| Columbia High Yield Bond Fund | Annual Report 2023 | 41 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| 42 | Columbia High Yield Bond Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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 High Yield Bond Fund | Annual Report 2023 | 43 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 44 | Columbia High Yield Bond Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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 High Yield Bond Fund | Annual Report 2023 | 45 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN160_05_N01_(07/23)
Columbia Dividend
Opportunity Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 38 |
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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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
Grace Lee, CAIA
Lead Portfolio Manager
Managed Fund since 2020
Yan Jin
Portfolio Manager
Managed Fund since 2018
David King, 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.
© 2023 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.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
May 31, 2023, Class A shares of Columbia Dividend Opportunity Fund returned -7.70% excluding sales charges. During the same time period, the Fund underperformed its benchmark, the MSCI USA High Dividend Yield Index
(Net), which returned -6.46%, as well as the Russell 1000 Value Index, which returned -4.55%.
Market overview
U.S. equities seesawed through
the 12-month period ending May 31, 2023, struggling to maintain positive momentum despite frequent rallies that brought major benchmarks above break-even. Although investors grappled with a variety of worries, market
trajectory both up and down was driven predominantly by cross currents centered on evolving expectations for inflation and the path of U.S. Federal Reserve (Fed) interest-rate hikes.
Despite the relatively steady pace
of interest rate hikes that began to unfold during the period, sentiment occasionally improved as the period progressed. Positives included hints of so-called “peak inflation” and attractive valuations, as
well as hopes that China’s economy would reopen after an extended zero-COVID-19 lockdown that gummed up global trade and contributed to cost pressures affecting economies worldwide. Better-than-feared earnings
results and guidance helped sentiment, particularly from bellwethers like Alphabet and Microsoft, as well as retailers like Walmart and Target early in the period. But most of the upside was sparked by
investors’ interpretation of Fed Chair Powell’s remarks after the Federal Open Market Committee announced an anticipated 75 basis point rate hike at the end of July 2022. (A basis point is 1/100 of a
percent.) What many seemingly heard were hints that rate hikes would slow in concert with softening economic growth. That takeaway evaporated a month later when Chair Powell spoke at a symposium in Jackson Hole,
Wyoming and prioritized fighting inflation no matter how much pain the economy might suffer. His inflation-fighting resolve was confirmed by an additional 75 basis point hike in September, along with a dot-plot
showing no expectations for rate cuts until 2024.
Equities continued to deliver lumpy
results and briefly turned higher into the start of 2023 as investors yet again seemed comfortable with the notion of a softer landing based on better-than-expected earnings, as well as constructive inflation and
economic data. But that bout of optimism proved short-lived during February 2023, as a blowout January employment report and continued higher-for-longer messaging from the Fed, along with mixed earnings reports and
geopolitical uncertainties, weighed on sentiment. Then in March 2023, banking sector turmoil dominated headlines as two banks failed in quick succession. While intervention to guarantee uninsured deposits and to
provide emergency liquidity helped to limit any broader banking contagion, regional bank stocks still suffered. However, the bank crisis brought with it a rate reprieve and heightened expectations for a Fed pivot,
providing a tailwind for technology and other growth-oriented stocks with future earnings that are made currently more attractive by lower interest rates. Even though the final rate hike of the period on May 3 brought
the target federal funds rate upper bound to 5.25% – a level not seen since mid-2006 – sentiment for high-growth stocks remained intact.
Headwinds swirling throughout the
end of the period included protracted wrangling between the White House and Republican leaders in efforts to raise the debt ceiling and avoid default on U.S. Treasury obligations. Lingering fears of more turmoil in
the banking sector, dampened China reopening momentum and persistent signs of an imminent recession added heft to downside expectations. Better-than-expected first quarter 2023 earnings reports and upbeat guidance
helped offset some of these worries, as did resilient consumer spending and a last-minute agreement in principle on May 27 that would suspend the debt ceiling until January 2025.
Against this backdrop, the
Fund’s benchmark delivered a return of -6.46%, with the consumer discretionary and information technology sectors delivering the only positive sector performance for the benchmark during the period. The
benchmark was weighed down most by the performance of the financials and communication services sectors. Growth stocks, as measured by the Russell 1000 Growth Index, significantly outperformed value stocks, as
measured by the Russell 1000 Value Index. Small-cap stocks, as measured by the Russell 2000 Index, and mid-cap stocks, represented by the Russell Midcap Index, each lost over 4.5%.
The Fund’s notable
detractors during the period
| • | The Fund’s underperformance of its benchmark was driven primarily by sector allocations during the period, most notably overweighted allocations to the financials and energy sectors and an allocation to the real estate sector. |
| • | Selections within the materials and consumer discretionary sectors also weighed on results versus the benchmark. |
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | Individual securities that detracted most from the Fund’s performance relative to the benchmark included Bank of America Corp., real estate investment trusts Crown Castle, Inc. and Medical Properties Trust, Inc., consumer and commercial products manufacturer Newell Brands, Inc. and Canadian fertilizer company Nutrien Ltd. |
| • | The Fund sold its positions in Crown Castle, Medical Properties Trust and Newell Brands during the period. |
The Fund’s notable
contributors during the period
| • | Strong broad-based security selections contributed to Fund performance versus the benchmark, particularly within the financials, energy, health care and information technology sectors. |
| • | Underweighted allocations to the communication services and health care sectors, both of which returned negative performance for the benchmark, also contributed to relative results. |
| • | Individual Fund holdings that contributed most to Fund performance versus the benchmark during the period included energy giant Exxon Mobil Corp., healthcare company CVS Health Corp., financial services company JPMorgan Chase & Co., semiconductor company Intel Corp. and medical device company Medtronic PLC. |
| • | The Fund sold its position in Intel during the period. |
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 2023 |
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 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 Dividend Opportunity Fund | Annual Report 2023 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 9 |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (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, 2023 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, 5.241% | ||||||||
| 3,121,726 | 582,042,590 | (584,854,261) | 4 | 310,059 | 2,978 | 616,052 | 310,214 | |
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:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
| ■ | 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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 94,066,950 | — | — | 94,066,950 |
| Consumer Discretionary | 101,259,200 | — | — | 101,259,200 |
| Consumer Staples | 322,709,260 | — | — | 322,709,260 |
| Energy | 243,714,750 | — | — | 243,714,750 |
| Financials | 406,453,275 | — | — | 406,453,275 |
| Health Care | 355,331,350 | — | — | 355,331,350 |
| Industrials | 120,433,600 | — | — | 120,433,600 |
| Information Technology | 212,059,075 | — | — | 212,059,075 |
| Materials | 41,797,750 | — | — | 41,797,750 |
| Real Estate | 162,261,350 | — | — | 162,261,350 |
| Utilities | 127,966,900 | — | — | 127,966,900 |
| Total Common Stocks | 2,188,053,460 | — | — | 2,188,053,460 |
| Convertible Preferred Stocks | ||||
| Industrials | — | 11,318,251 | — | 11,318,251 |
| Utilities | — | 40,736,050 | — | 40,736,050 |
| Total Convertible Preferred Stocks | — | 52,054,301 | — | 52,054,301 |
| Money Market Funds | 310,059 | — | — | 310,059 |
| Total Investments in Securities | 2,188,363,519 | 52,054,301 | — | 2,240,417,820 |
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 Dividend Opportunity Fund | Annual Report 2023 | 11 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,947,010,282) | $2,240,107,761 |
| Affiliated issuers (cost $310,055) | 310,059 |
| Receivable for: | |
| Investments sold | 21,075,557 |
| Capital shares sold | 596,509 |
| Dividends | 9,815,872 |
| Foreign tax reclaims | 1,465,990 |
| Prepaid expenses | 12,649 |
| Total assets | 2,273,384,397 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 15,049,957 |
| Capital shares purchased | 2,380,757 |
| Management services fees | 39,564 |
| Distribution and/or service fees | 10,869 |
| Transfer agent fees | 212,636 |
| Compensation of board members | 286,204 |
| Other expenses | 57,464 |
| Total liabilities | 18,037,451 |
| Net assets applicable to outstanding capital stock | $2,255,346,946 |
| Represented by | |
| Paid in capital | 1,946,218,111 |
| Total distributable earnings (loss) | 309,128,835 |
| Total - representing net assets applicable to outstanding capital stock | $2,255,346,946 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $1,179,047,058 |
| Shares outstanding | 36,006,467 |
| Net asset value per share | $32.75 |
| 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) | $34.75 |
| Advisor Class | |
| Net assets | $94,217,507 |
| Shares outstanding | 2,794,806 |
| Net asset value per share | $33.71 |
| Class C | |
| Net assets | $80,831,775 |
| Shares outstanding | 2,554,734 |
| Net asset value per share | $31.64 |
| Institutional Class | |
| Net assets | $588,309,784 |
| Shares outstanding | 17,838,338 |
| Net asset value per share | $32.98 |
| Institutional 2 Class | |
| Net assets | $117,286,372 |
| Shares outstanding | 3,543,989 |
| Net asset value per share | $33.09 |
| Institutional 3 Class | |
| Net assets | $158,594,897 |
| Shares outstanding | 4,685,035 |
| Net asset value per share | $33.85 |
| Class R | |
| Net assets | $37,059,553 |
| Shares outstanding | 1,132,439 |
| Net asset value per share | $32.73 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 13 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $94,374,121 |
| Dividends — affiliated issuers | 616,052 |
| Interfund lending | 700 |
| European Union tax reclaim | 294,366 |
| Foreign taxes withheld | (78,112) |
| Total income | 95,207,127 |
| Expenses: | |
| Management services fees | 15,253,316 |
| Distribution and/or service fees | |
| Class A | 3,212,006 |
| Class C | 897,614 |
| Class R | 195,560 |
| Transfer agent fees | |
| Class A | 1,200,838 |
| Advisor Class | 96,995 |
| Class C | 83,902 |
| Institutional Class | 572,672 |
| Institutional 2 Class | 64,545 |
| Institutional 3 Class | 11,906 |
| Class R | 36,564 |
| Compensation of board members | 53,222 |
| Custodian fees | 18,429 |
| Printing and postage fees | 117,216 |
| Registration fees | 145,256 |
| Accounting services fees | 63,630 |
| Legal fees | 44,631 |
| Interest on interfund lending | 330 |
| Compensation of chief compliance officer | 481 |
| Other | 48,014 |
| Total expenses | 22,117,127 |
| Fees waived by transfer agent | |
| Institutional 2 Class | (6,292) |
| Institutional 3 Class | (3,340) |
| Expense reduction | (120) |
| Total net expenses | 22,107,375 |
| Net investment income | 73,099,752 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 6,411,096 |
| Investments — affiliated issuers | 2,978 |
| Foreign currency translations | (1,667) |
| Net realized gain | 6,412,407 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (267,213,969) |
| Investments — affiliated issuers | 4 |
| Foreign currency translations | (6,378) |
| Net change in unrealized appreciation (depreciation) | (267,220,343) |
| Net realized and unrealized loss | (260,807,936) |
| Net decrease in net assets resulting from operations | $(187,708,184) |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $73,099,752 | $67,399,988 |
| Net realized gain | 6,412,407 | 203,391,886 |
| Net change in unrealized appreciation (depreciation) | (267,220,343) | (55,878,231) |
| Net increase (decrease) in net assets resulting from operations | (187,708,184) | 214,913,643 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (97,484,621) | (164,397,027) |
| Advisor Class | (7,839,120) | (12,767,220) |
| Class C | (6,374,852) | (11,089,843) |
| Institutional Class | (47,955,816) | (69,373,878) |
| Institutional 2 Class | (8,679,446) | (16,037,196) |
| Institutional 3 Class | (13,987,462) | (18,019,787) |
| Class R | (2,851,861) | (4,652,665) |
| Total distributions to shareholders | (185,173,178) | (296,337,616) |
| Increase in net assets from capital stock activity | 121,884,398 | 107,105,162 |
| Total increase (decrease) in net assets | (250,996,964) | 25,681,189 |
| Net assets at beginning of year | 2,506,343,910 | 2,480,662,721 |
| Net assets at end of year | $2,255,346,946 | $2,506,343,910 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 15 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 2,602,188 | 91,965,188 | 2,227,538 | 85,824,916 |
| Distributions reinvested | 2,717,498 | 95,309,534 | 4,319,885 | 160,563,998 |
| Redemptions | (5,660,192) | (198,426,011) | (4,740,677) | (184,402,807) |
| Net increase (decrease) | (340,506) | (11,151,289) | 1,806,746 | 61,986,107 |
| Advisor Class | ||||
| Subscriptions | 723,968 | 26,284,348 | 660,642 | 26,112,531 |
| Distributions reinvested | 216,769 | 7,810,840 | 333,065 | 12,711,577 |
| Redemptions | (1,036,445) | (37,023,294) | (774,394) | (31,055,700) |
| Net increase (decrease) | (95,708) | (2,928,106) | 219,313 | 7,768,408 |
| Class C | ||||
| Subscriptions | 661,727 | 22,773,103 | 605,451 | 22,724,414 |
| Distributions reinvested | 185,546 | 6,314,487 | 301,735 | 10,863,141 |
| Redemptions | (845,993) | (28,656,405) | (1,050,865) | (39,545,239) |
| Net increase (decrease) | 1,280 | 431,185 | (143,679) | (5,957,684) |
| Institutional Class | ||||
| Subscriptions | 5,208,749 | 185,738,456 | 3,536,655 | 137,420,967 |
| Distributions reinvested | 1,281,313 | 45,197,406 | 1,733,429 | 64,857,694 |
| Redemptions | (4,151,743) | (145,777,039) | (4,048,659) | (159,221,847) |
| Net increase | 2,338,319 | 85,158,823 | 1,221,425 | 43,056,814 |
| Institutional 2 Class | ||||
| Subscriptions | 1,143,181 | 40,246,582 | 581,309 | 22,838,793 |
| Distributions reinvested | 210,381 | 7,444,413 | 365,385 | 13,710,246 |
| Redemptions | (995,202) | (35,390,328) | (1,115,634) | (43,565,011) |
| Net increase (decrease) | 358,360 | 12,300,667 | (168,940) | (7,015,972) |
| Institutional 3 Class | ||||
| Subscriptions | 2,720,494 | 97,575,046 | 996,555 | 39,704,663 |
| Distributions reinvested | 363,220 | 13,158,018 | 438,620 | 16,801,049 |
| Redemptions | (2,102,212) | (75,719,910) | (1,280,795) | (50,753,698) |
| Net increase | 981,502 | 35,013,154 | 154,380 | 5,752,014 |
| Class R | ||||
| Subscriptions | 209,357 | 7,394,455 | 109,885 | 4,223,855 |
| Distributions reinvested | 81,046 | 2,843,366 | 124,613 | 4,628,174 |
| Redemptions | (206,025) | (7,177,857) | (189,210) | (7,336,554) |
| Net increase | 84,378 | 3,059,964 | 45,288 | 1,515,475 |
| Total net increase | 3,327,625 | 121,884,398 | 3,134,533 | 107,105,162 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
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 ratios of expenses and net investment income are 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 5/31/2023 | $38.28 | 1.04(c) | (3.86) | (2.82) | (1.02) | (1.69) | (2.71) |
| Year Ended 5/31/2022 | $39.82 | 1.04 | 2.32 | 3.36 | (1.05) | (3.85) | (4.90) |
| Year Ended 5/31/2021(f) | $30.78 | 1.01 | 9.43 | 10.44 | (1.12) | (0.28) | (1.40) |
| Year Ended 5/31/2020(f) | $35.23 | 1.20 | (1.17) | 0.03 | (1.12) | (3.36) | (4.48) |
| Year Ended 5/31/2019(f) | $38.24 | 1.08 | 0.15 | 1.23 | (1.24) | (3.00) | (4.24) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $39.33 | 1.16(c) | (3.97) | (2.81) | (1.12) | (1.69) | (2.81) |
| Year Ended 5/31/2022 | $40.78 | 1.17 | 2.38 | 3.55 | (1.15) | (3.85) | (5.00) |
| Year Ended 5/31/2021(f) | $31.49 | 1.12 | 9.65 | 10.77 | (1.20) | (0.28) | (1.48) |
| Year Ended 5/31/2020(f) | $35.96 | 1.32 | (1.23) | 0.09 | (1.20) | (3.36) | (4.56) |
| Year Ended 5/31/2019(f) | $38.94 | 1.20 | 0.14 | 1.34 | (1.32) | (3.00) | (4.32) |
| Class C | |||||||
| Year Ended 5/31/2023 | $37.06 | 0.75(c) | (3.73) | (2.98) | (0.75) | (1.69) | (2.44) |
| Year Ended 5/31/2022 | $38.69 | 0.72 | 2.25 | 2.97 | (0.75) | (3.85) | (4.60) |
| Year Ended 5/31/2021(f) | $29.93 | 0.74 | 9.18 | 9.92 | (0.88) | (0.28) | (1.16) |
| Year Ended 5/31/2020(f) | $34.34 | 0.92 | (1.13) | (0.21) | (0.84) | (3.36) | (4.20) |
| Year Ended 5/31/2019(f) | $37.37 | 0.80 | 0.13 | 0.93 | (0.96) | (3.00) | (3.96) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $38.54 | 1.13(c) | (3.88) | (2.75) | (1.12) | (1.69) | (2.81) |
| Year Ended 5/31/2022 | $40.06 | 1.15 | 2.33 | 3.48 | (1.15) | (3.85) | (5.00) |
| Year Ended 5/31/2021(f) | $30.95 | 1.10 | 9.49 | 10.59 | (1.20) | (0.28) | (1.48) |
| Year Ended 5/31/2020(f) | $35.42 | 1.28 | (1.19) | 0.09 | (1.20) | (3.36) | (4.56) |
| Year Ended 5/31/2019(f) | $38.42 | 1.20 | 0.12 | 1.32 | (1.32) | (3.00) | (4.32) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $38.66 | 1.15(c) | (3.90) | (2.75) | (1.13) | (1.69) | (2.82) |
| Year Ended 5/31/2022 | $40.18 | 1.17 | 2.33 | 3.50 | (1.17) | (3.85) | (5.02) |
| Year Ended 5/31/2021(f) | $31.04 | 1.12 | 9.52 | 10.64 | (1.22) | (0.28) | (1.50) |
| Year Ended 5/31/2020(f) | $35.50 | 1.32 | (1.18) | 0.14 | (1.24) | (3.36) | (4.60) |
| Year Ended 5/31/2019(f) | $38.49 | 1.20 | 0.17 | 1.37 | (1.36) | (3.00) | (4.36) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
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 5/31/2023 | $32.75 | (7.70%) | 1.00%(d) | 1.00%(d),(e) | 2.95%(c) | 52% | $1,179,047 |
| Year Ended 5/31/2022 | $38.28 | 9.04% | 0.99%(d) | 0.99%(d),(e) | 2.64% | 41% | $1,391,270 |
| Year Ended 5/31/2021(f) | $39.82 | 34.85% | 1.01% | 1.01%(e) | 2.98% | 51% | $1,375,445 |
| Year Ended 5/31/2020(f) | $30.78 | (0.90%) | 1.00% | 1.00%(e) | 3.44% | 47% | $1,179,625 |
| Year Ended 5/31/2019(f) | $35.23 | 3.47% | 0.99% | 0.99%(e) | 2.92% | 66% | $1,424,224 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $33.71 | (7.49%) | 0.75%(d) | 0.75%(d),(e) | 3.20%(c) | 52% | $94,218 |
| Year Ended 5/31/2022 | $39.33 | 9.32% | 0.74%(d) | 0.74%(d),(e) | 2.89% | 41% | $113,675 |
| Year Ended 5/31/2021(f) | $40.78 | 35.31% | 0.76% | 0.76%(e) | 3.23% | 51% | $108,945 |
| Year Ended 5/31/2020(f) | $31.49 | (0.74%) | 0.75% | 0.75%(e) | 3.72% | 47% | $79,477 |
| Year Ended 5/31/2019(f) | $35.96 | 3.77% | 0.74% | 0.74%(e) | 3.18% | 66% | $82,497 |
| Class C | |||||||
| Year Ended 5/31/2023 | $31.64 | (8.41%) | 1.75%(d) | 1.75%(d),(e) | 2.20%(c) | 52% | $80,832 |
| Year Ended 5/31/2022 | $37.06 | 8.21% | 1.74%(d) | 1.74%(d),(e) | 1.89% | 41% | $94,620 |
| Year Ended 5/31/2021(f) | $38.69 | 34.05% | 1.76% | 1.76%(e) | 2.26% | 51% | $104,339 |
| Year Ended 5/31/2020(f) | $29.93 | (1.67%) | 1.75% | 1.75%(e) | 2.68% | 47% | $163,439 |
| Year Ended 5/31/2019(f) | $34.34 | 2.64% | 1.74% | 1.74%(e) | 2.18% | 66% | $219,222 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $32.98 | (7.48%) | 0.75%(d) | 0.75%(d),(e) | 3.20%(c) | 52% | $588,310 |
| Year Ended 5/31/2022 | $38.54 | 9.32% | 0.74%(d) | 0.74%(d),(e) | 2.89% | 41% | $597,311 |
| Year Ended 5/31/2021(f) | $40.06 | 35.26% | 0.76% | 0.76%(e) | 3.23% | 51% | $572,007 |
| Year Ended 5/31/2020(f) | $30.95 | (0.63%) | 0.75% | 0.75%(e) | 3.68% | 47% | $510,928 |
| Year Ended 5/31/2019(f) | $35.42 | 3.71% | 0.74% | 0.74%(e) | 3.18% | 66% | $647,702 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $33.09 | (7.44%) | 0.71%(d) | 0.70%(d) | 3.24%(c) | 52% | $117,286 |
| Year Ended 5/31/2022 | $38.66 | 9.35% | 0.70%(d) | 0.69%(d) | 2.94% | 41% | $123,165 |
| Year Ended 5/31/2021(f) | $40.18 | 35.37% | 0.72% | 0.71% | 3.29% | 51% | $134,775 |
| Year Ended 5/31/2020(f) | $31.04 | (0.69%) | 0.71% | 0.70% | 3.76% | 47% | $112,602 |
| Year Ended 5/31/2019(f) | $35.50 | 3.87% | 0.70% | 0.69% | 3.22% | 66% | $116,907 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 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 5/31/2023 | $39.48 | 1.20(c) | (3.99) | (2.79) | (1.15) | (1.69) | (2.84) |
| Year Ended 5/31/2022 | $40.92 | 1.21 | 2.39 | 3.60 | (1.19) | (3.85) | (5.04) |
| Year Ended 5/31/2021(f) | $31.59 | 1.16 | 9.68 | 10.84 | (1.23) | (0.28) | (1.51) |
| Year Ended 5/31/2020(f) | $36.06 | 1.36 | (1.23) | 0.13 | (1.24) | (3.36) | (4.60) |
| Year Ended 5/31/2019(f) | $39.03 | 1.24 | 0.15 | 1.39 | (1.36) | (3.00) | (4.36) |
| Class R | |||||||
| Year Ended 5/31/2023 | $38.25 | 0.95(c) | (3.85) | (2.90) | (0.93) | (1.69) | (2.62) |
| Year Ended 5/31/2022 | $39.79 | 0.94 | 2.32 | 3.26 | (0.95) | (3.85) | (4.80) |
| Year Ended 5/31/2021(f) | $30.76 | 0.92 | 9.43 | 10.35 | (1.04) | (0.28) | (1.32) |
| Year Ended 5/31/2020(f) | $35.20 | 1.12 | (1.16) | (0.04) | (1.04) | (3.36) | (4.40) |
| Year Ended 5/31/2019(f) | $38.20 | 1.00 | 0.12 | 1.12 | (1.12) | (3.00) | (4.12) |
| 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 European Union tax reclaims which amounted to less than $0.01 per share. Excluding this amount, the ratio of net investment income to average net assets would have been lower by 0.01%. |
| (d) | Ratios include interfund lending expense which is less than 0.01%. |
| (e) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (f) | 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. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
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 5/31/2023 | $33.85 | (7.41%) | 0.66%(d) | 0.66%(d) | 3.30%(c) | 52% | $158,595 |
| Year Ended 5/31/2022 | $39.48 | 9.42% | 0.65%(d) | 0.65%(d) | 2.97% | 41% | $146,214 |
| Year Ended 5/31/2021(f) | $40.92 | 35.36% | 0.67% | 0.66% | 3.33% | 51% | $145,247 |
| Year Ended 5/31/2020(f) | $31.59 | (0.63%) | 0.66% | 0.65% | 3.83% | 47% | $112,370 |
| Year Ended 5/31/2019(f) | $36.06 | 3.87% | 0.65% | 0.64% | 3.28% | 66% | $112,951 |
| Class R | |||||||
| Year Ended 5/31/2023 | $32.73 | (7.93%) | 1.25%(d) | 1.25%(d),(e) | 2.70%(c) | 52% | $37,060 |
| Year Ended 5/31/2022 | $38.25 | 8.76% | 1.24%(d) | 1.24%(d),(e) | 2.39% | 41% | $40,089 |
| Year Ended 5/31/2021(f) | $39.79 | 34.60% | 1.26% | 1.26%(e) | 2.73% | 51% | $39,905 |
| Year Ended 5/31/2020(f) | $30.76 | (1.19%) | 1.25% | 1.25%(e) | 3.21% | 47% | $33,516 |
| Year Ended 5/31/2019(f) | $35.20 | 3.21% | 1.24% | 1.24%(e) | 2.67% | 66% | $38,093 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 21 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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.
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. Class C shares automatically convert to Class A shares after 8 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 price 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 ask 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 price 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 approved 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.
| 22 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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
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.
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 in the Statement of Assets and Liabilities.
The Fund may file withholding tax
reclaims in certain European Union countries to recover a portion of foreign taxes previously withheld on dividends earned, which may be reclaimable based upon certain provisions in the Treaty on the Functioning of
the European Union (EU) and subsequent rulings by the European Court of Justice. The Fund may record a reclaim receivable when the amount is known, the Fund has received notice of a pending refund, and there are no
significant uncertainties on collectability. Income received from EU reclaims is included in the Statement of Operations.
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
| 24 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, prior to October 1, 2022, Institutional 2 Class shares were subject
to a contractual transfer agency fee annual limitation of not more than 0.04% 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 2023 | 25 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
For the year ended May 31,
2023, 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 | 0.05 |
| 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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $120.
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 $836,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 771,588 |
| Class C | — | 1.00(b) | 7,020 |
| (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 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 classes’ 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, costs associated with shareholder meetings, 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 commitment, prior to October 1, 2022, 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. 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, investments in certain convertible securities, trustees’ deferred compensation, foreign currency transactions,
re-characterization of distributions for investments 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 ($) | Paid in capital ($) |
| 10,154 | 58,445 | (68,599) |
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 2023 | 27 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 71,050,612 | 114,122,566 | 185,173,178 | 66,305,482 | 230,032,134 | 296,337,616 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 12,703,759 | 10,733,285 | — | 286,068,891 |
At May 31, 2023, 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) ($) | Net unrealized appreciation ($) |
| 1,954,348,929 | 408,342,518 | (122,273,627) | 286,068,891 |
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 $1,252,253,799 and $1,239,309,206, respectively, for the year ended May 31, 2023. 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 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 480,000 | 4.71 | 5 |
| Lender | 3,500,000 | 3.60 | 2 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
Note 9. Significant
risks
Market 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
sanctions, a downgrade in the country’s
credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and espionage) could have severe adverse impacts on regional and/or global securities
and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in credit markets, further disruption of global supply chains, increased risk of
inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or issuers. These developments and other related events could negatively impact Fund
performance.
Shareholder concentration risk
At May 31, 2023, affiliated
shareholders of record owned 53.1% 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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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 2023 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023 and the
financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 by correspondence with the custodian, transfer agent and brokers. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 21, 2023
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 2023 | 31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Qualified dividend income | Dividends received deduction | Capital gain dividend |
| 100.00% | 100.00% | $11,460,465 |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| 32 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 33 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| 34 | Columbia Dividend Opportunity Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 35 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Dividend Opportunity Fund | Annual Report 2023 | 37 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN140_05_N01_(07/23)
Columbia Seligman
Technology and Information Fund
Not FDIC or NCUA 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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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 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.
© 2023 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.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
May 31, 2023, Class A shares of Columbia Seligman Technology and Information Fund returned 3.29% excluding sales charges. The Fund underperformed its benchmark, the S&P North American Technology Sector Index,
which returned 14.21% for the same time period.
Market overview
U.S. equities seesawed through
the 12-month period ending May 31, 2023, struggling to maintain positive momentum despite frequent rallies that brought major benchmarks above break-even. Although investors grappled with a variety of worries, market
trajectory both up and down was driven predominantly by cross currents centered on evolving expectations for inflation and the path of U.S. Federal Reserve (Fed) interest-rate hikes.
Despite the relatively steady pace
of interest rate hikes that unfolded during the period, sentiment occasionally did improve as the period progressed. Positives included hints of so-called “peak inflation” and attractive valuations,
as well as hopes that China’s economy would reopen after an extended zero-COVID-19 lockdown that gummed up global trade and contributed to cost pressures affecting economies worldwide. Most of the upside was
sparked by investors’ interpretation of Fed Chair Powell’s remarks after the Federal Open Market Committee announced an anticipated 75 basis point rate hike at the end of July 2022. (A basis point is
1/100 of a percent.) What many seemingly heard were hints that rate hikes would slow in concert with softening economic growth. That takeaway evaporated a month later when Powell spoke at a symposium in Jackson Hole,
Wyoming and prioritized fighting inflation no matter how much pain the economy might suffer. His inflation-fighting resolve was confirmed by an additional 75 basis point hike in September, along with a dot-plot
showing no expectations for rate cuts until 2024.
Equities continued to deliver lumpy
results and briefly turned higher into the start of 2023 as investors yet again seemed comfortable with the notion of a softer landing, based on better-than-expected earnings, as well as constructive inflation and
economic data. But that bout of optimism proved short-lived during February 2023, as a blowout January employment report and continued higher-for-longer messaging from the Fed, along with mixed earnings reports and
geopolitical uncertainties, weighed on sentiment. Then in March, banking sector turmoil dominated headlines as two banks failed quickly. While intervention to guarantee uninsured deposits and to provide emergency
liquidity helped to limit any broader banking contagion, regional bank stocks still suffered. However, the bank crisis brought with it a rate reprieve and heightened expectations for a Fed pivot, providing a tailwind
for technology and other growth-oriented stocks with future earnings that are made currently more attractive by lower interest rates. Even though the final rate hike of the period on May 3 brought the target federal
funds rate upper bound to 5.25% – a level not seen since mid-2006 – sentiment for high-growth stocks remained intact.
Headwinds swirling throughout the
end of the period included protracted wrangling between the White House and Republican leaders in efforts to raise the debt ceiling and avoid default on U.S. Treasury obligations. Lingering fears of more turmoil in
the banking sector, dampened China reopening momentum and persistent signs of an imminent recession added heft to downside expectations. Better-than-expected first quarter 2023 earnings reports and upbeat guidance
helped offset some of these worries, as did resilient consumer spending and a last-minute agreement in principle on May 27 that would suspend the debt ceiling until January 2025.
Technology stocks and the broad
market indices rebounded in January 2023 and through the end of the reporting period, as the December/January quarter earnings and guidance for many companies was somewhat better than feared. The IPO drought
continued, while a few technology companies agreed to be acquired by strategic players or private equity firms. At the same time, share repurchase activity continued at a strong pace, leading to a favorable
supply/demand picture for the broad stock market.
Within the benchmark S&P North
American Technology Sector Index, performance was led by the information technology sector, particularly the semiconductor, software, communications equipment and technology hardware industries. The health care,
industrials and financials sectors returned negative performance for the benchmark. Mid-period, transaction and payment processing companies were reclassified within the benchmark and moved from the information
technology sector to the financials sector.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
The Fund’s notable
detractors during the period
| • | The Fund’s underperformance, relative to the benchmark, was due to stock selection, particularly within semiconductors, technology hardware and communications equipment. |
| • | Selections within the communication services sector also weighed on performance. |
| • | Individual securities that detracted most from relative performance during the period included semiconductor companies NVIDIA Corp., Synaptics, Inc. and Teradyne, Inc., technology hardware company Western Digital Corp. and fuel cell technology company Bloom Energy Corp. |
| • | The Fund did not own NVIDIA for much of the period on valuation concerns and missed out on the company’s significant rise in stock price. |
| • | Not owning Meta Platforms, Inc. hurt relative performance. |
The Fund’s notable
contributors during the period
| • | Allocations were positive, relative to the benchmark, during the period. An overweighted allocation to semiconductors and an underweighted allocation to the financials and consumer discretionary sectors were most beneficial during the 12-month period. |
| • | Selections within the electronic equipment and software industries contributed, relative to the benchmark. |
| • | Top individual contributors included application software company Synopsis, Inc. and semiconductor companies Rambus, Inc., Broadcom, Inc. and Renesas Electronics Corp. |
| • | Not owning Amazon.com contributed, as did relative underweights in the poorly performing chip companies Intel Corp. and QUALCOMM. Inc. The Fund sold its positions in Intel and QUALCOMM. |
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 2023 |
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 Seligman Technology and Information Fund | Annual Report 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 Seligman Technology and Information Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| Money Market Funds 1.5% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 5.241%(f),(h) | 137,095,672 | 137,027,124 |
| Total Money Market Funds (Cost: $137,024,883) | 137,027,124 | |
| Total Investments in Securities (Cost $5,135,103,712) | 9,546,407,334 | |
| Other Assets & Liabilities, Net | 40,721,035 | |
| Net Assets | $9,587,128,369 | |
At May 31, 2023, securities and/or
cash totaling $156,511,725 were pledged as collateral.
Investments in derivatives
Notes to Portfolio of
Investments
| (a) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (b) | Non-income producing investment. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2023, the total value of these securities amounted to $29,789,795, which represents 0.31% 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 approved by the Fund’s Board of Trustees. At May 31, 2023, the total market value of these securities amounted to $29,789,795, which represents 0.31% of total net assets. Additional information on these securities is as follows: |
| Security | Acquisition Dates | Shares | Cost ($) | Value ($) |
| Apnimed, Inc. | 04/28/2022 | 360,327 | 4,002,965 | 3,999,990 |
| Apnimed, Inc. | 12/22/2022 | 450,409 | 5,005,765 | 4,999,990 |
| Apnimed, Inc. | 04/28/2022 | 675,613 | 5,999,993 | 7,499,980 |
| Apnimed, Inc. | 03/12/2021 | 1,127,586 | 9,999,997 | 12,517,332 |
| CommonBond LLC | 10/15/2020-12/31/2021 | 686,561 | 295,734 | 1 |
| CommonBond, Class A | 03/19/2018-12/31/2021 | 1,505,550 | 10,292,674 | 2 |
| Movella, Inc. | 03/08/2022 | 3,000,000 | 3,000,000 | 772,500 |
| 38,597,128 | 29,789,795 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 10 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Notes to Portfolio of Investments (continued)
| (e) | Valuation based on significant unobservable inputs. |
| (f) | 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, 2023 are as follows: |
| * | Includes the effects of a corporate action. |
| † | Issuer was not an affiliate at the end of period. |
| (g) | Perpetual security with no specified maturity date. |
| (h) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
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 Financial Statements are
an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
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.
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 1,043,335,648 | — | — | 1,043,335,648 |
| Consumer Discretionary | 165,634,765 | — | — | 165,634,765 |
| Financials | 417,559,914 | — | 2 | 417,559,916 |
| Health Care | 2,597,448 | — | 29,017,292 | 31,614,740 |
| Industrials | 193,545,859 | — | — | 193,545,859 |
| Information Technology | 7,360,892,995 | 185,556,851 | — | 7,546,449,846 |
| Total Common Stocks | 9,183,566,629 | 185,556,851 | 29,017,294 | 9,398,140,774 |
| Convertible Bonds | — | — | 772,500 | 772,500 |
| Exchange-Traded Equity Funds | 10,466,935 | — | — | 10,466,935 |
| Preferred Stocks | ||||
| Financials | — | — | 1 | 1 |
| Total Preferred Stocks | — | — | 1 | 1 |
| Money Market Funds | 137,027,124 | — | — | 137,027,124 |
| Total Investments in Securities | 9,331,060,688 | 185,556,851 | 29,789,795 | 9,546,407,334 |
| Investments in Derivatives | ||||
| Liability | ||||
| Call Option Contracts Written | (7,174,920) | — | — | (7,174,920) |
| Total | 9,323,885,768 | 185,556,851 | 29,789,795 | 9,539,232,414 |
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 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $4,501,549,727) | $8,867,339,968 |
| Affiliated issuers (cost $633,553,985) | 679,067,366 |
| Cash | 157,920 |
| Receivable for: | |
| Investments sold | 34,866,494 |
| Capital shares sold | 18,414,115 |
| Dividends | 7,009,595 |
| Interest | 221,500 |
| Foreign tax reclaims | 133,051 |
| Expense reimbursement due from Investment Manager | 219 |
| Prepaid expenses | 41,616 |
| Total assets | 9,607,251,844 |
| Liabilities | |
| Option contracts written, at value (premiums received $4,617,376) | 7,174,920 |
| Payable for: | |
| Investments purchased | 2,950,349 |
| Capital shares purchased | 8,409,586 |
| Management services fees | 220,163 |
| Distribution and/or service fees | 51,736 |
| Transfer agent fees | 802,259 |
| Compensation of board members | 373,961 |
| Other expenses | 140,501 |
| Total liabilities | 20,123,475 |
| Net assets applicable to outstanding capital stock | $9,587,128,369 |
| Represented by | |
| Paid in capital | 4,977,461,733 |
| Total distributable earnings (loss) | 4,609,666,636 |
| Total - representing net assets applicable to outstanding capital stock | $9,587,128,369 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 13 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $6,081,864,940 |
| Shares outstanding | 61,086,682 |
| Net asset value per share | $99.56 |
| 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) | $105.63 |
| Advisor Class | |
| Net assets | $352,599,425 |
| Shares outstanding | 3,706,494 |
| Net asset value per share | $95.13 |
| Class C | |
| Net assets | $312,209,850 |
| Shares outstanding | 6,619,834 |
| Net asset value per share | $47.16 |
| Institutional Class | |
| Net assets | $2,139,513,406 |
| Shares outstanding | 18,545,369 |
| Net asset value per share | $115.37 |
| Institutional 2 Class | |
| Net assets | $453,797,484 |
| Shares outstanding | 3,902,871 |
| Net asset value per share | $116.27 |
| Institutional 3 Class | |
| Net assets | $178,005,165 |
| Shares outstanding | 1,548,815 |
| Net asset value per share | $114.93 |
| Class R | |
| Net assets | $69,138,099 |
| Shares outstanding | 760,577 |
| Net asset value per share | $90.90 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $73,214,393 |
| Dividends — affiliated issuers | 6,111,728 |
| Interest | 180,000 |
| Interfund lending | 771 |
| Foreign taxes withheld | (667,374) |
| Total income | 78,839,518 |
| Expenses: | |
| Management services fees | 72,142,701 |
| Distribution and/or service fees | |
| Class A | 14,113,967 |
| Class C | 3,018,228 |
| Class R | 321,630 |
| Transfer agent fees | |
| Class A | 5,304,348 |
| Advisor Class | 287,477 |
| Class C | 283,512 |
| Institutional Class | 1,697,612 |
| Institutional 2 Class | 197,159 |
| Institutional 3 Class | 9,146 |
| Class R | 60,423 |
| Compensation of board members | 155,402 |
| Custodian fees | 50,695 |
| Printing and postage fees | 284,080 |
| Registration fees | 236,319 |
| Accounting services fees | 31,491 |
| Legal fees | 131,023 |
| Compensation of chief compliance officer | 1,571 |
| Other | 342,167 |
| Total expenses | 98,668,951 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (63,070) |
| Expense reduction | (4,852) |
| Total net expenses | 98,601,029 |
| Net investment loss | (19,761,511) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 288,535,231 |
| Investments — affiliated issuers | (65,411,190) |
| Foreign currency translations | (162,916) |
| Option contracts written | 1,853,869 |
| Net realized gain | 224,814,994 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 219,213,928 |
| Investments — affiliated issuers | (154,455,689) |
| Foreign currency translations | (579) |
| Option contracts written | (2,625,118) |
| Net change in unrealized appreciation (depreciation) | 62,132,542 |
| Net realized and unrealized gain | 286,947,536 |
| Net increase in net assets resulting from operations | $267,186,025 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 15 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment loss | $(19,761,511) | $(37,890,200) |
| Net realized gain | 224,814,994 | 1,086,869,313 |
| Net change in unrealized appreciation (depreciation) | 62,132,542 | (1,347,230,669) |
| Net increase (decrease) in net assets resulting from operations | 267,186,025 | (298,251,556) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (453,179,179) | (866,441,965) |
| Advisor Class | (25,065,096) | (43,557,391) |
| Class C | (46,498,959) | (83,396,546) |
| Institutional Class | (124,458,388) | (230,885,422) |
| Institutional 2 Class | (23,370,655) | (37,204,174) |
| Institutional 3 Class | (9,307,487) | (14,971,365) |
| Class R | (5,573,671) | (11,285,269) |
| Total distributions to shareholders | (687,453,435) | (1,287,742,132) |
| Increase in net assets from capital stock activity | 459,731,892 | 763,941,568 |
| Total increase (decrease) in net assets | 39,464,482 | (822,052,120) |
| Net assets at beginning of year | 9,547,663,887 | 10,369,716,007 |
| Net assets at end of year | $9,587,128,369 | $9,547,663,887 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 2,436,833 | 223,788,050 | 2,724,048 | 333,312,923 |
| Distributions reinvested | 4,798,848 | 413,372,766 | 6,190,765 | 789,879,698 |
| Redemptions | (6,844,105) | (625,242,591) | (6,441,394) | (777,124,975) |
| Net increase | 391,576 | 11,918,225 | 2,473,419 | 346,067,646 |
| Advisor Class | ||||
| Subscriptions | 1,117,877 | 98,976,421 | 1,049,902 | 122,233,718 |
| Distributions reinvested | 261,031 | 21,456,743 | 302,755 | 36,917,944 |
| Redemptions | (970,841) | (84,711,434) | (774,015) | (88,067,650) |
| Net increase | 408,067 | 35,721,730 | 578,642 | 71,084,012 |
| Class C | ||||
| Subscriptions | 927,383 | 41,731,245 | 699,676 | 46,253,388 |
| Distributions reinvested | 1,096,979 | 44,921,299 | 1,201,664 | 80,090,877 |
| Redemptions | (1,975,128) | (88,415,455) | (1,346,988) | (86,867,002) |
| Net increase (decrease) | 49,234 | (1,762,911) | 554,352 | 39,477,263 |
| Institutional Class | ||||
| Subscriptions | 5,016,960 | 532,801,222 | 2,802,246 | 388,214,158 |
| Distributions reinvested | 1,072,702 | 106,937,677 | 1,358,568 | 197,875,363 |
| Redemptions | (3,560,660) | (373,908,846) | (2,938,574) | (400,842,921) |
| Net increase | 2,529,002 | 265,830,053 | 1,222,240 | 185,246,600 |
| Institutional 2 Class | ||||
| Subscriptions | 1,676,583 | 179,430,642 | 940,648 | 130,422,369 |
| Distributions reinvested | 231,633 | 23,269,887 | 252,690 | 37,054,467 |
| Redemptions | (915,061) | (95,793,053) | (609,010) | (82,835,539) |
| Net increase | 993,155 | 106,907,476 | 584,328 | 84,641,297 |
| Institutional 3 Class | ||||
| Subscriptions | 609,711 | 64,108,609 | 479,084 | 67,810,180 |
| Distributions reinvested | 84,793 | 8,417,390 | 92,198 | 13,365,074 |
| Redemptions | (282,124) | (30,322,778) | (278,716) | (37,504,702) |
| Net increase | 412,380 | 42,203,221 | 292,566 | 43,670,552 |
| Class R | ||||
| Subscriptions | 116,210 | 9,864,917 | 141,187 | 16,209,102 |
| Distributions reinvested | 70,497 | 5,550,945 | 94,447 | 11,127,750 |
| Redemptions | (194,536) | (16,501,764) | (293,092) | (33,582,654) |
| Net decrease | (7,829) | (1,085,902) | (57,458) | (6,245,802) |
| Total net increase | 4,775,585 | 459,731,892 | 5,648,089 | 763,941,568 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 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 ratios of expenses and net investment income are 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 5/31/2023 | $105.00 | (0.26) | 2.52 | 2.26 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $121.58 | (0.48) | (0.88) | (1.36) | — | (15.22) | (15.22) |
| 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) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $100.47 | (0.03) | 2.39 | 2.36 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $116.88 | (0.17) | (0.72) | (0.89) | — | (15.52) | (15.52) |
| 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) |
| Class C | |||||||
| Year Ended 5/31/2023 | $54.65 | (0.47) | 0.68 | 0.21 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $69.20 | (0.76) | 0.51(g) | (0.25) | — | (14.30) | (14.30) |
| 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) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $120.01 | (0.03) | 3.09 | 3.06 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $137.04 | (0.20) | (1.31) | (1.51) | — | (15.52) | (15.52) |
| 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) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $120.85 | 0.01 | 3.11 | 3.12 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $137.89 | (0.16) | (1.31) | (1.47) | — | (15.57) | (15.57) |
| 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) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
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 5/31/2023 | $99.56 | 3.29% | 1.20% | 1.20%(c) | (0.28%) | 13% | $6,081,865 |
| Year Ended 5/31/2022 | $105.00 | (3.34%) | 1.17%(d) | 1.17%(c),(d) | (0.39%) | 16% | $6,373,137 |
| Year Ended 5/31/2021 | $121.58 | 70.10% | 1.20%(d) | 1.20%(c),(d) | (0.19%) | 32% | $7,078,794 |
| Year Ended 5/31/2020 | $79.11 | 31.36% | 1.23%(d),(f) | 1.23%(c),(d),(f) | 0.54% | 37% | $4,506,828 |
| Year Ended 5/31/2019 | $67.52 | (1.50%) | 1.25%(d) | 1.24%(c),(d) | (0.05%) | 37% | $3,759,214 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $95.13 | 3.55% | 0.95% | 0.95%(c) | (0.03%) | 13% | $352,599 |
| Year Ended 5/31/2022 | $100.47 | (3.10%) | 0.93%(d) | 0.93%(c),(d) | (0.14%) | 16% | $331,400 |
| Year Ended 5/31/2021 | $116.88 | 70.53% | 0.95%(d) | 0.95%(c),(d) | 0.06% | 32% | $317,883 |
| Year Ended 5/31/2020 | $76.31 | 31.69% | 0.98%(d),(f) | 0.98%(c),(d),(f) | 0.79% | 37% | $190,471 |
| Year Ended 5/31/2019 | $65.38 | (1.26%) | 0.99%(d) | 0.99%(c),(d) | 0.21% | 37% | $143,228 |
| Class C | |||||||
| Year Ended 5/31/2023 | $47.16 | 2.52% | 1.95% | 1.95%(c) | (1.03%) | 13% | $312,210 |
| Year Ended 5/31/2022 | $54.65 | (4.08%) | 1.92%(d) | 1.92%(c),(d) | (1.14%) | 16% | $359,106 |
| Year Ended 5/31/2021 | $69.20 | 68.85% | 1.94%(d) | 1.94%(c),(d) | (0.96%) | 32% | $416,301 |
| Year Ended 5/31/2020 | $48.21 | 30.39% | 1.98%(d),(f) | 1.98%(c),(d),(f) | (0.22%) | 37% | $339,268 |
| Year Ended 5/31/2019 | $43.98 | (2.23%) | 1.99%(d) | 1.99%(c),(d) | (0.75%) | 37% | $344,977 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $115.37 | 3.57% | 0.95% | 0.95%(c) | (0.03%) | 13% | $2,139,513 |
| Year Ended 5/31/2022 | $120.01 | (3.09%) | 0.92%(d) | 0.92%(c),(d) | (0.14%) | 16% | $1,922,182 |
| Year Ended 5/31/2021 | $137.04 | 70.53% | 0.95%(d) | 0.95%(c),(d) | 0.06% | 32% | $2,027,453 |
| Year Ended 5/31/2020 | $88.14 | 31.70% | 0.98%(d),(f) | 0.98%(c),(d),(f) | 0.80% | 37% | $1,292,741 |
| Year Ended 5/31/2019 | $74.36 | (1.25%) | 0.99%(d) | 0.99%(c),(d) | 0.21% | 37% | $1,030,165 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $116.27 | 3.58% | 0.91% | 0.91% | 0.01% | 13% | $453,797 |
| Year Ended 5/31/2022 | $120.85 | (3.05%) | 0.89%(d) | 0.89%(d) | (0.11%) | 16% | $351,625 |
| Year Ended 5/31/2021 | $137.89 | 70.60% | 0.91%(d) | 0.91%(d) | 0.09% | 32% | $320,652 |
| Year Ended 5/31/2020 | $88.63 | 31.76% | 0.94%(d),(f) | 0.94%(d),(f) | 0.83% | 37% | $223,964 |
| Year Ended 5/31/2019 | $74.73 | (1.20%) | 0.95%(d) | 0.95%(d) | 0.25% | 37% | $178,417 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 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 5/31/2023 | $119.49 | 0.06 | 3.08 | 3.14 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $136.48 | (0.09) | (1.27) | (1.36) | — | (15.63) | (15.63) |
| 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) |
| Class R | |||||||
| Year Ended 5/31/2023 | $96.85 | (0.45) | 2.20 | 1.75 | — | (7.70) | (7.70) |
| Year Ended 5/31/2022 | $113.17 | (0.73) | (0.67) | (1.40) | — | (14.92) | (14.92) |
| 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) |
| 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) | Ratios include interfund lending expense which is 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) | 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.
| 20 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
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 5/31/2023 | $114.93 | 3.64% | 0.86% | 0.86% | 0.06% | 13% | $178,005 |
| Year Ended 5/31/2022 | $119.49 | (3.01%) | 0.84%(d) | 0.84%(d) | (0.07%) | 16% | $135,794 |
| Year Ended 5/31/2021 | $136.48 | 70.67% | 0.86%(d) | 0.86%(d) | 0.17% | 32% | $115,173 |
| Year Ended 5/31/2020 | $87.79 | 31.81% | 0.89%(d),(f) | 0.89%(d),(f) | 0.93% | 37% | $49,333 |
| Year Ended 5/31/2019 | $74.09 | (1.14%) | 0.90%(d) | 0.90%(d) | 0.31% | 37% | $32,058 |
| Class R | |||||||
| Year Ended 5/31/2023 | $90.90 | 3.04% | 1.45% | 1.45%(c) | (0.53%) | 13% | $69,138 |
| Year Ended 5/31/2022 | $96.85 | (3.59%) | 1.42%(d) | 1.42%(c),(d) | (0.64%) | 16% | $74,421 |
| Year Ended 5/31/2021 | $113.17 | 69.70% | 1.44%(d) | 1.44%(c),(d) | (0.44%) | 32% | $93,459 |
| Year Ended 5/31/2020 | $74.19 | 31.03% | 1.48%(d),(f) | 1.48%(c),(d),(f) | 0.27% | 37% | $64,178 |
| Year Ended 5/31/2019 | $63.78 | (1.75%) | 1.49%(d) | 1.49%(c),(d) | (0.29%) | 37% | $64,874 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 21 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
Note 1. Organization
Columbia Seligman Technology 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.
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. Class C shares automatically convert to Class A shares after 8 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 price 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 ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued based on prices obtained from pricing services, which are intended to reflect 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 price 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 approved by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The
| 22 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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 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
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, failure of the clearinghouse or CCP may pose additional counterparty credit risk. 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 and such shortfall is remedied by the
CCP or otherwise, 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 instruments’ 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 or receive interest income on cash collateral pledged to the broker. 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.
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 has written option contracts to decrease the Fund’s exposure to equity risk and to facilitate buying and
selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded
| 24 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023:
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Option contracts written, at value | 7,174,920 |
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, 2023:
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2023:
| Derivative instrument | Average value ($)* |
| Option contracts written | (3,504,257) |
| * | Based on the ending quarterly outstanding amounts for the year ended May 31, 2023. |
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of May 31, 2023:
| Morgan Stanley ($) | |
| Liabilities | |
| Call option contracts written | 7,174,920 |
| Total financial and derivative net assets | (7,174,920) |
| Total collateral received (pledged) (a) | (7,174,920) |
| Net amount (b) | - |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | 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. 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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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.
| 26 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 in 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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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. Effective July 1, 2022, 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 0.705% as the Fund’s net assets increase. Prior to July 1, 2022, the management services fee was equal to a percentage of the
Fund’s daily net assets that declined from 0.915% to 0.755% as the Fund’s net assets increased. The effective management services fee rate for the year ended May 31, 2023 was 0.838% of the Fund’s
average daily net assets.
To the extent the Fund invests a
portion of its assets in affiliated mutual funds, exchange-traded funds and closed-end funds that pay a management services fee or an investment advisory service fee to the Investment Manager, the Investment Manager
has contractually agreed to waive net management services fees (management services fees, less reimbursements/waivers) or, where applicable, the net investment advisory services fees (investment advisory services
fees, less reimbursements/waivers) charged to such affiliated fund(s). The Investment Manager, in its discretion, may revise or discontinue this arrangement at any time.
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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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.
| 28 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023,
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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $4,852.
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 $14,055,000 for Class C shares. This amount is based on the most recent information available
as of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the
distribution and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 1,711,431 |
| Class C | — | 1.00(b) | 15,124 |
| (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.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 classes’ 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, costs associated with shareholder meetings, 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, tax straddles, late-year ordinary losses, trustees’ deferred compensation, foreign currency transactions and net operating
loss reclassification. 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 ($) | Paid in capital ($) |
| 16,590,210 | 162,916 | (16,753,126) |
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.
| 30 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| — | 687,453,435 | 687,453,435 | 223,351,754 | 1,064,390,378 | 1,287,742,132 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| — | 222,975,438 | — | 4,396,127,402 |
At May 31, 2023, 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) ($) | Net unrealized appreciation ($) |
| 5,143,105,012 | 4,846,852,888 | (450,725,486) | 4,396,127,402 |
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, 2023, the Fund will elect to treat the following late-year ordinary losses and post-October capital losses as arising on June 1, 2023.
| Late year ordinary losses ($) | Post-October capital losses ($) |
| 9,067,402 | — |
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 $1,150,420,738 and $1,572,506,476, respectively, for the year ended May 31, 2023. 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.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 2,350,000 | 3.47 | 4 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
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 sector 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
| 32 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
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 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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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 Seligman Technology and Information Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
| 34 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the
related notes, and the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023 and the financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 by correspondence with the custodian, transfer agent and broker. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
July 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 35 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Capital gain dividend | |
| $234,479,618 |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| 36 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 37 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| 38 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 39 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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.
| 40 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Seligman Technology and Information Fund | Annual Report 2023 | 41 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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.
| 42 | Columbia Seligman Technology and Information Fund | Annual Report 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN219_05_N01_(07/23)
Columbia Large Cap
Value Fund
Not FDIC or NCUA 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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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
Lead Portfolio Manager
Managed Fund since 2013
Arthur Hurley, CFA
Portfolio Manager
Managed Fund since April 2023
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.
© 2023 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.
| Columbia Large Cap Value Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Large Cap Value Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
May 31, 2023, Class A shares of Columbia Large Cap Value Fund returned -6.20% excluding sales charges. The Fund’s benchmark, the Russell 1000 Value Index, returned -4.55% for the same period.
Market overview
Entering the period, geopolitical
developments weighed heavily on risk sentiment, including Russia’s ongoing invasion of Ukraine and the shuttering of China’s economy in conjunction with the government’s zero-COVID-19 policy. At the
same time, policymakers were confronted with historically high inflation with U.S. consumer price inflation peaking at over 9% in June 2022. With the market concerned over whether the response to inflation by the U.S.
Federal Reserve (Fed) would plunge the economy into recession, returns for equities and other riskier assets turned negative.
The Fed aggressively hiked its
benchmark overnight lending rate between May and December, bringing the federal funds target rate to a range of 4.25% to 4.50% at the end of 2022, versus 0% to 0.25% at the beginning of the year. U.S. Treasury yields
moved sharply higher in response, and the yield curve became inverted as the market anticipated recession.
Entering 2023, risk assets rallied
amid growing optimism that the Fed was coming to the end of its rate hiking cycle. Within equities, growth stocks began to outperform value on hopes for lower interest rates, reversing the trend seen for most of 2022.
In addition, performance leadership became highly concentrated among a handful of mostly technology-related, mega-capitalization companies.
On February 1, the Fed implemented
a modest 25 basis point rate increase, bringing the federal funds target rate to a range of 4.50% to 4.75%. (A basis point is 1/100 of a percent.) In March, the failure of two U.S. banks and collapse of European giant
Credit Suisse raised fears of a financial crisis, leading the market to anticipate Fed rate cuts over the second half of the year. At its March 23rd meeting, the Fed went forward with another incremental quarter-point
increase, leaving the federal funds target rate at 4.75% to 5.0%. The increase was largely received by financial markets as an indication that the central bank believed the financial system remained sound overall.
While the federal funds target rate was increased by another 25 basis points on May 3, 2023, with inflation data on a clear downward trend, most investors believed the Fed’s hiking cycle had likely concluded.
Within the Fund’s benchmark,
the industrials, information technology and communication services sectors posted positive returns for the 12 months ended May 31, 2023. Conversely, returns for the real estate, materials, utilities and financials
sectors were well into negative territory. The Fund’s underperformance relative to the benchmark was driven primarily by sector allocation, while stock selection was mostly neutral.
The Fund’s notable
detractors during the period
| • | Selection within communication services, industrials and energy weighed most heavily on the Fund’s relative performance. |
| • | In terms of individual companies, positioning with respect to Facebook curator Meta Platforms, Inc. was, by a wide margin, the largest detractor from relative performance. We exited Meta at a loss on concerns that the company was investing too heavily on development related to distant virtual reality products even as a sharp dip in advertising spending by recession-wary customers was already weighing on earnings. However, Meta posted results for the fourth quarter of 2023 that reflected an abrupt course correction with respect to capital expenditures, leading the stock to surge higher. |
| • | While overall selection within financials contributed positively, a pair of regional banks, PNC Financial Services Group, Inc. and Trust Financial Corp., were leading laggards within the portfolio as the March run on bank deposits experienced some West Coast banks weighed broadly on the segment. We exited the position in Trust Financial in favor of another bank we viewed as more favorably positioned. |
| • | Finally, exposure to the convertible bond of Dish Network Corp. proved detrimental. With the bond maturing in approximately two-and-a-half years, some investors viewed the direct-broadcast satellite company as subject to liquidity risk. In our view, the viability of Dish is not threatened, and we added to the position on weakness based on an extremely attractive yield. |
| Columbia Large Cap Value Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
The Fund’s notable
contributors during the period
| • | The Fund’s stock selection was strongest within the consumer discretionary, information technology, and financials sectors. |
| • | In terms of individual holdings, leading contributors to relative performance included casino operator Las Vegas Sands Corp. Having exited the United States market, the company does business principally in Singapore and, most notably, the Chinese special administrative region of Macau, which before the pandemic was the largest center of gambling globally by a wide margin. Sentiment with respect to the stock was boosted by China’s unexpectedly abrupt reversal of its zero-COVID-19 policy, and we viewed Las Vegas Sands as poised to post several years of strong results. |
| • | Semiconductor company Broadcom, Inc. has strong market share across all of its products. Along with those of several other chipmakers, the stock was a prime beneficiary of headlines as 2023 progressed around the wide array of potential industrial applications of artificial intelligence. |
| • | Biotechnology company Vertex Pharmaceuticals, Inc. has, at times in the past, been viewed as something of a “one-trick pony” built on the dominant position of its cystic fibrosis franchise. However, in recent quarters, investors have begun to recognize Vertex’s promising drug pipeline. During the period, the company reported strong progress with respect to its non-opioid pain and sickle cell treatments. |
| • | Darden Restaurants, Inc. encompasses a number of well-known restaurant brands, such as Olive Garden. The company continued to post strong results despite investor worries over the impact of historically high inflation on discretionary consumer spending. |
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 2023 |
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 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 Large Cap Value Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Large Cap Value Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Zero coupon bond. |
| (c) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (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, 2023 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, 5.241% | ||||||||
| 38,639,026 | 250,156,576 | (273,389,073) | 2,235 | 15,408,764 | (10,242) | 801,337 | 15,416,472 | |
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.
| 10 | Columbia Large Cap Value Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
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 2023 | 11 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,534,890,653) | $2,161,093,682 |
| Affiliated issuers (cost $15,406,529) | 15,408,764 |
| Receivable for: | |
| Capital shares sold | 372,715 |
| Dividends | 4,229,482 |
| Prepaid expenses | 13,460 |
| Total assets | 2,181,118,103 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 1,041,670 |
| Management services fees | 38,404 |
| Distribution and/or service fees | 10,439 |
| Transfer agent fees | 146,159 |
| Compensation of board members | 310,458 |
| Other expenses | 57,554 |
| Total liabilities | 1,604,684 |
| Net assets applicable to outstanding capital stock | $2,179,513,419 |
| Represented by | |
| Paid in capital | 1,516,924,240 |
| Total distributable earnings (loss) | 662,589,179 |
| Total - representing net assets applicable to outstanding capital stock | $2,179,513,419 |
| Class A | |
| Net assets | $1,466,080,142 |
| Shares outstanding | 102,883,806 |
| Net asset value per share | $14.25 |
| 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) | $15.12 |
| Advisor Class | |
| Net assets | $35,051,960 |
| Shares outstanding | 2,462,004 |
| Net asset value per share | $14.24 |
| Class C | |
| Net assets | $10,247,565 |
| Shares outstanding | 721,511 |
| Net asset value per share | $14.20 |
| Institutional Class | |
| Net assets | $218,833,735 |
| Shares outstanding | 15,389,190 |
| Net asset value per share | $14.22 |
| Institutional 2 Class | |
| Net assets | $37,876,998 |
| Shares outstanding | 2,659,056 |
| Net asset value per share | $14.24 |
| Institutional 3 Class | |
| Net assets | $408,730,925 |
| Shares outstanding | 28,275,735 |
| Net asset value per share | $14.46 |
| Class R | |
| Net assets | $2,692,094 |
| Shares outstanding | 190,579 |
| Net asset value per share | $14.13 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Large Cap Value Fund | Annual Report 2023 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $58,860,874 |
| Dividends — affiliated issuers | 801,337 |
| Interest | 338,313 |
| Total income | 60,000,524 |
| Expenses: | |
| Management services fees | 14,872,802 |
| Distribution and/or service fees | |
| Class A | 3,943,260 |
| Class C | 109,998 |
| Class R | 15,162 |
| Transfer agent fees | |
| Class A | 1,324,438 |
| Advisor Class | 32,596 |
| Class C | 9,234 |
| Institutional Class | 179,995 |
| Institutional 2 Class | 15,741 |
| Institutional 3 Class | 28,913 |
| Class R | 2,547 |
| Compensation of board members | 52,615 |
| Custodian fees | 11,692 |
| Printing and postage fees | 117,370 |
| Registration fees | 148,904 |
| Accounting services fees | 30,090 |
| Legal fees | 43,758 |
| Compensation of chief compliance officer | 458 |
| Other | 46,931 |
| Total expenses | 20,986,504 |
| Expense reduction | (120) |
| Total net expenses | 20,986,384 |
| Net investment income | 39,014,140 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 30,954,034 |
| Investments — affiliated issuers | (10,242) |
| Net realized gain | 30,943,792 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (226,246,007) |
| Investments — affiliated issuers | 2,235 |
| Net change in unrealized appreciation (depreciation) | (226,243,772) |
| Net realized and unrealized loss | (195,299,980) |
| Net decrease in net assets resulting from operations | $(156,285,840) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Large Cap Value Fund | Annual Report 2023 | 13 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $39,014,140 | $33,361,363 |
| Net realized gain | 30,943,792 | 256,699,425 |
| Net change in unrealized appreciation (depreciation) | (226,243,772) | (243,833,224) |
| Net increase (decrease) in net assets resulting from operations | (156,285,840) | 46,227,564 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (135,804,759) | (113,587,179) |
| Advisor Class | (3,557,660) | (2,780,127) |
| Class C | (865,912) | (717,638) |
| Institutional Class | (18,916,605) | (15,102,047) |
| Institutional 2 Class | (2,755,492) | (2,079,822) |
| Institutional 3 Class | (40,719,461) | (42,237,274) |
| Class R | (260,172) | (187,147) |
| Total distributions to shareholders | (202,880,061) | (176,691,234) |
| Decrease in net assets from capital stock activity | (99,459,291) | (41,502,157) |
| Total decrease in net assets | (458,625,192) | (171,965,827) |
| Net assets at beginning of year | 2,638,138,611 | 2,810,104,438 |
| Net assets at end of year | $2,179,513,419 | $2,638,138,611 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Large Cap Value Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 2,403,115 | 36,552,779 | 2,963,699 | 50,087,908 |
| Distributions reinvested | 8,915,017 | 135,135,823 | 6,817,584 | 112,802,091 |
| Redemptions | (12,347,635) | (187,300,022) | (12,222,236) | (207,037,967) |
| Net decrease | (1,029,503) | (15,611,420) | (2,440,953) | (44,147,968) |
| Advisor Class | ||||
| Subscriptions | 566,765 | 8,648,908 | 421,130 | 7,144,146 |
| Distributions reinvested | 233,939 | 3,539,945 | 166,836 | 2,757,667 |
| Redemptions | (860,094) | (13,072,413) | (535,180) | (9,083,558) |
| Net increase (decrease) | (59,390) | (883,560) | 52,786 | 818,255 |
| Class C | ||||
| Subscriptions | 203,519 | 3,089,901 | 156,071 | 2,632,408 |
| Distributions reinvested | 57,115 | 865,911 | 43,390 | 716,183 |
| Redemptions | (268,829) | (4,039,174) | (240,502) | (4,048,461) |
| Net decrease | (8,195) | (83,362) | (41,041) | (699,870) |
| Institutional Class | ||||
| Subscriptions | 4,793,964 | 72,204,041 | 2,868,888 | 48,516,464 |
| Distributions reinvested | 1,247,988 | 18,857,576 | 911,766 | 15,052,963 |
| Redemptions | (4,767,873) | (72,257,040) | (2,596,972) | (43,925,831) |
| Net increase | 1,274,079 | 18,804,577 | 1,183,682 | 19,643,596 |
| Institutional 2 Class | ||||
| Subscriptions | 936,232 | 14,289,264 | 506,749 | 8,655,079 |
| Distributions reinvested | 182,212 | 2,754,214 | 125,751 | 2,079,822 |
| Redemptions | (375,011) | (5,668,726) | (345,494) | (5,836,984) |
| Net increase | 743,433 | 11,374,752 | 287,006 | 4,897,917 |
| Institutional 3 Class | ||||
| Subscriptions | 427,307 | 6,489,868 | 2,910,332 | 50,994,692 |
| Distributions reinvested | 2,651,987 | 40,717,028 | 2,520,100 | 42,233,098 |
| Redemptions | (10,268,131) | (160,123,754) | (6,769,335) | (115,518,413) |
| Net decrease | (7,188,837) | (112,916,858) | (1,338,903) | (22,290,623) |
| Class R | ||||
| Subscriptions | 25,486 | 386,610 | 49,538 | 830,890 |
| Distributions reinvested | 17,296 | 260,172 | 11,402 | 187,147 |
| Redemptions | (52,540) | (790,202) | (43,781) | (741,501) |
| Net increase (decrease) | (9,758) | (143,420) | 17,159 | 276,536 |
| Total net decrease | (6,278,171) | (99,459,291) | (2,280,264) | (41,502,157) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Large Cap Value Fund | Annual Report 2023 | 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 ratios of expenses and net investment income are 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 5/31/2023 | $16.56 | 0.24 | (1.20) | (0.96) | (0.23) | (1.12) | (1.35) |
| Year Ended 5/31/2022 | $17.39 | 0.19 | 0.09 | 0.28 | (0.19) | (0.92) | (1.11) |
| 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) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $16.55 | 0.28 | (1.20) | (0.92) | (0.27) | (1.12) | (1.39) |
| Year Ended 5/31/2022 | $17.38 | 0.23 | 0.09 | 0.32 | (0.23) | (0.92) | (1.15) |
| 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) |
| Class C | |||||||
| Year Ended 5/31/2023 | $16.50 | 0.12 | (1.19) | (1.07) | (0.11) | (1.12) | (1.23) |
| Year Ended 5/31/2022 | $17.33 | 0.06 | 0.09 | 0.15 | (0.06) | (0.92) | (0.98) |
| 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) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $16.53 | 0.28 | (1.20) | (0.92) | (0.27) | (1.12) | (1.39) |
| Year Ended 5/31/2022 | $17.36 | 0.23 | 0.09 | 0.32 | (0.23) | (0.92) | (1.15) |
| 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) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $16.56 | 0.28 | (1.20) | (0.92) | (0.28) | (1.12) | (1.40) |
| Year Ended 5/31/2022 | $17.39 | 0.24 | 0.09 | 0.33 | (0.24) | (0.92) | (1.16) |
| 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) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Large Cap Value Fund | Annual Report 2023 |
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 5/31/2023 | $14.25 | (6.20%) | 0.99% | 0.99%(c) | 1.57% | 12% | $1,466,080 |
| Year Ended 5/31/2022 | $16.56 | 1.64% | 0.97% | 0.97%(c) | 1.11% | 21% | $1,720,873 |
| 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 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $14.24 | (5.95%) | 0.74% | 0.74%(c) | 1.82% | 12% | $35,052 |
| Year Ended 5/31/2022 | $16.55 | 1.91% | 0.72% | 0.72%(c) | 1.36% | 21% | $41,728 |
| 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 |
| Class C | |||||||
| Year Ended 5/31/2023 | $14.20 | (6.90%) | 1.74% | 1.74%(c) | 0.82% | 12% | $10,248 |
| Year Ended 5/31/2022 | $16.50 | 0.86% | 1.72% | 1.72%(c) | 0.36% | 21% | $12,043 |
| 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 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $14.22 | (5.95%) | 0.74% | 0.74%(c) | 1.82% | 12% | $218,834 |
| Year Ended 5/31/2022 | $16.53 | 1.91% | 0.72% | 0.72%(c) | 1.36% | 21% | $233,329 |
| 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 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $14.24 | (5.97%) | 0.70% | 0.70% | 1.86% | 12% | $37,877 |
| Year Ended 5/31/2022 | $16.56 | 1.95% | 0.68% | 0.68% | 1.39% | 21% | $31,720 |
| 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 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Large Cap Value Fund | Annual Report 2023 | 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 5/31/2023 | $16.78 | 0.29 | (1.21) | (0.92) | (0.28) | (1.12) | (1.40) |
| Year Ended 5/31/2022 | $17.61 | 0.25 | 0.08 | 0.33 | (0.24) | (0.92) | (1.16) |
| 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) |
| Class R | |||||||
| Year Ended 5/31/2023 | $16.43 | 0.20 | (1.19) | (0.99) | (0.19) | (1.12) | (1.31) |
| Year Ended 5/31/2022 | $17.26 | 0.15 | 0.08 | 0.23 | (0.14) | (0.92) | (1.06) |
| 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) |
| 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.
| 18 | Columbia Large Cap Value Fund | Annual Report 2023 |
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 5/31/2023 | $14.46 | (5.85%) | 0.66% | 0.66% | 1.91% | 12% | $408,731 |
| Year Ended 5/31/2022 | $16.78 | 1.96% | 0.64% | 0.64% | 1.43% | 21% | $595,155 |
| 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 |
| Class R | |||||||
| Year Ended 5/31/2023 | $14.13 | (6.43%) | 1.24% | 1.24%(c) | 1.32% | 12% | $2,692 |
| Year Ended 5/31/2022 | $16.43 | 1.39% | 1.22% | 1.22%(c) | 0.86% | 21% | $3,291 |
| 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 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Large Cap Value Fund | Annual Report 2023 | 19 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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. Class C shares automatically convert to Class A shares after 8 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 price 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 ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued based on prices obtained from pricing services, which are intended to reflect 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 price 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 approved by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The
| 20 | Columbia Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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 2023 | 21 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
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, 2023 was 0.63% of the Fund’s average
daily net assets.
| 22 | Columbia Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, 2023,
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 | 0.05 |
| 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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $120.
| Columbia Large Cap Value Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 $592,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 293,388 |
| Class C | — | 1.00(b) | 1,257 |
| (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 classes’ 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, costs associated with shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is
| 24 | Columbia Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and distribution reclassifications. 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 ($) | Paid in capital ($) |
| (7,226) | 7,226 | — |
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, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 46,715,413 | 156,164,648 | 202,880,061 | 53,349,820 | 123,341,414 | 176,691,234 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 6,799,556 | 31,059,050 | — | 625,037,681 |
At May 31, 2023, 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) ($) | Net unrealized appreciation ($) |
| 1,551,464,764 | 739,407,209 | (114,369,528) | 625,037,681 |
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.
| Columbia Large Cap Value Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $285,120,340 and $529,129,319, respectively, for the year ended May 31, 2023. 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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
| 26 | Columbia Large Cap Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 one or more
industries or sectors, which makes them vulnerable to economic conditions that affect such industries or sectors. 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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
Shareholder concentration risk
At May 31, 2023, affiliated
shareholders of record owned 84.0% 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.
| Columbia Large Cap Value Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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 Large Cap Value Fund | Annual Report 2023 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023 and the
financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
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 2023 | 29 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Qualified dividend income | Dividends received deduction | Section 199A dividends | Capital gain dividend |
| 98.79% | 97.16% | 1.21% | $32,642,964 |
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
(Unaudited)
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).
| 30 | Columbia Large Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Columbia Large Cap Value Fund | Annual Report 2023 | 31 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| 32 | Columbia Large Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Columbia Large Cap Value Fund | Annual Report 2023 | 33 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| 34 | Columbia Large Cap Value Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
(Unaudited)
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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. Beckman, who is President and
Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Large Cap Value Fund | Annual Report 2023 | 35 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
Fund officers (continued)
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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 Large Cap Value Fund | Annual Report 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN138_05_N01_(07/23)
Multi-Manager Value
Strategies Fund
Not FDIC or NCUA 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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with growth of capital and income.
Portfolio management
Columbia Management Investment Advisers, LLC
Michael Barclay, CFA
Tara Gately, CFA
Effective June 30, 2023, Scott Davis retired from the Investment Manager.
Diamond Hill Capital Management, Inc.
Charles Bath, CFA
Austin Hawley, CFA
Dimensional Fund Advisors LP
Jed Fogdall
Joel Schneider
John Hertzer, CFA
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.
© 2023 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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
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, 2023,
CMIA, DFA and Diamond Hill managed approximately 29.4%, 36.2% and 34.4% of the portfolio, respectively.
For the 12-month period that ended
May 31, 2023, Institutional Class shares of Multi Manager Value Strategies Fund returned -5.54%. The Fund underperformed its benchmark, the Russell 1000 Value Index, which returned -4.55% for the same time period.
Market overview
U.S. equities seesawed through
the 12-month period ending May 31, 2023, struggling to maintain positive momentum despite frequent rallies that brought major benchmarks above break-even. Although investors grappled with a variety of worries, market
trajectory both up and down was driven predominantly by cross currents centered on evolving expectations for inflation and the path of U.S. Federal Reserve (Fed) interest-rate hikes.
Despite the relatively steady pace
of interest rate hikes that unfolded during the period, sentiment occasionally did improve as the period progressed. Positives included hints of so-called “peak inflation” and attractive valuations, as
well as hopes that China’s economy would reopen after an extended zero-COVID-19 lockdown that gummed up global trade and contributed to cost pressures affecting economies worldwide. Better-than-feared earnings
results and guidance helped sentiment, particularly from bellwethers like Alphabet and Microsoft as well as retailers like Walmart and Target early in the period. But most of the upside was sparked by investors’
interpretation of Fed Chair Powell’s remarks after the Federal Open Market Committee announced an anticipated 75 basis point rate hike at the end of July 2022. (A basis point is 1/100 of a percent.) What many
seemingly heard were hints that rate hikes would slow in concert with softening economic growth. That takeaway evaporated a month later when Chair Powell spoke at a symposium in Jackson Hole, Wyoming and prioritized
fighting inflation no matter how much pain the economy might suffer. His inflation-fighting resolve was confirmed by an additional 75 basis point hike in September, along with a dot-plot showing no expectations for
rate cuts until 2024.
Equities continued to deliver lumpy
results and briefly turned higher into the start of 2023 as investors yet again seemed comfortable with the notion of a softer landing, based on better-than-expected earnings, as well as constructive inflation and
economic data. But that bout of optimism proved short-lived during February 2023, as a blowout January employment report and continued higher-for-longer messaging from the Fed, along with mixed earnings reports and
geopolitical uncertainties, weighed on sentiment. Then in March, banking sector turmoil dominated headlines as two banks failed quickly. While intervention to guarantee uninsured deposits and to provide emergency
liquidity helped to limit any broader banking contagion, regional bank stocks still suffered. However, the bank crisis brought with it a rate reprieve and heightened expectations for a Fed pivot, providing a tailwind
for technology and other growth-oriented stocks with future earnings that are made currently more attractive by lower interest rates. Even though the final rate hike of the period on May 3rd brought the target federal
funds rate upper bound to 5.25% – a level not seen since mid-2006 – sentiment for high-growth stocks remained intact.
Headwinds swirling throughout the
end of the period included protracted wrangling between the White House and Republican leaders in efforts to raise the debt ceiling and avoid default on U.S. Treasury obligations. Lingering fears of more turmoil in
the banking sector, dampened China reopening momentum and persistent signs of an imminent recession added heft to downside expectations. Better-than-expected first quarter 2023 earnings reports and upbeat guidance
helped offset some of these worries, as did resilient consumer spending and a last-minute agreement in principle on May 27th that would suspend the debt ceiling until January 2025.
Against this backdrop, growth
stocks, as measured by the Russell 1000 Growth Index, significantly outperformed value stocks, as measured by the benchmark Russell 1000 Value Index. Small-cap stocks, as measured by the Russell 2000 Index, and
mid-cap stocks, represented by the Russell Midcap Index, each lost over 4.5%.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
CMIA
Our portion of the Fund’s
portfolio measures its relative performance against the Russell 1000 Index. During the 12-month period that ended May 31, 2022, our portion of the Fund underperformed the Russell 1000 Index.
Notable detractors in the CMIA
portion of the Fund during the period
| • | Stock selection was the primary driver of relative underperformance during the 12-month period. Sector allocations were a secondary source of detraction versus the benchmark. |
| • | Selections within the information technology, communication services and financials sector weighed most on relative performance. |
| • | An underweight to the strong-performing information technology sector detracted, as did a relative overweight to the utilities sector, which returned negatively for the benchmark during the period. |
| • | Fund holdings that detracted most relative to the benchmark included an underweight to software company Microsoft Corp. and exposure to financial companies Bank of America Corp., PNC Financial Services Group, Inc., U.S. Bancorp and Northern Trust Corp. |
| • | Not owning NVIDIA, Apple and Meta Platforms also detracted. |
Notable contributors in the CMIA
portion of the Fund during the period
| • | Stock selection within the materials and energy sector contributed to relative performance during the period. |
| • | Underweighted allocations to the consumer discretionary and real estate sectors, relative to the benchmark, also aided performance during the period. |
| • | Individual fund holdings that contributed most to relative performance during the period included semiconductor companies Broadcom, Inc., KLA Corp. and Lam Research Corp., pharmaceutical giant Merck & Co., Inc. and electrical equipment company Eaton Corp. PLC. |
| • | Not owning Tesla and Pfizer during the period also contributed. |
Diamond Hill
Our portion of the Fund
underperformed its benchmark, the Russell 1000 Value Index, for the 12-month period that ended May 31, 2023.
Notable detractors in the Diamond
Hill portion of the Fund during the period
| • | Underperformance in our portion of the Fund relative to the benchmark was primarily driven by security selection and an overweight position within the financials sector. |
| • | Our holdings in the financial sector came under intense pressure as the failures of SVB Bank and Signature Bank took place, starting on March 10th. While we did not hold either of those stocks in our portfolio at the time, we did hold First Republic Bank. We fully exited our position in First Republic Bank on March 14th, as we believed the risks of continuing to hold the stock outweighed the benefits. |
| • | Both security selection and the Fund’s underweight position within the communication services sector detracted from relative returns. |
| • | Security selection within the industrials sector detracted from the Fund’s relative return. |
| • | Individual securities that detracted most during the period included financial services companies Truist Financial Corp., First Republic Bank and SVB Financial Group. We exited our position in SVB Financial Group shares during the fourth quarter of 2022, before the bank’s failure. As noted above, we exited our position in First Republic Bank on March 14, 2023. |
| 6 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
Notable contributors in the
Diamond Hill portion of the Fund during the period
| • | Security selection within the health care, consumer staples and materials sectors contributed to relative returns in our portion of the Fund during the period. |
| • | An overweighted allocation to the industrials sector contributed. |
| • | Individual securities that contributed most to relative performance during the period included healthcare facilities operator HCA Healthcare, Inc., homebuilder NVR, Inc. and medical device manufacturer Stryker Corp. |
DFA
Our portion of the Fund
underperformed its benchmark, the Russell 1000 Value Index, for the 12-month period that ended May 31, 2023.
Notable detractors in the DFA
portion of the Fund during the period
| • | The primary driver of underperformance in our portion of the Fund was a greater emphasis on mid-cap and value stocks during a period when larger cap stocks outperformed small and mid-cap stocks and the growth style outperformed the value style. |
| • | Security selection within the communication services, health care and information technology sectors detracted from relative results during the period. |
| • | An overweighted allocation to the communications services sector also weighed on relative results. |
| • | Individual securities that detracted most from our portion of the Fund on a relative basis were pharmaceutical company Pfizer, Inc., semiconductor company Intel Corp. and streaming services provider Netflix, Inc. |
| ○ | The Fund’s overweighting in Pfizer and Intel, both of which underperformed the benchmark during the period had a negative impact on performance versus the benchmark. |
| ○ | Not owning Netflix, which outperformed the benchmark considerably during the period weighed on our portion of the Fund relative to the benchmark. |
Notable contributors in the DFA
portion of the Fund during the period
| • | An underweighted allocation in our portion of the Fund in real estate investment trusts (REITs) contributed to performance versus the benchmark during the period. The sector delivered negative performance for the benchmark during the period. Our strategy generally excludes REITs from purchase. |
| • | Our underweighted allocation to the utilities sector relative to the Russell 1000 Value Index also contributed to performance in our portion of the Fund relative to the benchmark. The sector returned negatively for both the benchmark and our portion of the Fund during the period. Our strategy generally excludes highly regulated utilities from purchase because while they tend to have low relative prices, their expected returns tend to be lower than those of value stocks. |
| • | The industrials sector was another area of contribution for our portion of the Fund. The sector was one of the stronger performing sectors of the benchmark during the period and our portion of the Fund outperformed the benchmark due to our overweighted allocation and security selection. |
| • | Individual securities that contributed most to performance in our portion of the Fund included home construction company D.R. Horton, Inc., energy giant Exxon Mobil Corp. and healthcare company Johnson & Johnson. |
| ○ | We held a larger weighting of both D.R. Horton and Exxon Mobil than the benchmark and the stock of both companies delivered strong gains during the period. |
| ○ | Not holding Johnson & Johnson in our portion of the Fund contributed. The stock, which is a constituent of the benchmark, delivered disappointing results during the period. |
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 7 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
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 2023 |
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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 9 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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.
| 10 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 15 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Notes to Portfolio of
Investments
| (a) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2023, the total value of these securities amounted to $0, which represents less than 0.01% of total net assets. |
| (b) | Non-income producing investment. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (e) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.241% | ||||||||
| 41,578,354 | 532,152,794 | (494,694,641) | (622) | 79,035,885 | 6,581 | 2,157,925 | 79,075,422 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
| * | Rounds to zero. |
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.
| 18 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $3,590,627,320) | $4,082,675,542 |
| Affiliated issuers (cost $79,036,507) | 79,035,885 |
| Receivable for: | |
| Investments sold | 1,188,587 |
| Capital shares sold | 4,372,690 |
| Dividends | 10,116,628 |
| Foreign tax reclaims | 113,968 |
| Prepaid expenses | 20,793 |
| Total assets | 4,177,524,093 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 1,360,328 |
| Capital shares purchased | 3,937,802 |
| Management services fees | 69,134 |
| Transfer agent fees | 371,554 |
| Compensation of board members | 173,943 |
| Other expenses | 131,828 |
| Total liabilities | 6,044,589 |
| Net assets applicable to outstanding capital stock | $4,171,479,504 |
| Represented by | |
| Paid in capital | 3,537,668,095 |
| Total distributable earnings (loss) | 633,811,409 |
| Total - representing net assets applicable to outstanding capital stock | $4,171,479,504 |
| Institutional Class | |
| Net assets | $4,171,477,089 |
| Shares outstanding | 299,036,806 |
| Net asset value per share | $13.95 |
| Institutional 3 Class | |
| Net assets | $2,415 |
| Shares outstanding | 173 |
| Net asset value per share(a) | $13.98 |
| (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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 19 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $99,759,095 |
| Dividends — affiliated issuers | 2,157,925 |
| European Union tax reclaim | 133,632 |
| Foreign taxes withheld | (50) |
| Total income | 102,050,602 |
| Expenses: | |
| Management services fees | 25,362,399 |
| Transfer agent fees | |
| Institutional Class | 4,394,377 |
| Institutional 3 Class | 1 |
| Compensation of board members | 85,715 |
| Custodian fees | 38,855 |
| Printing and postage fees | 308,249 |
| Registration fees | 91,562 |
| Accounting services fees | 30,749 |
| Legal fees | 68,789 |
| Interest on interfund lending | 99 |
| Compensation of chief compliance officer | 826 |
| Other | 70,984 |
| Total expenses | 30,452,605 |
| Net investment income | 71,597,997 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 196,702,211 |
| Investments — affiliated issuers | 6,581 |
| Foreign currency translations | 1,075 |
| Futures contracts | (83,887) |
| Net realized gain | 196,625,980 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (506,495,432) |
| Investments — affiliated issuers | (622) |
| Foreign currency translations | (495) |
| Net change in unrealized appreciation (depreciation) | (506,496,549) |
| Net realized and unrealized loss | (309,870,569) |
| Net decrease in net assets resulting from operations | $(238,272,572) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $71,597,997 | $68,222,560 |
| Net realized gain | 196,625,980 | 476,060,691 |
| Net change in unrealized appreciation (depreciation) | (506,496,549) | (497,624,233) |
| Net increase (decrease) in net assets resulting from operations | (238,272,572) | 46,659,018 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Institutional Class | (459,910,497) | (408,044,013) |
| Institutional 3 Class | (297) | (244) |
| Total distributions to shareholders | (459,910,794) | (408,044,257) |
| Increase (decrease) in net assets from capital stock activity | 280,464,948 | (105,137,297) |
| Total decrease in net assets | (417,718,418) | (466,522,536) |
| Net assets at beginning of year | 4,589,197,922 | 5,055,720,458 |
| Net assets at end of year | $4,171,479,504 | $4,589,197,922 |
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Institutional Class | ||||
| Subscriptions | 60,652,201 | 897,414,259 | 54,031,716 | 935,240,677 |
| Distributions reinvested | 31,671,423 | 459,910,497 | 23,954,125 | 408,044,013 |
| Redemptions | (71,142,459) | (1,076,859,808) | (86,176,500) | (1,448,421,987) |
| Net increase (decrease) | 21,181,165 | 280,464,948 | (8,190,659) | (105,137,297) |
| Total net increase (decrease) | 21,181,165 | 280,464,948 | (8,190,659) | (105,137,297) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 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 ratios of expenses and net investment income are 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 5/31/2023 | $16.52 | 0.25 | (1.12) | (0.87) | (0.25) | (1.45) | (1.70) |
| Year Ended 5/31/2022 | $17.67 | 0.23 | 0.02(d) | 0.25 | (0.22) | (1.18) | (1.40) |
| 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) |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2023 | $16.55 | 0.27 | (1.12) | (0.85) | (0.27) | (1.45) | (1.72) |
| Year Ended 5/31/2022 | $17.69 | 0.24 | 0.03(d) | 0.27 | (0.23) | (1.18) | (1.41) |
| Year Ended 5/31/2021 | $12.50 | 0.22 | 5.34 | 5.56 | (0.22) | (0.15) | (0.37) |
| Year Ended 5/31/2020(e) | $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) | 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.
| 22 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
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 5/31/2023 | $13.95 | (5.54%) | 0.72%(c) | 0.72%(c) | 1.69% | 23% | $4,171,477 |
| Year Ended 5/31/2022 | $16.52 | 1.22% | 0.69%(c) | 0.69%(c) | 1.31% | 22% | $4,589,195 |
| 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 |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2023 | $13.98 | (5.42%) | 0.61%(c) | 0.61%(c) | 1.79% | 23% | $2 |
| Year Ended 5/31/2022 | $16.55 | 1.35% | 0.62%(c) | 0.62%(c) | 1.37% | 22% | $3 |
| Year Ended 5/31/2021 | $17.69 | 45.20% | 0.63%(c) | 0.63%(c) | 1.49% | 29% | $3 |
| Year Ended 5/31/2020(e) | $12.50 | (13.14%) | 0.66% | 0.64% | 1.84% | 19% | $2 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 23 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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 price 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 ask 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 price 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 approved 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
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.
| 24 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, failure of the clearinghouse or CCP may pose additional counterparty credit risk. 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 and such shortfall is remedied by the CCP or otherwise, 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 2023 | 25 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Master Agreement, the Fund may, under certain
circumstances, offset with the counterparty certain derivative instruments’ 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 or receive interest income on cash collateral pledged to the broker. 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.
| 26 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Equity risk | (83,887) |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 507,731 |
| * | Based on the ending daily outstanding amounts for the year ended May 31, 2023. |
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 2023 | 27 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 in the Statement of Assets and Liabilities.
The Fund may file withholding tax
reclaims in certain European Union countries to recover a portion of foreign taxes previously withheld on dividends earned, which may be reclaimable based upon certain provisions in the Treaty on the Functioning of
the European Union (EU) and subsequent rulings by the European Court of Justice. The Fund may record a reclaim receivable when the amount is known, the Fund has received notice of a pending refund, and there are no
significant uncertainties on collectability. Income received from EU reclaims is included in the Statement of Operations.
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
| 28 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023
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. 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.
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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 shares.
For the year ended May 31, 2023,
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 | 0.10 |
| Institutional 3 Class | 0.02 |
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.
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 classes’ average daily net assets:
| October 1, 2022 through September 30, 2023 | Prior to October 1, 2022 | |
| Institutional Class | 0.74% | 0.74% |
| Institutional 3 Class | 0.67 | 0.68 |
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, costs associated with shareholder meetings, 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, foreign currency transactions, distribution reclassifications, earnings and profits
distributed to shareholders on the redemption of shares and miscellaneous adjustments. 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.
| 30 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| (1,100,443) | (14,063,557) | 15,164,000 |
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, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 78,103,251 | 381,807,543 | 459,910,794 | 100,200,562 | 307,843,695 | 408,044,257 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 11,729,788 | 151,105,582 | — | 471,149,930 |
At May 31, 2023, 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) ($) | Net unrealized appreciation ($) |
| 3,690,561,497 | 686,962,703 | (215,812,773) | 471,149,930 |
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 $959,886,816 and $1,103,436,088, respectively, for the year ended May 31, 2023. 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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 700,000 | 5.10 | 1 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
Note 9. Significant
risks
Market 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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
| 32 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
Shareholder concentration risk
At May 31, 2023, 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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 33 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, 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, 2023, 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, 2023 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, 2023 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 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 34 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Qualified dividend income | Dividends received deduction | Capital gain dividend |
| 100.00% | 100.00% | $216,606,728 |
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
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 35 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| 36 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 37 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| 38 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 39 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 40 | Multi-Manager Value Strategies Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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.
| Multi-Manager Value Strategies Fund | Annual Report 2023 | 41 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN116_05_N01_(07/23)
Columbia Commodity
Strategy Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 19 | |
| 21 | |
| 22 | |
| 24 | |
| 28 | |
| 43 | |
| 44 | |
| 50 |
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 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, is available on columbiathreadneedleus.com/investor/or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with total return.
Portfolio management
Marc Khalamayzer, CFA
Commodity Strategies Co-Portfolio Manager
Managed Fund since 2019
Matthew Ferrelli, CFA
Commodity Strategies Co-Portfolio Manager
Managed Fund since 2019
Ronald Stahl, CFA
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since 2021
Gregory Liechty
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since 2021
John D. Dempsey, CFA
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since 2021
| Columbia Commodity Strategy Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| 4 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
At May 31, 2023, 77.44% 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 ended May
31, 2023, Class A shares of Columbia Commodity Strategy Fund returned -22.59% excluding sales charges. The Fund slightly underperformed its benchmark, the Bloomberg Commodity Index Total Return, which returned -22.48%
over the same period. The Fund accesses commodities markets via listed futures, using these commodities futures to position the Fund relative to the benchmark and to provide shareholders with total return.
Market overview
The commodity rally that began in
2021 and continued through the first half of 2022 tapered off in the second of half of 2022 and into 2023. Higher than normal inflation was a key driver behind the strong performance from commodities, and those
numbers began to cool off from the highs reached in previous years. Lower trending inflation, combined with additional time to shore up supply chain issues that remained from the initial challenges of the COVID-19
pandemic, led to a decline in commodity prices overall. Although Russia’s invasion of Ukraine has continued, the concerns over distribution of agricultural products from Ukraine has subsided. The restriction on
port activity from Ukraine took place from March – August 2022, after which Ukraine, Russia, Turkey and the United Nations signed the Black Sea Grain Initiative. The Black Sea routes were reopened, and exports
of corn and wheat from Ukraine returned to seasonal average levels. One question that remains crucial to future commodity prices is how quickly China will continue its reopening policy following its zero-COVID-19
lockdown. China’s lockdown led to a significant cut in demand for metals and energy, as a large amount of the country’s real estate development projects were put on hold and travel throughout China was
stalled. A successful reopening from China could lead to a bump in demand across various commodity sectors, providing a catalyst to balance supply and demand effects.
Most commodity subsectors posted
negative returns for the year ending May 31, 2023, with energy and industrial metals lagging substantially. Within energy, natural gas was a major laggard, driven primarily by a reduction in demand needed to heat
homes as a result of a mild winter. Industrial metals were negatively affected by China’s zero-COVID-19 lockdown that led to a halt in production within Chinese real estate, which in turn drove down demand for
most industrial metals. Agriculture overall posted negative returns, but within the sector individual commodities such as sugar, cocoa and coffee returned positively for the period. Precious metals posted positive
returns during the period, led by strong returns from gold which accounts for a large percentage of the precious metal exposure in the benchmark. Livestock was another positive returning subsector overall, led by the
performance of live cattle, though lean hogs lagged in performance.
The Fund’s notable
detractors during the period
| • | On a subsector level, grains, softs (commodities that are grown versus mined), livestock and industrial metals were all detractors for the Fund versus its benchmark during the period. |
| • | Within grains, corn, soybean and soybean meal were the largest detracting commodities for the Fund, driven primarily by security selection. |
| • | The Fund was overweight in zinc versus the benchmark, which detracted overall from relative performance. |
| • | Within energy, brent crude oil was the single largest detractor, driven by an overweight relative to the benchmark. |
The Fund’s notable
contributors during the period
| • | Both the energy and precious metals subsectors contributed positively to the Fund’s performance relative to the benchmark during the period. |
| • | Within energy, natural gas was the single largest contributing commodity for the Fund, driven primarily by curve positioning as compared to the benchmark. |
| Columbia Commodity Strategy Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | Within precious metals, gold was the highest contributing commodity for the Fund due to strong security selection. |
| • | Within grains, both wheat and soybean oil contributed positively to Fund performance relative to its benchmark. |
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 2023 |
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 2023 | 7 |
Consolidated Portfolio of Investments
May 31, 2023
May 31, 2023
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| 8 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 9 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| 10 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 11 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| 12 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 13 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
At May 31, 2023,
securities and/or cash totaling $32,387,121 were pledged as collateral.
Investments in
derivatives
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 14 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| Long futures contracts (continued) | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Cotton | 65 | 12/2023 | USD | 2,582,775 | — | (87,392) |
| Cotton | 21 | 03/2024 | USD | 835,380 | — | (11,933) |
| Feeder Cattle | 10 | 08/2023 | USD | 1,195,875 | 6,846 | — |
| Gas Oil | 27 | 07/2023 | USD | 1,773,225 | — | (169,285) |
| Gas Oil | 19 | 09/2023 | USD | 1,252,100 | — | (205,045) |
| Gas Oil | 19 | 11/2023 | USD | 1,253,525 | — | (106,042) |
| Gas Oil | 39 | 01/2024 | USD | 2,556,450 | — | (118,372) |
| Gold 100 oz. | 46 | 08/2023 | USD | 9,117,660 | — | (62,034) |
| Gold 100 oz. | 100 | 12/2023 | USD | 20,204,000 | 721,287 | — |
| Gold 100 oz. | 32 | 12/2023 | USD | 6,465,280 | — | (109,733) |
| Gold 100 oz. | 43 | 02/2024 | USD | 8,767,270 | — | (296,603) |
| Lead | 77 | 07/2023 | USD | 3,876,950 | — | (152,859) |
| Lead | 10 | 09/2023 | USD | 503,438 | — | (31,327) |
| Lead | 10 | 11/2023 | USD | 504,188 | — | (26,071) |
| Lead | 20 | 01/2024 | USD | 1,010,125 | — | (62,372) |
| Lean Hogs | 62 | 07/2023 | USD | 2,066,460 | — | (69,500) |
| Lean Hogs | 31 | 10/2023 | USD | 932,480 | — | (136,733) |
| Lean Hogs | 63 | 12/2023 | USD | 1,827,630 | — | (135,467) |
| Lean Hogs | 30 | 02/2024 | USD | 930,900 | — | (24,517) |
| Live Cattle | 33 | 08/2023 | USD | 2,213,310 | 93,282 | — |
| Live Cattle | 29 | 10/2023 | USD | 1,992,590 | 82,938 | — |
| Live Cattle | 57 | 12/2023 | USD | 4,000,260 | 92,421 | — |
| Live Cattle | 28 | 02/2024 | USD | 2,009,560 | 61,962 | — |
| Natural Gas | 133 | 06/2023 | USD | 3,013,780 | — | (535,281) |
| Natural Gas | 132 | 08/2023 | USD | 3,112,560 | — | (524,669) |
| Natural Gas | 107 | 10/2023 | USD | 3,130,820 | — | (268,614) |
| Natural Gas | 172 | 12/2023 | USD | 6,298,640 | — | (217,985) |
| Nickel | 3 | 07/2023 | USD | 368,964 | — | (143,184) |
| Nickel | 9 | 09/2023 | USD | 1,114,398 | — | (361,553) |
| Nickel | 9 | 11/2023 | USD | 1,122,552 | — | (175,136) |
| Nickel | 19 | 01/2024 | USD | 2,389,326 | — | (293,355) |
| NY Harbor ULSD Heat Oil | 21 | 06/2023 | USD | 1,985,294 | — | (181,529) |
| NY Harbor ULSD Heat Oil | 10 | 08/2023 | USD | 950,082 | — | (156,402) |
| NY Harbor ULSD Heat Oil | 10 | 10/2023 | USD | 953,736 | — | (79,460) |
| NY Harbor ULSD Heat Oil | 20 | 12/2023 | USD | 1,907,724 | — | (121,918) |
| Primary Aluminum | 21 | 07/2023 | USD | 1,180,463 | — | (96,985) |
| Primary Aluminum | 40 | 09/2023 | USD | 2,254,480 | — | (287,891) |
| Primary Aluminum | 40 | 11/2023 | USD | 2,275,000 | — | (135,758) |
| Primary Aluminum | 79 | 01/2024 | USD | 4,537,523 | — | (121,690) |
| RBOB Gasoline | 29 | 06/2023 | USD | 2,976,548 | 26,849 | — |
| RBOB Gasoline | 15 | 08/2023 | USD | 1,454,292 | — | (96,191) |
| RBOB Gasoline | 17 | 10/2023 | USD | 1,466,270 | — | (97,674) |
| RBOB Gasoline | 34 | 12/2023 | USD | 2,853,572 | — | (140,752) |
| Silver | 2 | 07/2023 | USD | 235,870 | 7,630 | — |
| Silver | 21 | 07/2023 | USD | 2,476,635 | — | (104,821) |
| Silver | 1 | 09/2023 | USD | 119,030 | 3,964 | — |
| Silver | 20 | 09/2023 | USD | 2,380,600 | — | (66,912) |
| Silver | 42 | 12/2023 | USD | 5,068,350 | — | (384,941) |
| Silver | 21 | 03/2024 | USD | 2,566,410 | — | (184,942) |
| Soybean | 95 | 07/2023 | USD | 6,173,813 | — | (524,590) |
| Soybean | 103 | 11/2023 | USD | 5,904,475 | — | (846,095) |
| Soybean | 102 | 01/2024 | USD | 5,900,700 | — | (561,426) |
| Soybean Meal | 155 | 07/2023 | USD | 6,097,700 | — | (370,781) |
| Soybean Meal | 93 | 12/2023 | USD | 3,394,500 | — | (442,730) |
| Soybean Meal | 94 | 01/2024 | USD | 3,412,200 | — | (298,646) |
| Soybean Oil | 72 | 07/2023 | USD | 1,995,840 | — | (270,520) |
| Soybean Oil | 105 | 12/2023 | USD | 2,907,450 | — | (441,488) |
| Soybean Oil | 105 | 01/2024 | USD | 2,907,450 | — | (308,874) |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 15 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| Long futures contracts (continued) | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Sugar #11 | 91 | 06/2023 | USD | 2,554,115 | 235,968 | — |
| Sugar #11 | 45 | 09/2023 | USD | 1,246,896 | 144,721 | — |
| Sugar #11 | 24 | 09/2023 | USD | 665,011 | — | (30,813) |
| Sugar #11 | 81 | 02/2024 | USD | 2,220,826 | 56,919 | — |
| Sugar #11 | 129 | 02/2024 | USD | 3,536,870 | — | (122,452) |
| Wheat | 43 | 07/2023 | USD | 1,699,575 | — | (121,913) |
| Wheat | 31 | 07/2023 | USD | 921,088 | — | (176,634) |
| Wheat | 10 | 09/2023 | USD | 392,625 | 1,591 | — |
| Wheat | 15 | 09/2023 | USD | 588,938 | — | (57,489) |
| Wheat | 44 | 09/2023 | USD | 1,337,600 | — | (247,643) |
| Wheat | 51 | 12/2023 | USD | 1,991,550 | — | (79,376) |
| Wheat | 86 | 12/2023 | USD | 2,695,025 | — | (253,255) |
| Wheat | 26 | 03/2024 | USD | 1,007,500 | — | (63,759) |
| Wheat | 42 | 03/2024 | USD | 1,348,200 | — | (78,848) |
| WTI Crude | 112 | 06/2023 | USD | 7,626,080 | — | (745,631) |
| WTI Crude | 63 | 08/2023 | USD | 4,292,820 | — | (529,475) |
| WTI Crude | 63 | 10/2023 | USD | 4,261,320 | — | (414,681) |
| WTI Crude | 128 | 12/2023 | USD | 8,581,120 | — | (572,785) |
| Zinc | 34 | 07/2023 | USD | 1,907,188 | — | (328,340) |
| Zinc | 23 | 09/2023 | USD | 1,294,038 | — | (494,509) |
| Zinc | 23 | 11/2023 | USD | 1,295,763 | — | (303,192) |
| Zinc | 45 | 01/2024 | USD | 2,539,688 | — | (454,239) |
| Total | 1,568,473 | (19,690,035) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | (179) | 09/2023 | USD | (36,843,235) | 16,357 | — |
Notes to Consolidated 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, 2023, the total value of these securities amounted to $66,250,747, which represents 25.50% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of May 31, 2023. |
| (c) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of May 31, 2023. |
| (d) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of May 31, 2023. |
| (e) | Principal and interest may not be guaranteed by a governmental entity. |
| (f) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (g) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.241% | ||||||||
| 230,547,183 | 502,189,834 | (634,302,942) | (8,896) | 98,425,179 | (45,078) | 3,080,315 | 98,474,416 | |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 16 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 89,606,529 | — | 89,606,529 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 10,871,639 | — | 10,871,639 |
| Corporate Bonds & Notes | — | 109,048,543 | — | 109,048,543 |
| Foreign Government Obligations | — | 2,251,097 | — | 2,251,097 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 6,746,251 | — | 6,746,251 |
| U.S. Government & Agency Obligations | — | 2,248,798 | — | 2,248,798 |
| U.S. Treasury Obligations | — | 2,252,922 | — | 2,252,922 |
| Money Market Funds | 98,425,179 | — | — | 98,425,179 |
| Total Investments in Securities | 98,425,179 | 223,025,779 | — | 321,450,958 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 1,584,830 | — | — | 1,584,830 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 17 |
Consolidated Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Liability | ||||
| Futures Contracts | (19,690,035) | — | — | (19,690,035) |
| Total | 80,319,974 | 223,025,779 | — | 303,345,753 |
See the Consolidated 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.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 18 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Statement of Assets and
Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $224,025,189) | $223,025,779 |
| Affiliated issuers (cost $98,435,310) | 98,425,179 |
| Cash | 45,072,517 |
| Margin deposits on: | |
| Futures contracts | 32,387,121 |
| Receivable for: | |
| Investments sold | 187,805 |
| Capital shares sold | 54,706 |
| Dividends | 577,100 |
| Interest | 969,266 |
| Foreign tax reclaims | 11,197 |
| Variation margin for futures contracts | 1,076,116 |
| Prepaid expenses | 5,288 |
| Total assets | 401,792,074 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 2,110,118 |
| Capital shares purchased | 136,396,953 |
| Variation margin for futures contracts | 3,415,160 |
| Management services fees | 6,890 |
| Distribution and/or service fees | 280 |
| Transfer agent fees | 12,951 |
| Compensation of board members | 53,914 |
| Other expenses | 34,229 |
| Total liabilities | 142,030,495 |
| Net assets applicable to outstanding capital stock | $259,761,579 |
| Represented by | |
| Paid in capital | 522,989,812 |
| Total distributable earnings (loss) | (263,228,233) |
| Total - representing net assets applicable to outstanding capital stock | $259,761,579 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 19 |
Consolidated Statement of Assets and
Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $20,036,927 |
| Shares outstanding | 2,365,633 |
| Net asset value per share | $8.47 |
| 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) | $8.99 |
| Advisor Class | |
| Net assets | $13,225,773 |
| Shares outstanding | 1,455,675 |
| Net asset value per share | $9.09 |
| Class C | |
| Net assets | $4,034,556 |
| Shares outstanding | 566,569 |
| Net asset value per share | $7.12 |
| Institutional Class | |
| Net assets | $18,972,784 |
| Shares outstanding | 2,133,150 |
| Net asset value per share | $8.89 |
| Institutional 2 Class | |
| Net assets | $8,575,564 |
| Shares outstanding | 928,313 |
| Net asset value per share | $9.24 |
| Institutional 3 Class | |
| Net assets | $192,743,858 |
| Shares outstanding | 20,474,585 |
| Net asset value per share | $9.41 |
| Class R | |
| Net assets | $2,172,117 |
| Shares outstanding | 270,474 |
| Net asset value per share | $8.03 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 20 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $3,080,315 |
| Interest | 5,797,110 |
| Interfund lending | 2,743 |
| Foreign taxes withheld | (354) |
| Total income | 8,879,814 |
| Expenses: | |
| Management services fees | 1,998,710 |
| Distribution and/or service fees | |
| Class A | 65,939 |
| Class C | 51,861 |
| Class R | 12,022 |
| Transfer agent fees | |
| Class A | 37,105 |
| Advisor Class | 26,088 |
| Class C | 7,313 |
| Institutional Class | 64,948 |
| Institutional 2 Class | 6,730 |
| Institutional 3 Class | 12,581 |
| Class R | 3,403 |
| Compensation of board members | 20,263 |
| Custodian fees | 21,457 |
| Printing and postage fees | 36,416 |
| Registration fees | 133,627 |
| Accounting services fees | 40,290 |
| Legal fees | 16,659 |
| Compensation of chief compliance officer | 34 |
| Other | 19,554 |
| Total expenses | 2,575,000 |
| Expense reduction | (20) |
| Total net expenses | 2,574,980 |
| Net investment income | 6,304,834 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (1,381,522) |
| Investments — affiliated issuers | (45,078) |
| Futures contracts | (70,143,141) |
| Swap contracts | 445,812 |
| Net realized loss | (71,123,929) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 903,200 |
| Investments — affiliated issuers | (8,896) |
| Futures contracts | (42,052,788) |
| Swap contracts | 24,955 |
| Net change in unrealized appreciation (depreciation) | (41,133,529) |
| Net realized and unrealized loss | (112,257,458) |
| Net decrease in net assets resulting from operations | $(105,952,624) |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 21 |
Consolidated Statement of Changes in Net
Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income (loss) | $6,304,834 | $(1,447,231) |
| Net realized gain (loss) | (71,123,929) | 194,142,110 |
| Net change in unrealized appreciation (depreciation) | (41,133,529) | (7,499,396) |
| Net increase (decrease) in net assets resulting from operations | (105,952,624) | 185,195,483 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (13,091,140) | (1,367,093) |
| Advisor Class | (6,087,308) | (907,105) |
| Class C | (2,316,643) | (526,987) |
| Institutional Class | (12,482,584) | (3,725,492) |
| Institutional 2 Class | (5,768,737) | (2,514,889) |
| Institutional 3 Class | (43,069,997) | (123,791,658) |
| Class R | (1,311,006) | (244,620) |
| Total distributions to shareholders | (84,127,415) | (133,077,844) |
| Increase (decrease) in net assets from capital stock activity | 16,082,060 | (45,107,803) |
| Total increase (decrease) in net assets | (173,997,979) | 7,009,836 |
| Net assets at beginning of year | 433,759,558 | 426,749,722 |
| Net assets at end of year | $259,761,579 | $433,759,558 |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 22 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Consolidated Statement of Changes in Net
Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 1,190,286 | 19,404,883 | 1,912,684 | 37,475,133 |
| Distributions reinvested | 1,372,544 | 12,984,269 | 86,880 | 1,356,192 |
| Redemptions | (1,672,213) | (24,152,784) | (656,974) | (13,269,279) |
| Net increase | 890,617 | 8,236,368 | 1,342,590 | 25,562,046 |
| Advisor Class | ||||
| Subscriptions | 1,630,630 | 23,492,853 | 1,152,473 | 25,273,477 |
| Distributions reinvested | 594,517 | 6,022,454 | 53,518 | 865,391 |
| Redemptions | (1,986,456) | (31,559,191) | (155,727) | (3,403,112) |
| Net increase (decrease) | 238,691 | (2,043,884) | 1,050,264 | 22,735,756 |
| Class C | ||||
| Subscriptions | 281,127 | 3,325,844 | 239,505 | 4,580,503 |
| Distributions reinvested | 290,217 | 2,315,930 | 36,641 | 526,525 |
| Redemptions | (290,334) | (3,646,121) | (26,158) | (499,293) |
| Net increase | 281,010 | 1,995,653 | 249,988 | 4,607,735 |
| Institutional Class | ||||
| Subscriptions | 3,126,495 | 41,353,583 | 4,641,966 | 91,175,164 |
| Distributions reinvested | 1,243,568 | 12,336,201 | 232,754 | 3,724,071 |
| Redemptions | (6,547,667) | (103,674,723) | (629,517) | (13,227,370) |
| Net increase (decrease) | (2,177,604) | (49,984,939) | 4,245,203 | 81,671,865 |
| Institutional 2 Class | ||||
| Subscriptions | 404,062 | 5,024,414 | 456,720 | 9,921,132 |
| Distributions reinvested | 560,000 | 5,768,006 | 154,164 | 2,514,419 |
| Redemptions | (796,411) | (10,668,390) | (754,802) | (15,768,236) |
| Net increase (decrease) | 167,651 | 124,030 | (143,918) | (3,332,685) |
| Institutional 3 Class | ||||
| Subscriptions | 27,437,309 | 298,268,124 | 33,008,655 | 694,995,472 |
| Distributions reinvested | 4,102,610 | 43,036,376 | 7,516,160 | 123,791,160 |
| Redemptions | (21,922,485) | (285,164,246) | (48,212,582) | (996,632,284) |
| Net increase (decrease) | 9,617,434 | 56,140,254 | (7,687,767) | (177,845,652) |
| Class R | ||||
| Subscriptions | 98,876 | 1,416,624 | 81,715 | 1,583,080 |
| Distributions reinvested | 145,915 | 1,310,314 | 16,054 | 244,173 |
| Redemptions | (90,012) | (1,112,360) | (16,937) | (334,121) |
| Net increase | 154,779 | 1,614,578 | 80,832 | 1,493,132 |
| Total net increase (decrease) | 9,172,578 | 16,082,060 | (862,808) | (45,107,803) |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 23 |
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 ratios of expenses and net investment income are 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 5/31/2023 | $21.90 | 0.21 | (4.16) | (3.95) | (9.48) | (9.48) |
| Year Ended 5/31/2022 | $20.69 | (0.12) | 7.43 | 7.31 | (6.10) | (6.10) |
| Year Ended 5/31/2021(e) | $13.99 | (0.18) | 6.90 | 6.72 | (0.02) | (0.02) |
| Year Ended 5/31/2020(e) | $16.67 | 0.12 | (2.64) | (2.52) | (0.16) | (0.16) |
| Year Ended 5/31/2019(e) | $23.03 | 0.24 | (3.60) | (3.36) | (3.00) | (3.00) |
| Advisor Class | ||||||
| Year Ended 5/31/2023 | $22.71 | 0.25 | (4.34) | (4.09) | (9.53) | (9.53) |
| Year Ended 5/31/2022 | $21.22 | (0.08) | 7.70 | 7.62 | (6.13) | (6.13) |
| Year Ended 5/31/2021(e) | $14.32 | (0.11) | 7.03 | 6.92 | (0.02) | (0.02) |
| Year Ended 5/31/2020(e) | $17.05 | 0.16 | (2.69) | (2.53) | (0.20) | (0.20) |
| Year Ended 5/31/2019(e) | $23.49 | 0.28 | (3.64) | (3.36) | (3.08) | (3.08) |
| Class C | ||||||
| Year Ended 5/31/2023 | $20.09 | 0.10 | (3.75) | (3.65) | (9.32) | (9.32) |
| Year Ended 5/31/2022 | $19.53 | (0.26) | 6.86 | 6.60 | (6.04) | (6.04) |
| Year Ended 5/31/2021(e) | $13.30 | (0.30) | 6.54 | 6.24 | (0.01) | (0.01) |
| Year Ended 5/31/2020(e) | $15.84 | (0.00)(f) | (2.54) | (2.54) | (0.00)(f) | (0.00)(f) |
| Year Ended 5/31/2019(e) | $22.03 | 0.08 | (3.43) | (3.35) | (2.84) | (2.84) |
| Institutional Class | ||||||
| Year Ended 5/31/2023 | $22.47 | 0.24 | (4.29) | (4.05) | (9.53) | (9.53) |
| Year Ended 5/31/2022 | $21.05 | (0.05) | 7.59 | 7.54 | (6.12) | (6.12) |
| Year Ended 5/31/2021(e) | $14.20 | (0.15) | 7.02 | 6.87 | (0.02) | (0.02) |
| Year Ended 5/31/2020(e) | $16.91 | 0.20 | (2.71) | (2.51) | (0.20) | (0.20) |
| Year Ended 5/31/2019(e) | $23.32 | 0.28 | (3.61) | (3.33) | (3.08) | (3.08) |
| Institutional 2 Class | ||||||
| Year Ended 5/31/2023 | $22.92 | 0.27 | (4.40) | (4.13) | (9.55) | (9.55) |
| Year Ended 5/31/2022 | $21.34 | (0.07) | 7.78 | 7.71 | (6.13) | (6.13) |
| Year Ended 5/31/2021(e) | $14.40 | (0.12) | 7.08 | 6.96 | (0.02) | (0.02) |
| Year Ended 5/31/2020(e) | $17.14 | 0.24 | (2.78) | (2.54) | (0.20) | (0.20) |
| Year Ended 5/31/2019(e) | $23.59 | 0.32 | (3.69) | (3.37) | (3.08) | (3.08) |
| Institutional 3 Class | ||||||
| Year Ended 5/31/2023 | $23.15 | 0.29 | (4.47) | (4.18) | (9.56) | (9.56) |
| Year Ended 5/31/2022 | $21.48 | (0.07) | 7.88 | 7.81 | (6.14) | (6.14) |
| Year Ended 5/31/2021(e) | $14.48 | (0.11) | 7.14 | 7.03 | (0.03) | (0.03) |
| Year Ended 5/31/2020(e) | $17.20 | 0.20 | (2.72) | (2.52) | (0.20) | (0.20) |
| Year Ended 5/31/2019(e) | $23.66 | 0.32 | (3.66) | (3.34) | (3.12) | (3.12) |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 24 | Columbia Commodity Strategy Fund | Annual Report 2023 |
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 | |||||||
| Year Ended 5/31/2023 | $8.47 | (22.59%) | 1.13% | 1.13%(c) | 1.62% | 142% | $20,037 |
| Year Ended 5/31/2022 | $21.90 | 47.23% | 1.12%(d) | 1.12%(d) | (0.57%) | 329% | $32,304 |
| Year Ended 5/31/2021(e) | $20.69 | 47.95% | 1.14%(d) | 1.14%(c),(d) | (1.03%) | 0% | $2,739 |
| Year Ended 5/31/2020(e) | $13.99 | (15.35%) | 1.14% | 1.14%(c) | 0.63% | 0% | $1,283 |
| Year Ended 5/31/2019(e) | $16.67 | (14.76%) | 1.11% | 1.11%(c) | 1.18% | 0% | $1,775 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $9.09 | (22.33%) | 0.87% | 0.87%(c) | 1.76% | 142% | $13,226 |
| Year Ended 5/31/2022 | $22.71 | 47.57% | 0.89%(d) | 0.89%(d) | (0.36%) | 329% | $27,641 |
| Year Ended 5/31/2021(e) | $21.22 | 48.38% | 0.85%(d) | 0.85%(c),(d) | (0.71%) | 0% | $3,537 |
| Year Ended 5/31/2020(e) | $14.32 | (15.05%) | 0.89% | 0.89%(c) | 0.86% | 0% | $20,335 |
| Year Ended 5/31/2019(e) | $17.05 | (14.62%) | 0.86% | 0.86%(c) | 1.44% | 0% | $23,533 |
| Class C | |||||||
| Year Ended 5/31/2023 | $7.12 | (23.16%) | 1.88% | 1.88%(c) | 0.87% | 142% | $4,035 |
| Year Ended 5/31/2022 | $20.09 | 46.14% | 1.88%(d) | 1.88%(d) | (1.36%) | 329% | $5,738 |
| Year Ended 5/31/2021(e) | $19.53 | 47.13% | 1.87%(d) | 1.87%(c),(d) | (1.78%) | 0% | $695 |
| Year Ended 5/31/2020(e) | $13.30 | (16.08%) | 1.89% | 1.89%(c) | (0.11%) | 0% | $76 |
| Year Ended 5/31/2019(e) | $15.84 | (15.53%) | 1.86% | 1.86%(c) | 0.41% | 0% | $124 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $8.89 | (22.43%) | 0.86% | 0.86%(c) | 1.55% | 142% | $18,973 |
| Year Ended 5/31/2022 | $22.47 | 47.60% | 0.86%(d) | 0.86%(d) | (0.26%) | 329% | $96,858 |
| Year Ended 5/31/2021(e) | $21.05 | 48.45% | 0.90%(d) | 0.90%(c),(d) | (0.82%) | 0% | $1,380 |
| Year Ended 5/31/2020(e) | $14.20 | (15.15%) | 0.86% | 0.86%(c) | 1.07% | 0% | $66 |
| Year Ended 5/31/2019(e) | $16.91 | (14.51%) | 0.84% | 0.84%(c) | 1.35% | 0% | $771 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $9.24 | (22.32%) | 0.79% | 0.79% | 1.84% | 142% | $8,576 |
| Year Ended 5/31/2022 | $22.92 | 47.79% | 0.77%(d) | 0.77%(d) | (0.34%) | 329% | $17,431 |
| Year Ended 5/31/2021(e) | $21.34 | 48.41% | 0.77%(d) | 0.77%(d) | (0.68%) | 0% | $19,305 |
| Year Ended 5/31/2020(e) | $14.40 | (14.90%) | 0.76% | 0.76% | 1.32% | 0% | $57 |
| Year Ended 5/31/2019(e) | $17.14 | (14.64%) | 0.78% | 0.78% | 1.52% | 0% | $1,404 |
| Institutional 3 Class | |||||||
| Year Ended 5/31/2023 | $9.41 | (22.31%) | 0.72% | 0.72% | 2.20% | 142% | $192,744 |
| Year Ended 5/31/2022 | $23.15 | 47.94% | 0.70%(d) | 0.70%(d) | (0.32%) | 329% | $251,323 |
| Year Ended 5/31/2021(e) | $21.48 | 48.57% | 0.71%(d) | 0.71%(d) | (0.61%) | 0% | $398,386 |
| Year Ended 5/31/2020(e) | $14.48 | (14.77%) | 0.70% | 0.70% | 1.20% | 0% | $159,442 |
| Year Ended 5/31/2019(e) | $17.20 | (14.34%) | 0.70% | 0.70% | 1.56% | 0% | $320,251 |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 25 |
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 | ||||||
| Year Ended 5/31/2023 | $21.31 | 0.18 | (4.04) | (3.86) | (9.42) | (9.42) |
| Year Ended 5/31/2022 | $20.32 | (0.18) | 7.25 | 7.07 | (6.08) | (6.08) |
| Year Ended 5/31/2021(e) | $13.77 | (0.21) | 6.77 | 6.56 | (0.01) | (0.01) |
| Year Ended 5/31/2020(e) | $16.40 | 0.04 | (2.55) | (2.51) | (0.12) | (0.12) |
| Year Ended 5/31/2019(e) | $22.70 | 0.20 | (3.54) | (3.34) | (2.96) | (2.96) |
| 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) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (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: |
| Class | 5/31/2022 | 5/31/2021 |
| Class A | 0.01% | 0.02% |
| Advisor Class | 0.01% | less than 0.01% |
| Class C | 0.01% | 0.05% |
| Institutional Class | 0.01% | 0.02% |
| Institutional 2 Class | 0.01% | 0.02% |
| Institutional 3 Class | 0.01% | 0.01% |
| Class R | 0.01% | 0.01% |
| (e) | 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. |
| (f) | Rounds to zero. |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 26 | Columbia Commodity Strategy Fund | Annual Report 2023 |
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 | |||||||
| Year Ended 5/31/2023 | $8.03 | (22.77%) | 1.38% | 1.38%(c) | 1.46% | 142% | $2,172 |
| Year Ended 5/31/2022 | $21.31 | 46.82% | 1.37%(d) | 1.37%(d) | (0.89%) | 329% | $2,466 |
| Year Ended 5/31/2021(e) | $20.32 | 47.81% | 1.38%(d) | 1.38%(c),(d) | (1.27%) | 0% | $708 |
| Year Ended 5/31/2020(e) | $13.77 | (15.59%) | 1.39% | 1.39%(c) | 0.38% | 0% | $416 |
| Year Ended 5/31/2019(e) | $16.40 | (15.08%) | 1.36% | 1.36%(c) | 0.97% | 0% | $590 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 27 |
Notes to Consolidated Financial
Statements
May 31, 2023
May 31, 2023
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.
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, 2023, 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. Class C shares automatically convert to Class A shares after 8 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.
| 28 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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 based on prices obtained from pricing services, which are intended to reflect 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, 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.
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
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.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 29 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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, failure of the clearinghouse or CCP may pose additional counterparty credit risk. 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 and such shortfall is remedied by the CCP or otherwise, 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 instruments’ 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 or receive interest income on cash collateral pledged to the broker. 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 the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to the commodities markets. These instruments may be used for other
| 30 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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 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.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and are entered into bilaterally 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 Consolidated Portfolio of Investments and cash deposited is recorded in the Consolidated 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
Consolidated 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 Consolidated 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 bilateral counterparty, FCM or CCP, as applicable, may not fulfill its obligation under the contract.
Interest rate and inflation rate swap
contracts
The Fund entered into interest rate
swap transactions and/or 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 or inflation rate swap, as applicable, 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.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 31 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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, 2023:
| Asset derivatives | ||
| Risk exposure category | Consolidated statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 16,357* |
| Commodity-related investment risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 1,568,473* |
| Total | 1,584,830 |
| Liability derivatives | ||
| Risk exposure category | Consolidated statement of assets and liabilities location | Fair value ($) |
| Commodity-related investment risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 19,690,035* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Consolidated Portfolio of Investments. Only the current day’s variation margin for futures and centrally cleared swaps, if any, is reported in receivables or payables in the Consolidated Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Consolidated Statement of Operations for the year ended May 31, 2023:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 327,011,674 |
| Futures contracts — short | 22,040,147 |
| 32 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
| Derivative instrument | Average unrealized appreciation ($)** | Average unrealized depreciation ($)** |
| Interest rate swap contracts | 102,110 | (1,868) |
| * | Based on the ending quarterly outstanding amounts for the year ended May 31, 2023. |
| ** | Based on the ending daily outstanding amounts for the year ended May 31, 2023. |
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.
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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 33 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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 in the Consolidated 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.
In order to avoid federal excise
tax in 2022, the Fund declared a special ordinary income distribution to shareholders of record on December 2, 2022, which was paid on December 5, 2022.
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
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, 2023 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, 2023, Threadneedle is not providing services to the Fund pursuant to the Subadvisory Agreement.
| 34 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, 2023,
the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Columbia Commodity Strategy Fund | Annual Report 2023 | 35 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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, 2023, 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%, 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 $63,000 for Class C shares. This amount is based on the most recent information available as of
March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 146,175 |
| Class C | — | 1.00(b) | 2,068 |
| (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 classes’ average daily net assets:
| 36 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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, costs associated with shareholder meetings, 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, derivative investments, tax straddles, principal and/or interest from fixed income securities, capital loss carryforwards,
trustees’ deferred compensation, investments in commodity subsidiaries, swap investments and miscellaneous adjustments. 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 ($) | Paid in capital ($) |
| (70,180,690) | (448,136) | 70,628,826 |
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, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 84,127,415 | — | 84,127,415 | 133,077,844 | — | 133,077,844 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 4,296,065 | — | (2,637,434) | (266,601,234) |
At May 31, 2023, 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) ($) | Net unrealized (depreciation) ($) |
| 623,457,088 | 16,357 | (266,617,591) | (266,601,234) |
| Columbia Commodity Strategy Fund | Annual Report 2023 | 37 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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, 2023, 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,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (1,876,512) | (760,922) | (2,637,434) | — |
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 $284,166,667 and $226,808,836, respectively, for the year ended May 31, 2023, of which $8,444,023 and
$7,438,464, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate 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.
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 2,070,000 | 4.99 | 10 |
Interest income earned by the Fund
is recorded as interfund lending in the Consolidated Statement of Operations. The Fund had no outstanding interfund loans at May 31, 2023.
| 38 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank
funding rate plus, in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
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 (and therefore the Fund) 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.
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,
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 interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise. Actions by
governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates may
negatively affect the value of debt securities held by the
| Columbia Commodity Strategy Fund | Annual Report 2023 | 39 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
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.
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 Fund’s
net asset value 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 to increase the collateral. Leverage can create an interest expense that may lower the Fund’s overall returns.
Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that a leveraging strategy will be
successful.
Liquidity risk
Liquidity risk is the risk
associated with 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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
| 40 | Columbia Commodity Strategy Fund | Annual Report 2023 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
Money market fund investment risk
An investment in a money market
fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. Certain money market funds float their net asset value while others seek to preserve the value of
investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it
is possible for the Fund to lose money by investing in these and other types of money market funds. If the liquidity of a money market fund’s portfolio deteriorates below certain levels, the money market fund
may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up to 2% on amounts the Fund redeems from the money market
fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Investment Manager would otherwise redeem shares. In addition to the fees and
expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests, including affiliated money market funds. By investing in a money market fund, the
Fund will be exposed to the investment risks of the money market fund in direct proportion to such investment. 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 such instruments. Money market funds and the securities they invest in are subject to
comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money
market funds.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities 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, 2023, affiliated
shareholders of record owned 74.0% 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.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 41 |
Notes to Consolidated Financial
Statements (continued)
May 31, 2023
May 31, 2023
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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.
| 42 | Columbia Commodity Strategy Fund | Annual Report 2023 |
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, 2023, the related consolidated statement of operations for the year ended May 31, 2023, the consolidated statement of changes in net assets for each of the two
years in the period ended May 31, 2023, including the related notes, and the consolidated financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023 and the financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Commodity Strategy Fund | Annual Report 2023 | 43 |
TRUSTEES AND
OFFICERS
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| 44 | Columbia Commodity Strategy Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Columbia Commodity Strategy Fund | Annual Report 2023 | 45 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| 46 | Columbia Commodity Strategy Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Columbia Commodity Strategy Fund | Annual Report 2023 | 47 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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.
| 48 | Columbia Commodity Strategy Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Commodity Strategy Fund | Annual Report 2023 | 49 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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.
| 50 | Columbia Commodity Strategy Fund | Annual Report 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN129_05_N01_(07/23)
Columbia Mortgage
Opportunities Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 8 | |
| 25 | |
| 27 | |
| 28 | |
| 30 | |
| 34 | |
| 51 | |
| 52 | |
| 58 |
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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (April 30, 2014 — May 31, 2023)
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.
| 4 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended May 31, 2023, Class A shares of Columbia Mortgage Opportunities Fund returned -10.26% excluding sales charges. The Fund’s benchmark, the FTSE One-Month U.S. Treasury Bill Index, returned 3.32% for the same
period.
Market overview
Entering the period, against the
backdrop of historically high inflation, the U.S. Federal Reserve (Fed) had ended its program of bond purchases designed to keep longer term borrowing costs low and embarked upon a series of sharp increases in its
benchmark overnight lending rate. The central bank would bring the federal funds target rate to a range of 4.25% to 4.50% by the end of 2022, its highest level since the fall of 2007. U.S. consumer price inflation
peaked at 9.1% in June of 2022 before beginning to recede modestly over the remainder of the year. Treasury yields moved higher and risk sentiment waned on the Fed’s tightening of policy, weighing broadly on
bond market returns.
With signs of inflation moderating,
markets began to anticipate an end to the Fed’s rate hiking cycle entering 2023. At its February 1st meeting, the Fed raised short-term rates by a relatively incremental 25 basis points. (A basis point is 1/100
of a percent.) March saw the failure of a pair of U.S. banks and the collapse of Credit Suisse in Europe raise the prospect of a financial crisis, leading Treasury yields to plummet as investors factored in increased
recession risks. On March 23rd, the Fed increased the federal funds target rate by another quarter point, a move that was generally received as a signal that the central bank believed the financial system remained on
stable footing. The Fed implemented another 25 basis point increase in early May, bringing the federal funds target rate to the 5.00%-5.25% range. However, the market increasingly viewed a pause in the Fed’s
rate hiking cycle as likely, absent monthly inflation data surprising on the upside.
Treasury yields finished the period
higher with the 10-year bond ending May 2023 at 3.64%, an increase of 79 basis points relative to its starting point of 2.85% 12 months earlier. Spreads for agency residential mortgage-backed securities (MBS) ended
the period at historically attractive levels relative to Treasuries, as the sector was negatively impacted by the Fed’s efforts to reduce its balance sheet after several years of being a major bond buyer.
The Fund experienced a significant
increase in portfolio turnover during the period due to an increase in purchase and sales of Federal National Mortgage Association (FNMA) securities.
The Fund’s notable
detractors during the period
| • | The Fund’s positioning over the period with respect to overall portfolio duration and corresponding interest rate sensitivity was, by a wide margin, the leading detractor from performance relative to the benchmark. Any exposure to interest rate risk proved detrimental relative to cash (as represented by the Fund’s benchmark) as Treasury yields finished the period higher. |
| • | The Fund’s allocation to commercial MBS weighed on performance, as higher borrowing costs negatively impacted profitability for the commercial real estate sector and pressured spreads wider, most notably with respect to issues backed by office properties. |
| • | Within asset-backed securities, holdings within the non-traditional, market-based lending segment performed poorly as delinquencies rose for the less-affluent consumers most impacted by the historically high inflation during the period. |
The Fund’s notable
contributors during the period
| • | The Fund’s positioning within non-agency residential MBS contributed positively to performance versus the benchmark. Fundamentals for the sector held up better than for most other credit-oriented areas of the market, supported by continued relative strength in the housing market, despite higher borrowing costs due to the rise in Treasury yields. |
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 negative impact on results overall.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
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 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. 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 2023 |
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 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 15 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
At May 31, 2023,
securities and/or cash totaling $187,957,300 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | 9,432 | 09/2023 | USD | 1,941,370,884 | — | (3,138,912) |
| U.S. Treasury Ultra Bond | 1,316 | 09/2023 | USD | 180,127,500 | 2,496,349 | — |
| Total | 2,496,349 | (3,138,912) | ||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 19 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | (27,223) | 09/2023 | USD | (3,116,182,781) | — | (9,849,274) |
| U.S. Treasury 5-Year Note | (265) | 09/2023 | USD | (28,905,703) | — | (166,240) |
| Total | — | (10,015,514) | ||||
| Call option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 202,000,000 | 202,000,000 | 2.75 | 06/26/2023 | 6,559,951 | 118,574 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 74,220,000 | 74,220,000 | 2.75 | 07/11/2023 | 2,597,700 | 103,292 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 325,000,000 | 325,000,000 | 2.00 | 08/03/2023 | 5,476,250 | 103,285 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 190,000,000 | 190,000,000 | 3.50 | 10/27/2023 | 6,745,000 | 6,392,588 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 150,000,000 | 150,000,000 | 3.50 | 10/27/2023 | 5,700,000 | 5,046,780 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 120,290,000 | 120,290,000 | 3.30 | 11/14/2023 | 3,849,280 | 3,139,581 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 470,000,000 | 470,000,000 | 3.30 | 11/30/2023 | 12,455,000 | 12,974,773 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 400,000,000 | 400,000,000 | 3.00 | 11/30/2023 | 12,300,000 | 6,872,520 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | 175,000,000 | 175,000,000 | 3.00 | 12/01/2023 | 6,037,500 | 3,023,598 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay SOFR | Morgan Stanley | USD | 250,000,000 | 250,000,000 | 3.00 | 01/10/2024 | 8,537,500 | 4,974,000 |
| Total | 70,258,181 | 42,748,991 | ||||||
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| Put option contracts written | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Premium received ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay SOFR | Citi | USD | (182,500,000) | (182,500,000) | 3.30 | 06/15/2023 | (1,250,126) | (2,355,163) |
| 10-Year OTC interest rate swap with JPMorgan to receive exercise rate and pay SOFR | JPMorgan | USD | (180,000,000) | (180,000,000) | 3.30 | 06/15/2023 | (1,260,000) | (2,322,900) |
| 10-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay SOFR | Morgan Stanley | USD | (380,000,000) | (380,000,000) | 3.25 | 06/12/2023 | (2,850,000) | (5,657,250) |
| 5-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay SOFR | Morgan Stanley | USD | (330,000,000) | (330,000,000) | 3.45 | 06/01/2023 | (1,551,000) | (1,619,376) |
| Total | (6,911,126) | (11,954,689) | ||||||
| Cleared credit default swap contracts - buy protection | |||||||||||
| Reference entity | Counterparty | Maturity date | Pay fixed rate (%) | Payment frequency | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America High Yield Index, Series 40 | Morgan Stanley | 06/20/2028 | 5.000 | Quarterly | USD | 96,500,000 | (2,162,356) | — | — | — | (2,162,356) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 21 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
| 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 | 16.577 | USD | 10,000,000 | (3,277,607) | 5,833 | — | (1,876,233) | — | (1,395,541) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 16.577 | USD | 16,500,000 | (5,408,051) | 9,625 | — | (3,190,107) | — | (2,208,319) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 16.577 | USD | 13,000,000 | (4,260,888) | 7,583 | — | (2,001,825) | — | (2,251,480) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 16.577 | USD | 26,500,000 | (8,685,658) | 15,458 | — | (4,849,457) | — | (3,820,743) |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 70.861 | USD | 2,550,000 | (543,704) | 1,488 | — | (204,041) | — | (338,175) |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 70.861 | USD | 5,000,000 | (1,066,084) | 2,917 | — | (262,653) | — | (800,514) |
| Markit CMBX North America Index, Series 8 BBB- | Morgan Stanley | 10/17/2057 | 3.000 | Monthly | 22.655 | USD | 2,750,000 | (598,582) | 1,604 | — | (558,984) | — | (37,994) |
| Total | (46,390,509) | 84,640 | — | (23,478,071) | — | (22,827,798) | |||||||
* 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.
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, 2023, the total value of these securities amounted to $1,797,124,518, which represents 71.69% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of May 31, 2023. |
| (c) | 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, 2023 and is not reflective of the cash flow payments. |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2023, the total value of these securities amounted to $47,147,369, which represents 1.88% of total net assets. |
| (f) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of May 31, 2023. |
| (g) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (h) | Represents a security purchased on a when-issued basis. |
| (i) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Notes to Portfolio of Investments (continued)
| (j) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.241% | ||||||||
| 218,546,293 | 2,047,281,583 | (2,202,189,426) | 8,197 | 63,646,647 | (19,706) | 4,954,100 | 63,678,486 | |
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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. Representatives of Columbia Management Investment
Advisers, LLC report to 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 Mortgage Opportunities Fund | Annual Report 2023 | 23 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2023:
The following table is a summary of the inputs used to value the Fund’s investments at May 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 307,468,834 | 41,377,838 | 348,846,672 |
| Commercial Mortgage-Backed Securities - Agency | — | 3,344,289 | — | 3,344,289 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 113,464,540 | — | 113,464,540 |
| Residential Mortgage-Backed Securities - Agency | — | 2,932,015,011 | — | 2,932,015,011 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 1,225,599,271 | 134,816,392 | 1,360,415,663 |
| Call Option Contracts Purchased | — | 42,748,991 | — | 42,748,991 |
| Put Option Contracts Purchased | — | 3,514,000 | — | 3,514,000 |
| Money Market Funds | 63,646,647 | — | — | 63,646,647 |
| Total Investments in Securities | 63,646,647 | 4,628,154,936 | 176,194,230 | 4,867,995,813 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 2,496,349 | — | — | 2,496,349 |
| Swap Contracts | — | 4,451,210 | — | 4,451,210 |
| Liability | ||||
| Futures Contracts | (13,154,426) | — | — | (13,154,426) |
| Call Option Contracts Written | — | (2,751) | — | (2,751) |
| Put Option Contracts Written | — | (11,954,689) | — | (11,954,689) |
| Swap Contracts | — | (24,990,154) | — | (24,990,154) |
| Total | 52,988,570 | 4,595,658,552 | 176,194,230 | 4,824,841,352 |
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 05/31/2022 ($) | Increase (decrease) in accrued discounts/ premiums ($) | Realized gain (loss) ($) | Change in unrealized appreciation (depreciation)(a) ($) | Purchases ($) | Sales ($) | Transfers into Level 3 ($) | Transfers out of Level 3 ($) | Balance as of 05/31/2023 ($) | |
| Asset-Backed Securities — Non-Agency | 154,202,529 | (61,228,496) | (69,518,568) | 56,525,943 | 10,754,490 | (49,358,060) | - | - | 41,377,838 |
| Residential Mortgage-Backed Securities — Non-Agency | 232,604,003 | 217,254 | 35,443 | (2,253,649) | 24,639,749 | (120,426,408) | - | - | 134,816,392 |
| Total | 386,806,532 | (61,011,242) | (69,483,125) | 54,272,294 | 35,394,239 | (169,784,468) | - | - | 176,194,230 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at May 31, 2023 was $23,320,409, which is comprised of Asset Backed Securities - Non-Agency of $25,758,210 and Residential Mortgage-Backed Securities -Non-Agency
of $(2,437,801).
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 accompanying Notes to Financial Statements are
an integral part of this statement.
| 24 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $5,067,111,417) | $4,758,086,175 |
| Affiliated issuers (cost $63,638,109) | 63,646,647 |
| Option contracts purchased (cost $75,758,181) | 46,262,991 |
| Cash | 7,543,260 |
| Cash collateral held at broker for: | |
| Swap contracts | 3,150,000 |
| Option contracts written | 4,280,000 |
| TBA | 74,236,016 |
| Other(a) | 36,412,000 |
| Margin deposits on: | |
| Futures contracts | 63,701,715 |
| Swap contracts | 6,177,569 |
| Unrealized appreciation on swap contracts | 4,451,210 |
| Upfront payments on swap contracts | 20,519,628 |
| Receivable for: | |
| Investments sold | 159,046 |
| Capital shares sold | 1,981,963 |
| Dividends | 494,867 |
| Interest | 14,471,587 |
| Variation margin for futures contracts | 4,501,702 |
| Variation margin for swap contracts | 128,526 |
| Prepaid expenses | 13,078 |
| Total assets | 5,110,217,980 |
| Liabilities | |
| Option contracts written, at value (premiums received $11,396,126) | 11,957,440 |
| Unrealized depreciation on swap contracts | 22,827,798 |
| Upfront receipts on swap contracts | 23,478,071 |
| Payable for: | |
| Investments purchased | 14,489,662 |
| Investments purchased on a delayed delivery basis | 2,512,162,371 |
| Capital shares purchased | 6,141,289 |
| Variation margin for futures contracts | 12,001,156 |
| Management services fees | 43,426 |
| Distribution and/or service fees | 3,784 |
| Transfer agent fees | 226,970 |
| Compensation of board members | 93,920 |
| Other expenses | 96,606 |
| Total liabilities | 2,603,522,493 |
| Net assets applicable to outstanding capital stock | $2,506,695,487 |
| Represented by | |
| Paid in capital | 3,489,713,977 |
| Total distributable earnings (loss) | (983,018,490) |
| Total - representing net assets applicable to outstanding capital stock | $2,506,695,487 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 25 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $351,898,420 |
| Shares outstanding | 43,770,485 |
| Net asset value per share | $8.04 |
| 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) | $8.29 |
| Advisor Class | |
| Net assets | $148,829,835 |
| Shares outstanding | 18,538,890 |
| Net asset value per share | $8.03 |
| Class C | |
| Net assets | $50,691,036 |
| Shares outstanding | 6,307,947 |
| Net asset value per share | $8.04 |
| Institutional Class | |
| Net assets | $1,342,560,332 |
| Shares outstanding | 167,100,972 |
| Net asset value per share | $8.03 |
| Institutional 2 Class | |
| Net assets | $419,705,892 |
| Shares outstanding | 52,260,333 |
| Net asset value per share | $8.03 |
| Institutional 3 Class | |
| Net assets | $193,009,972 |
| Shares outstanding | 24,011,497 |
| Net asset value per share | $8.04 |
| (a) | Includes collateral related to option contracts purchased, option contracts written and swap contracts. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $6,330,344 |
| Dividends — affiliated issuers | 4,954,100 |
| Interest | 209,464,723 |
| Interfund lending | 4,419 |
| Total income | 220,753,586 |
| Expenses: | |
| Management services fees | 18,293,480 |
| Distribution and/or service fees | |
| Class A | 917,143 |
| Class C | 610,999 |
| Transfer agent fees | |
| Class A | 376,764 |
| Advisor Class | 214,829 |
| Class C | 62,730 |
| Institutional Class | 1,595,961 |
| Institutional 2 Class | 253,365 |
| Institutional 3 Class | 15,175 |
| Compensation of board members | 65,631 |
| Custodian fees | 63,986 |
| Printing and postage fees | 187,659 |
| Registration fees | 199,647 |
| Accounting services fees | 50,490 |
| Legal fees | 52,004 |
| Interest on collateral | 724,425 |
| Compensation of chief compliance officer | 501 |
| Other | 55,925 |
| Total expenses | 23,740,714 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (167,103) |
| Expense reduction | (20) |
| Total net expenses | 23,573,591 |
| Net investment income | 197,179,995 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (156,618,575) |
| Investments — affiliated issuers | (19,706) |
| Futures contracts | (208,796,708) |
| Option contracts purchased | (29,754,494) |
| Option contracts written | (39,361,963) |
| Swap contracts | (53,593,161) |
| Net realized loss | (488,144,607) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (103,366,644) |
| Investments — affiliated issuers | 8,197 |
| Forward sale commitments | 7,447,265 |
| Futures contracts | (8,869,089) |
| Option contracts purchased | (23,008,970) |
| Option contracts written | 45,596,485 |
| Swap contracts | (3,276,654) |
| Net change in unrealized appreciation (depreciation) | (85,469,410) |
| Net realized and unrealized loss | (573,614,017) |
| Net decrease in net assets resulting from operations | $(376,434,022) |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 27 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $197,179,995 | $201,714,621 |
| Net realized loss | (488,144,607) | (159,961,741) |
| Net change in unrealized appreciation (depreciation) | (85,469,410) | (391,101,621) |
| Net decrease in net assets resulting from operations | (376,434,022) | (349,348,741) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (24,674,274) | (15,264,078) |
| Advisor Class | (14,075,726) | (18,693,751) |
| Class C | (3,603,885) | (3,049,711) |
| Institutional Class | (106,156,971) | (111,364,858) |
| Institutional 2 Class | (31,267,712) | (31,642,312) |
| Institutional 3 Class | (17,108,035) | (18,896,928) |
| Total distributions to shareholders | (196,886,603) | (198,911,638) |
| Increase (decrease) in net assets from capital stock activity | (829,079,379) | 476,133,368 |
| Total decrease in net assets | (1,402,400,004) | (72,127,011) |
| Net assets at beginning of year | 3,909,095,491 | 3,981,222,502 |
| Net assets at end of year | $2,506,695,487 | $3,909,095,491 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 28 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 20,787,809 | 181,705,951 | 38,999,287 | 406,944,552 |
| Distributions reinvested | 2,940,103 | 24,662,667 | 1,480,236 | 15,255,621 |
| Redemptions | (22,703,765) | (192,945,494) | (15,320,599) | (157,908,941) |
| Net increase | 1,024,147 | 13,423,124 | 25,158,924 | 264,291,232 |
| Advisor Class | ||||
| Subscriptions | 8,214,755 | 70,299,900 | 22,674,673 | 237,290,697 |
| Distributions reinvested | 1,664,639 | 14,055,653 | 1,802,248 | 18,671,922 |
| Redemptions | (25,355,349) | (217,252,053) | (29,584,615) | (304,569,303) |
| Net decrease | (15,475,955) | (132,896,500) | (5,107,694) | (48,606,684) |
| Class C | ||||
| Subscriptions | 920,257 | 7,803,452 | 2,816,093 | 29,802,151 |
| Distributions reinvested | 427,612 | 3,590,282 | 292,117 | 3,022,837 |
| Redemptions | (3,003,946) | (25,446,529) | (1,762,205) | (18,009,594) |
| Net increase (decrease) | (1,656,077) | (14,052,795) | 1,346,005 | 14,815,394 |
| Institutional Class | ||||
| Subscriptions | 94,374,552 | 797,976,808 | 167,893,736 | 1,751,722,439 |
| Distributions reinvested | 12,455,172 | 104,797,230 | 10,682,012 | 110,463,436 |
| Redemptions | (164,127,766) | (1,398,778,903) | (138,750,909) | (1,410,271,854) |
| Net increase (decrease) | (57,298,042) | (496,004,865) | 39,824,839 | 451,914,021 |
| Institutional 2 Class | ||||
| Subscriptions | 28,013,811 | 239,552,014 | 39,473,192 | 410,487,335 |
| Distributions reinvested | 3,715,773 | 31,221,508 | 3,061,126 | 31,617,889 |
| Redemptions | (46,790,133) | (406,914,625) | (48,368,850) | (502,357,562) |
| Net decrease | (15,060,549) | (136,141,103) | (5,834,532) | (60,252,338) |
| Institutional 3 Class | ||||
| Subscriptions | 10,650,344 | 93,263,692 | 13,714,243 | 145,223,510 |
| Distributions reinvested | 2,010,075 | 16,938,515 | 1,803,629 | 18,771,991 |
| Redemptions | (20,145,074) | (173,609,447) | (29,443,098) | (310,023,758) |
| Net decrease | (7,484,655) | (63,407,240) | (13,925,226) | (146,028,257) |
| Total net increase (decrease) | (95,951,131) | (829,079,379) | 41,462,316 | 476,133,368 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 29 |
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 ratios of expenses and net investment income are 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 5/31/2023 | $9.59 | 0.56 | (1.54) | (0.98) | (0.57) | — | (0.57) |
| Year Ended 5/31/2022 | $10.87 | 0.48 | (1.30) | (0.82) | (0.40) | (0.06) | (0.46) |
| 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) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $9.58 | 0.59 | (1.55) | (0.96) | (0.59) | — | (0.59) |
| Year Ended 5/31/2022 | $10.86 | 0.49 | (1.28) | (0.79) | (0.43) | (0.06) | (0.49) |
| 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) |
| Class C | |||||||
| Year Ended 5/31/2023 | $9.58 | 0.50 | (1.53) | (1.03) | (0.51) | — | (0.51) |
| Year Ended 5/31/2022 | $10.87 | 0.39 | (1.30) | (0.91) | (0.32) | (0.06) | (0.38) |
| 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) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $9.58 | 0.59 | (1.55) | (0.96) | (0.59) | — | (0.59) |
| Year Ended 5/31/2022 | $10.86 | 0.49 | (1.28) | (0.79) | (0.43) | (0.06) | (0.49) |
| 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) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $9.58 | 0.59 | (1.54) | (0.95) | (0.60) | — | (0.60) |
| Year Ended 5/31/2022 | $10.86 | 0.50 | (1.29) | (0.79) | (0.43) | (0.06) | (0.49) |
| 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) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 30 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
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 5/31/2023 | $8.04 | (10.26%) | 1.03%(c) | 1.03%(c),(d) | 6.60% | 624% | $351,898 |
| Year Ended 5/31/2022 | $9.59 | (7.79%) | 0.99%(c) | 0.99%(c),(d) | 4.58% | 340% | $409,868 |
| 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 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $8.03 | (10.04%) | 0.78%(c) | 0.77%(c),(d) | 6.86% | 624% | $148,830 |
| Year Ended 5/31/2022 | $9.58 | (7.56%) | 0.74%(c) | 0.74%(c),(d) | 4.65% | 340% | $325,742 |
| 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 |
| Class C | |||||||
| Year Ended 5/31/2023 | $8.04 | (10.84%) | 1.78%(c) | 1.78%(c),(d) | 5.85% | 624% | $50,691 |
| Year Ended 5/31/2022 | $9.58 | (8.57%) | 1.74%(c) | 1.74%(c),(d) | 3.70% | 340% | $76,327 |
| 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 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $8.03 | (10.04%) | 0.78%(c) | 0.77%(c),(d) | 6.84% | 624% | $1,342,560 |
| Year Ended 5/31/2022 | $9.58 | (7.56%) | 0.74%(c) | 0.74%(c),(d) | 4.72% | 340% | $2,150,404 |
| 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 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $8.03 | (10.01%) | 0.74%(c) | 0.74%(c) | 6.87% | 624% | $419,706 |
| Year Ended 5/31/2022 | $9.58 | (7.52%) | 0.70%(c) | 0.70%(c) | 4.76% | 340% | $644,830 |
| 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 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 31 |
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 5/31/2023 | $9.59 | 0.60 | (1.55) | (0.95) | (0.60) | — | (0.60) |
| Year Ended 5/31/2022 | $10.87 | 0.49 | (1.27) | (0.78) | (0.44) | (0.06) | (0.50) |
| 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) |
| 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: |
| Class | 5/31/2023 | 5/31/2022 | 5/31/2021 | 5/31/2020 | 5/31/2019 |
| Class A | 0.03% | less than 0.01% | less than 0.01% | 0.01% | 0.01% |
| Advisor Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | 0.01% |
| Class C | 0.03% | less than 0.01% | less than 0.01% | 0.01% | 0.01% |
| Institutional Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | 0.01% |
| Institutional 2 Class | 0.03% | less than 0.01% | less than 0.01% | 0.01% | 0.01% |
| Institutional 3 Class | 0.02% | less than 0.01% | less than 0.01% | 0.01% | 0.01% |
| (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.
| 32 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
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 5/31/2023 | $8.04 | (9.95%) | 0.69%(c) | 0.68%(c) | 6.96% | 624% | $193,010 |
| Year Ended 5/31/2022 | $9.59 | (7.47%) | 0.65%(c) | 0.65%(c) | 4.65% | 340% | $301,924 |
| 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 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 33 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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. Class C shares automatically convert to Class A shares after 8 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.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
| 34 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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, failure of the clearinghouse or CCP may pose additional counterparty credit risk. 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 and such shortfall is remedied by the CCP or otherwise, 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 instruments’ 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 2023 | 35 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 or receive interest income on cash collateral pledged to the broker. 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 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 hedge certain Fund investment exposures, 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.
| 36 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 are entered into bilaterally 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 2023 | 37 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 bilateral counterparty, FCM or CCP, as applicable, 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, increase or decrease its credit exposure to a specific debt security or a basket of debt securities, as a protection buyer, to reduce
overall credit exposure or 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.
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 payment or receipt 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.
| 38 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023:
| 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 | 4,451,210* |
| Credit risk | Upfront payments on swap contracts | 20,519,628 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 2,496,349* |
| Interest rate risk | Investments, at value — Option contracts purchased | 46,262,991 |
| Total | 73,730,178 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 24,990,154* |
| Credit risk | Upfront receipts on swap contracts | 23,478,071 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 13,154,426* |
| Interest rate risk | Option contracts written, at value | 11,957,440 |
| Total | 73,580,091 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin for futures and centrally cleared swaps, if any, is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended May 31, 2023:
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 39 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended May 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 1,102,240,018 |
| Futures contracts — short | 2,572,345,894 |
| Credit default swap contracts — buy protection | 286,412,500 |
| Credit default swap contracts — sell protection | 267,787,500 |
| Derivative instrument | Average value ($)* |
| Option contracts purchased | 46,160,152 |
| Option contracts written | (12,509,238) |
| * | Based on the ending quarterly outstanding amounts for the year ended May 31, 2023. |
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. These transactions may increase the Fund’s portfolio turnover rate. 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. 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. All cash proceeds will be invested
| 40 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing
transactions.
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 in 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 in 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, 2023:
| Citi ($)(a) | Citi ($)(a) | Goldman Sachs International ($) | JPMorgan ($)(a) | JPMorgan ($)(a) | Morgan Stanley ($)(a) | Morgan Stanley ($)(a) | Total ($) | |
| Assets | ||||||||
| Centrally cleared credit default swap contracts (b) | - | - | - | - | - | 128,526 | - | 128,526 |
| Call option contracts purchased | 37,774,991 | - | - | - | - | - | 4,974,000 | 42,748,991 |
| Put option contracts purchased | - | - | - | - | - | - | 3,514,000 | 3,514,000 |
| OTC credit default swap contracts (c) | - | 22,211,630 | 2,759,208 | - | - | - | - | 24,970,838 |
| Total assets | 37,774,991 | 22,211,630 | 2,759,208 | - | - | 128,526 | 8,488,000 | 71,362,355 |
| Liabilities | ||||||||
| Call option contracts written | 1,197 | - | - | - | - | - | 1,554 | 2,751 |
| Put option contracts written | 2,355,163 | - | - | 2,322,900 | - | - | 7,276,626 | 11,954,689 |
| OTC credit default swap contracts (c) | - | 16,358,868 | - | - | 3,271,774 | - | 26,675,227 | 46,305,869 |
| Total liabilities | 2,356,360 | 16,358,868 | - | 2,322,900 | 3,271,774 | - | 33,953,407 | 58,263,309 |
| Total financial and derivative net assets | 35,418,631 | 5,852,762 | 2,759,208 | (2,322,900) | (3,271,774) | 128,526 | (25,465,407) | 13,099,046 |
| Total collateral received (pledged) (d) | 20,315,000 | 5,720,000 | 2,750,000 | (2,322,900) | (3,150,000) | - | (25,465,407) | (2,153,307) |
| Net amount (e) | 15,103,631 | 132,762 | 9,208 | - | (121,774) | 128,526 | - | 15,252,353 |
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 41 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
| (a) | Exposure can only be netted across transactions governed under the same master agreement with the same legal entity. |
| (b) | Centrally cleared swaps are included within payable/receivable for variation margin in the Statement of Assets and Liabilities. |
| (c) | 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. |
| (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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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.
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.
| 42 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
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 0.535% as the Fund’s net assets increase. The effective management services fee rate for the year ended May 31, 2023 was 0.632% 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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 43 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
serve as sub-transfer agent. Prior to January 1,
2023, SS&C GIDS was known as DST Asset Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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, 2023,
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, 2023, 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 $297,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.50 - 1.00(a) | 156,360 |
| Class C | — | 1.00(b) | 11,818 |
| 44 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
| (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 classes’ average daily net assets:
| Fee rate(s) contractual September 30, 2023 | |
| 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, costs associated with shareholder meetings, 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, 2023, these differences
were primarily due to differing treatment for derivative investments, tax straddles, principal and/or interest from fixed income securities, capital loss carryforwards, trustees’ deferred compensation and
investments in partnerships and/or grantor trusts. 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 (loss) ($) | Paid in capital ($) |
| (2,792,887) | 2,792,888 | (1) |
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 Mortgage Opportunities Fund | Annual Report 2023 | 45 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 196,886,603 | — | 196,886,603 | 198,911,638 | — | 198,911,638 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 15,200,807 | — | (615,532,304) | (382,596,663) |
At May 31, 2023, 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) ($) | Net unrealized (depreciation) ($) |
| 5,204,479,572 | 69,813,292 | (452,409,955) | (382,596,663) |
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, 2023, 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,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (347,414,695) | (268,117,609) | (615,532,304) | — |
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 $29,028,279,832 and $28,286,940,894, respectively, for the year ended May 31, 2023, of which $28,626,311,540
and $26,808,032,824, 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.
| 46 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 4,225,000 | 4.51 | 8 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
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,
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 2023 | 47 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise. Actions by
governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise 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.
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 Fund’s
net asset value 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 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.
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. The U.K.
Financial Conduct Authority and the ICE Benchmark Administration have announced that a majority of U.S. dollar LIBOR settings will cease publication after June 30, 2023. A subset of non-U.S. dollar LIBOR settings is
continuing to be published on a “synthetic” basis and it is possible that a subset of U.S. dollar LIBOR settings will also be published after June 30, 2023 on a “synthetic” basis. Any such
publications are, or would be considered, non-representative of the underlying market. Markets are slowly developing in response to the elimination of LIBOR. 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 more settled. Alternatives to LIBOR have been established or are in development in most major currencies, including the Secured Overnight Financing
Rate (SOFR), which the U.S. Federal Reserve is promoting as the alternative reference rate to U.S. dollar LIBOR.
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.
| 48 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
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.
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.
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 49 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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.
| 50 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023
and the financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
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 2023 | 51 |
TRUSTEES AND
OFFICERS
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| 52 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 53 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| 54 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 55 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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.
| 56 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Mortgage Opportunities Fund | Annual Report 2023 | 57 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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.
| 58 | Columbia Mortgage Opportunities Fund | Annual Report 2023 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN251_05_N01_(07/23)
Columbia Flexible
Capital Income Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 22 | |
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| 36 | |
| 37 | |
| 37 | |
| 43 |
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, is available on columbiathreadneedleus.com/investor/ or 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 2023
Fund at a Glance
(Unaudited)
(Unaudited)
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 2020
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (May 31, 2013 — May 31, 2023)
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.
| (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 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended May 31, 2023, Class A shares of Columbia Flexible Capital Income Fund returned -8.30% excluding sales charges. During the same time period, the Fund underperformed its Blended Benchmark which returned -2.08%, as
well as the Bloomberg U.S. Aggregate Bond Index, which returned -2.14%.
Market overview
U.S. equities seesawed through
the 12-month period ending May 31, 2023, struggling to maintain positive momentum despite frequent rallies that brought major benchmarks above break-even. Although investors grappled with a variety of worries,
the market trajectory both up and down was driven predominantly by cross currents centered on evolving expectations for inflation and the path of U.S. Federal Reserve (Fed) interest-rate hikes.
Despite the relatively steady pace
of interest rate hikes that began to unfold during the period, sentiment occasionally did improve as the period progressed. Positives included hints of so-called “peak inflation” and attractive valuations,
as well as hopes that China’s economy would reopen after an extended zero-COVID-19 lockdown that gummed up global trade and contributed to cost pressures affecting economies worldwide. Better-than-feared
earnings results and guidance helped sentiment, particularly from bellwethers like Alphabet and Microsoft as well as retailers like Walmart and Target early in the period. But most of the upside was sparked by
investors’ interpretation of U.S. Federal Reserve (Fed) Chair Powell’s remarks after the Federal Open Market Committee announced an anticipated 75 basis point rate hike at the end of July 2022. (A basis
point is 1/100 of a percent.) What many seemingly heard were hints that rate hikes would slow in concert with softening economic growth. That takeaway evaporated a month later when Powell spoke at a symposium in
Jackson Hole, Wyoming and prioritized fighting inflation no matter how much pain the economy might suffer. His inflation-fighting resolve was confirmed by an additional 75 basis point hike in September, along with a
dot-plot showing no expectations for rate cuts until 2024.
Equities continued to deliver lumpy
results and briefly turned higher into the start of 2023 as investors yet again seemed comfortable with the notion of a softer landing, based on better-than-expected earnings, as well as constructive inflation and
economic data. But that bout of optimism proved short-lived during February 2023, as a blowout January employment report and continued higher-for-longer messaging from the Fed, along with mixed earnings reports and
geopolitical uncertainties, weighed on sentiment. Then in March, banking sector turmoil dominated headlines as two banks failed quickly. While intervention to guarantee uninsured deposits and to provide emergency
liquidity helped to limit any broader banking contagion, regional bank stocks still suffered. However, the bank crisis brought with it a rate reprieve and heightened expectations for a Fed pivot, providing a tailwind
for technology and other growth-oriented stocks with future earnings that are currently made more attractive by lower interest rates. Even though the final rate hike of the period on May 3 brought the target federal
funds rate upper bound to 5.25% – a level not seen since mid-2006 – sentiment for high-growth stocks remained intact.
Headwinds swirling throughout the
end of the period included protracted wrangling between the White House and Republican leaders about efforts to raise the debt ceiling and avoid default on U.S. Treasury obligations. Lingering fears of more
turmoil in the banking sector, dampened China’s reopening momentum and persistent signs of an imminent recession added heft to downside expectations. Better-than-expected first quarter 2023 earnings reports and
upbeat guidance helped offset some of these worries, as did resilient consumer spending and a last-minute agreement in principle on May 27 that would suspend the debt ceiling until January 2025.
The Fund’s notable
detractors during the period
| • | The Fund’s equities exposure was the largest area of detraction for the Fund during the period. The Fund’s fixed income and convertible securities holdings also weighed on results. |
| • | The largest detractors within the Fund’s equities holdings included sustainable energy company Enviva, Inc., household durables company Newell Brands, Inc., regional bank M&T Bank Corp. and fertilizer company Nutrien Ltd. The Fund sold its position in Enviva during the period. |
| • | Within fixed income, Fund holding tech hardware company Diebold Nixdorf, Inc. and software company Avaya, Inc. led detractors. The Fund sold its position in Avaya during the period. |
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | Biotechnology company Clovis Oncology, Inc. and media company DISH Network Corp. were the top detractors among the Fund’s convertible securities holdings. |
The Fund’s notable
contributors during the period
| • | From an asset class allocation perspective, the Fund’s holdings in preferred securities overall contributed most positively to returns during the period. Holdings that contributed most within the preferred space included medical devices company Boston Scientific Corp. and Citigroup Capital within the banking industry. |
| • | Within the Fund’s equity holdings, notable contributions came from semiconductor company Broadcom, Inc., pharmaceutical company Merck & Co., Inc., energy company Exxon Mobil Corp. and communications equipment company Cisco Systems, Inc. |
| • | Within the Fund’s convertible securities holdings, global cruise company Royal Caribbean Cruises, Ltd., pharmaceutical company Bridgebio Pharma, Inc. and interactive media company fuboTV, Inc. were top contributors. |
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 2023 |
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 Flexible Capital Income Fund | Annual Report 2023 | 7 |
Portfolio of Investments
May 31, 2023
May 31, 2023
(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 Flexible Capital Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
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, 2023, the total value of these securities amounted to $446,038,100, which represents 34.04% of total net assets. |
| (c) | Represents a security in default. |
| (d) | Perpetual security with no specified maturity date. |
| (e) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At May 31, 2023, the total value of these securities amounted to $1,596,932, which represents 0.12% of total net assets. |
| (f) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (g) | Valuation based on significant unobservable inputs. |
| (h) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of May 31, 2023. |
| (i) | The rate shown is the seven-day current annualized yield at May 31, 2023. |
| (j) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended May 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.241% | ||||||||
| 20,206,575 | 382,223,420 | (401,921,605) | 101 | 508,491 | (8,196) | 755,332 | 508,745 | |
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.
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.
The Fund’s Board of Trustees
(the Board) has designated the Investment Manager, through its Valuation Committee (the Committee), as valuation designee, responsible for determining the fair value of the assets of the Fund for which market
quotations are not readily available using 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 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;
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
May 31, 2023
May 31, 2023
Fair value measurements (continued)
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. Representatives of Columbia Management Investment Advisers, LLC report to the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
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. Representatives of Columbia Management Investment Advisers, LLC report to 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, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 28,341,050 | — | — | 28,341,050 |
| Consumer Discretionary | 23,177,775 | — | — | 23,177,775 |
| Consumer Staples | 35,994,732 | — | — | 35,994,732 |
| Energy | 59,128,500 | — | — | 59,128,500 |
| Financials | 128,255,150 | — | — | 128,255,150 |
| Health Care | 64,544,400 | — | — | 64,544,400 |
| Industrials | 40,228,625 | — | — | 40,228,625 |
| Information Technology | 85,104,175 | — | — | 85,104,175 |
| Materials | 25,172,500 | — | — | 25,172,500 |
| Real Estate | 39,589,906 | — | — | 39,589,906 |
| Utilities | 26,544,450 | — | — | 26,544,450 |
| Total Common Stocks | 556,081,263 | — | — | 556,081,263 |
| Convertible Bonds | — | 167,125,066 | — | 167,125,066 |
| Convertible Preferred Stocks | ||||
| Financials | — | 18,794,500 | — | 18,794,500 |
| Health Care | — | 10,837,861 | — | 10,837,861 |
| Industrials | — | 13,029,323 | — | 13,029,323 |
| Information Technology | — | 7,425,530 | — | 7,425,530 |
| Utilities | — | 47,022,231 | — | 47,022,231 |
| Total Convertible Preferred Stocks | — | 97,109,445 | — | 97,109,445 |
| Corporate Bonds & Notes | — | 457,368,560 | 2,294,432 | 459,662,992 |
| Preferred Debt | 7,157,500 | — | — | 7,157,500 |
| Warrants | ||||
| Health Care | — | 130 | — | 130 |
| Total Warrants | — | 130 | — | 130 |
| Money Market Funds | 508,491 | — | — | 508,491 |
| Total Investments in Securities | 563,747,254 | 721,603,201 | 2,294,432 | 1,287,644,887 |
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.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 15 |
Statement of Assets and Liabilities
May 31, 2023
May 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,382,836,598) | $1,287,136,396 |
| Affiliated issuers (cost $508,390) | 508,491 |
| Receivable for: | |
| Investments sold | 9,728,599 |
| Capital shares sold | 958,189 |
| Dividends | 4,280,258 |
| Interest | 9,757,075 |
| Foreign tax reclaims | 12,480 |
| Prepaid expenses | 8,092 |
| Total assets | 1,312,389,580 |
| Liabilities | |
| Due to custodian | 425 |
| Payable for: | |
| Capital shares purchased | 1,807,553 |
| Management services fees | 22,895 |
| Distribution and/or service fees | 7,707 |
| Transfer agent fees | 107,997 |
| Compensation of board members | 78,565 |
| Other expenses | 43,848 |
| Total liabilities | 2,068,990 |
| Net assets applicable to outstanding capital stock | $1,310,320,590 |
| Represented by | |
| Paid in capital | 1,462,362,944 |
| Total distributable earnings (loss) | (152,042,354) |
| Total - representing net assets applicable to outstanding capital stock | $1,310,320,590 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Statement of Assets and Liabilities (continued)
May 31, 2023
May 31, 2023
| Class A | |
| Net assets | $349,965,982 |
| Shares outstanding | 28,312,170 |
| Net asset value per share | $12.36 |
| 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) | $13.11 |
| Advisor Class | |
| Net assets | $40,614,609 |
| Shares outstanding | 3,251,724 |
| Net asset value per share | $12.49 |
| Class C | |
| Net assets | $191,070,127 |
| Shares outstanding | 15,570,860 |
| Net asset value per share | $12.27 |
| Institutional Class | |
| Net assets | $666,293,909 |
| Shares outstanding | 53,921,554 |
| Net asset value per share | $12.36 |
| Institutional 2 Class | |
| Net assets | $39,047,213 |
| Shares outstanding | 3,123,450 |
| Net asset value per share | $12.50 |
| Institutional 3 Class | |
| Net assets | $22,442,556 |
| Shares outstanding | 1,825,235 |
| Net asset value per share | $12.30 |
| Class R | |
| Net assets | $886,194 |
| Shares outstanding | 71,778 |
| Net asset value per share | $12.35 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 17 |
Statement of Operations
Year Ended May 31, 2023
Year Ended May 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $38,115,075 |
| Dividends — affiliated issuers | 755,332 |
| Interest | 46,649,935 |
| Interfund lending | 113 |
| Foreign taxes withheld | (41,310) |
| Total income | 85,479,145 |
| Expenses: | |
| Management services fees | 8,863,891 |
| Distribution and/or service fees | |
| Class A | 900,302 |
| Class C | 2,146,110 |
| Class R | 4,898 |
| Transfer agent fees | |
| Class A | 292,598 |
| Advisor Class | 42,323 |
| Class C | 174,214 |
| Institutional Class | 568,991 |
| Institutional 2 Class | 29,668 |
| Institutional 3 Class | 1,805 |
| Class R | 796 |
| Compensation of board members | 38,130 |
| Custodian fees | 9,492 |
| Printing and postage fees | 91,439 |
| Registration fees | 157,954 |
| Accounting services fees | 30,090 |
| Legal fees | 31,257 |
| Compensation of chief compliance officer | 270 |
| Other | 35,495 |
| Total expenses | 13,419,723 |
| Expense reduction | (60) |
| Total net expenses | 13,419,663 |
| Net investment income | 72,059,482 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (64,810,664) |
| Investments — affiliated issuers | (8,196) |
| Net realized loss | (64,818,860) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (132,064,429) |
| Investments — affiliated issuers | 101 |
| Net change in unrealized appreciation (depreciation) | (132,064,328) |
| Net realized and unrealized loss | (196,883,188) |
| Net decrease in net assets resulting from operations | $(124,823,706) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | |
| Operations | ||
| Net investment income | $72,059,482 | $58,163,026 |
| Net realized gain (loss) | (64,818,860) | 57,932,135 |
| Net change in unrealized appreciation (depreciation) | (132,064,328) | (129,244,474) |
| Net decrease in net assets resulting from operations | (124,823,706) | (13,149,313) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (27,400,922) | (28,924,537) |
| Advisor Class | (4,161,116) | (4,896,894) |
| Class C | (14,805,054) | (18,629,219) |
| Institutional Class | (55,111,107) | (53,681,002) |
| Institutional 2 Class | (4,209,195) | (5,504,814) |
| Institutional 3 Class | (1,813,733) | (1,764,705) |
| Class R | (72,445) | (87,902) |
| Total distributions to shareholders | (107,573,572) | (113,489,073) |
| Increase in net assets from capital stock activity | 38,636,588 | 353,304,182 |
| Total increase (decrease) in net assets | (193,760,690) | 226,665,796 |
| Net assets at beginning of year | 1,504,081,280 | 1,277,415,484 |
| Net assets at end of year | $1,310,320,590 | $1,504,081,280 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 19 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| May 31, 2023 | May 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Subscriptions | 6,394,484 | 84,796,868 | 7,695,132 | 118,865,323 |
| Distributions reinvested | 2,070,228 | 26,918,174 | 1,867,061 | 28,276,585 |
| Redemptions | (5,662,836) | (74,275,805) | (4,675,421) | (71,774,812) |
| Net increase | 2,801,876 | 37,439,237 | 4,886,772 | 75,367,096 |
| Advisor Class | ||||
| Subscriptions | 1,060,158 | 14,224,061 | 2,364,105 | 37,097,040 |
| Distributions reinvested | 315,860 | 4,148,386 | 320,200 | 4,893,480 |
| Redemptions | (2,491,937) | (32,924,316) | (1,805,017) | (28,295,014) |
| Net increase (decrease) | (1,115,919) | (14,551,869) | 879,288 | 13,695,506 |
| Class C | ||||
| Subscriptions | 1,798,121 | 23,728,293 | 3,699,449 | 57,160,500 |
| Distributions reinvested | 1,141,051 | 14,766,667 | 1,234,165 | 18,571,698 |
| Redemptions | (4,344,297) | (56,858,147) | (3,319,328) | (50,590,070) |
| Net increase (decrease) | (1,405,125) | (18,363,187) | 1,614,286 | 25,142,128 |
| Institutional Class | ||||
| Subscriptions | 16,836,250 | 222,554,298 | 20,077,936 | 308,144,991 |
| Distributions reinvested | 4,215,522 | 54,775,418 | 3,523,851 | 53,340,988 |
| Redemptions | (17,557,490) | (229,780,514) | (9,254,572) | (141,972,179) |
| Net increase | 3,494,282 | 47,549,202 | 14,347,215 | 219,513,800 |
| Institutional 2 Class | ||||
| Subscriptions | 872,590 | 11,714,330 | 2,903,364 | 44,953,976 |
| Distributions reinvested | 318,083 | 4,183,579 | 358,447 | 5,481,177 |
| Redemptions | (2,452,165) | (32,391,458) | (2,490,769) | (37,822,086) |
| Net increase (decrease) | (1,261,492) | (16,493,549) | 771,042 | 12,613,067 |
| Institutional 3 Class | ||||
| Subscriptions | 556,635 | 7,345,502 | 614,850 | 9,462,948 |
| Distributions reinvested | 140,354 | 1,813,521 | 117,126 | 1,764,444 |
| Redemptions | (459,329) | (6,034,866) | (273,612) | (4,140,660) |
| Net increase | 237,660 | 3,124,157 | 458,364 | 7,086,732 |
| Class R | ||||
| Subscriptions | 19,371 | 251,944 | 23,577 | 358,476 |
| Distributions reinvested | 5,559 | 72,239 | 5,784 | 87,647 |
| Redemptions | (30,271) | (391,586) | (35,885) | (560,270) |
| Net decrease | (5,341) | (67,403) | (6,524) | (114,147) |
| Total net increase | 2,745,941 | 38,636,588 | 22,950,443 | 353,304,182 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
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 ratios of expenses and net investment income are 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 5/31/2023 | $14.56 | 0.67 | (1.85) | (1.18) | (0.67) | (0.35) | (1.02) |
| Year Ended 5/31/2022 | $15.90 | 0.63 | (0.71) | (0.08) | (0.63) | (0.63) | (1.26) |
| 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) |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $14.71 | 0.71 | (1.88) | (1.17) | (0.70) | (0.35) | (1.05) |
| Year Ended 5/31/2022 | $16.04 | 0.68 | (0.71) | (0.03) | (0.67) | (0.63) | (1.30) |
| 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) |
| Class C | |||||||
| Year Ended 5/31/2023 | $14.46 | 0.57 | (1.84) | (1.27) | (0.57) | (0.35) | (0.92) |
| Year Ended 5/31/2022 | $15.80 | 0.51 | (0.71) | (0.20) | (0.51) | (0.63) | (1.14) |
| 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) |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $14.56 | 0.71 | (1.86) | (1.15) | (0.70) | (0.35) | (1.05) |
| Year Ended 5/31/2022 | $15.90 | 0.67 | (0.71) | (0.04) | (0.67) | (0.63) | (1.30) |
| 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) |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $14.72 | 0.71 | (1.87) | (1.16) | (0.71) | (0.35) | (1.06) |
| Year Ended 5/31/2022 | $16.06 | 0.68 | (0.72) | (0.04) | (0.67) | (0.63) | (1.30) |
| 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) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
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 5/31/2023 | $12.36 | (8.30%) | 0.99% | 0.99%(c) | 5.11% | 44% | $349,966 |
| Year Ended 5/31/2022 | $14.56 | (0.65%) | 0.98% | 0.98% | 4.06% | 38% | $371,502 |
| 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 |
| Advisor Class | |||||||
| Year Ended 5/31/2023 | $12.49 | (8.11%) | 0.74% | 0.74%(c) | 5.33% | 44% | $40,615 |
| Year Ended 5/31/2022 | $14.71 | (0.32%) | 0.73% | 0.73% | 4.32% | 38% | $64,229 |
| 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 |
| Class C | |||||||
| Year Ended 5/31/2023 | $12.27 | (9.01%) | 1.74% | 1.74%(c) | 4.33% | 44% | $191,070 |
| Year Ended 5/31/2022 | $14.46 | (1.41%) | 1.73% | 1.73% | 3.30% | 38% | $245,459 |
| 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 |
| Institutional Class | |||||||
| Year Ended 5/31/2023 | $12.36 | (8.06%) | 0.74% | 0.74%(c) | 5.35% | 44% | $666,294 |
| Year Ended 5/31/2022 | $14.56 | (0.40%) | 0.73% | 0.73% | 4.33% | 38% | $734,226 |
| 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 |
| Institutional 2 Class | |||||||
| Year Ended 5/31/2023 | $12.50 | (8.08%) | 0.71% | 0.71% | 5.32% | 44% | $39,047 |
| Year Ended 5/31/2022 | $14.72 | (0.37%) | 0.71% | 0.71% | 4.33% | 38% | $64,534 |
| 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 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 23 |
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 5/31/2023 | $14.49 | 0.71 | (1.84) | (1.13) | (0.71) | (0.35) | (1.06) |
| Year Ended 5/31/2022 | $15.83 | 0.68 | (0.71) | (0.03) | (0.68) | (0.63) | (1.31) |
| 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) |
| Class R | |||||||
| Year Ended 5/31/2023 | $14.55 | 0.64 | (1.86) | (1.22) | (0.63) | (0.35) | (0.98) |
| Year Ended 5/31/2022 | $15.88 | 0.59 | (0.70) | (0.11) | (0.59) | (0.63) | (1.22) |
| 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) |
| 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. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
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 5/31/2023 | $12.30 | (7.96%) | 0.67% | 0.67% | 5.44% | 44% | $22,443 |
| Year Ended 5/31/2022 | $14.49 | (0.33%) | 0.66% | 0.66% | 4.40% | 38% | $23,010 |
| 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 |
| Class R | |||||||
| Year Ended 5/31/2023 | $12.35 | (8.54%) | 1.24% | 1.24%(c) | 4.83% | 44% | $886 |
| Year Ended 5/31/2022 | $14.55 | (0.84%) | 1.23% | 1.23% | 3.78% | 38% | $1,122 |
| 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 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 25 |
Notes to Financial Statements
May 31, 2023
May 31, 2023
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. Class C shares automatically convert to Class A shares after 8 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 price 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 ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued based on prices obtained from pricing services, which are intended to reflect 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 price 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 approved by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The
| 26 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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
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. The Fund may also adjust
accrual rates when it becomes probable the full interest will not be collected and a partial payment will be received. 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 Flexible Capital Income Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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.
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 in 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.
Recent accounting pronouncement
Tailored Shareholder Reports
In October 2022, the Securities and
Exchange Commission (SEC) adopted a final rule relating to Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The rule and form amendments
will, among other things, require the Fund to transmit concise and visually engaging shareholder reports that highlight key information. The amendments will require that funds tag information in a structured data
format and that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective January 24, 2023. There is an 18-month
transition period after the effective date of the amendment.
| 28 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 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" in 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 SS&C GIDS, Inc. (SS&C GIDS) to serve as sub-transfer agent. Prior to January 1, 2023, SS&C GIDS was known as DST Asset
Manager Solutions, Inc. The Transfer Agent pays the fees of SS&C GIDS for services as sub-transfer agent and SS&C GIDS 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 Flexible Capital Income Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
For the year ended May 31, 2023,
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, 2023, these minimum account balance fees reduced total expenses of
the Fund by $60.
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 $1,151,000 for Class C shares. This amount is based on the most recent information available as
of March 31, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended May 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 728,364 |
| Class C | — | 1.00(b) | 14,283 |
| (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.
| 30 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 classes’ 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, costs associated with shareholder meetings, 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, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, investments in certain convertible securities, deemed distributions, principal and/or interest from fixed income securities,
defaulted securities/troubled debt, capital loss carryforwards, trustees’ deferred compensation, re-characterization of distributions for investments, investments in partnerships and/or grantor trusts and
distribution reclassifications. 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 (loss) ($) | Paid in capital ($) |
| (444,604) | (635,316) | 1,079,920 |
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 Flexible Capital Income Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended May 31, 2023 | Year Ended May 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 70,801,021 | 36,772,551 | 107,573,572 | 55,987,653 | 57,501,420 | 113,489,073 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At May 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 13,858,701 | — | (64,430,178) | (101,395,122) |
At May 31, 2023, 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) ($) | Net unrealized (depreciation) ($) |
| 1,389,040,009 | 67,930,850 | (169,325,972) | (101,395,122) |
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, 2023, 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,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (55,637,974) | (8,792,204) | (64,430,178) | — |
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 $622,380,576 and $601,820,481, respectively, for the year ended May 31, 2023. 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.
| 32 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 400,000 | 5.10 | 2 |
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, 2023.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 27, 2022 amendment and restatement, the credit facility, which is an agreement between the Fund and certain other funds managed by the Investment Manager
or an affiliated investment manager, severally and not jointly, permits aggregate borrowings up to $950 million. Interest is currently 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 secured overnight financing rate plus 0.10% and (iii) the overnight bank funding rate plus, in each case, 1.00%. 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 October unless extended or renewed. Prior to the October 27, 2022 amendment and restatement, the Fund had access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. 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 secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate plus,
in each case, 1.00%.
The Fund had no borrowings during
the year ended May 31, 2023.
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.
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise. Actions by
governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise 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 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’s ability to price or value hard-to-value assets in thinly traded and closed markets and could cause 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 large-scale invasion of Ukraine
by Russia in February 2022 has resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of
Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter-measures or responses
thereto (including international sanctions, a downgrade in the country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and
espionage) could have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in
credit markets, further disruption of global supply chains, increased risk of inflation, restricted cross-border payments and limited access to investments and/or assets in certain international markets and/or
issuers. These developments and other related events could negatively impact Fund performance.
Shareholder concentration risk
At May 31, 2023, affiliated
shareholders of record owned 34.6% 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.
| 34 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
May 31, 2023
May 31, 2023
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 are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions concerning matters arising in connection
with the conduct of their activities as part of a diversified financial services firm. 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 Flexible Capital Income Fund | Annual Report 2023 | 35 |
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, 2023, the related statement of operations for the year ended May 31, 2023, the statement of changes in net assets for each of the two years in the period ended May 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended May 31, 2023 (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, 2023, 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, 2023
and the financial highlights for each of the five years in the period ended May 31, 2023 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, 2023 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 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 36 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended May 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Qualified dividend income | Dividends received deduction | Section 199A dividends |
| 41.73% | 39.71% | 4.50% |
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.
TRUSTEES AND
OFFICERS
(Unaudited)
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 and other relevant Board experience |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 174 | 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; former Board Member, Chase Bank International, 1993-1994 |
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 37 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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-July 2017; Interim President and Chief Executive Officer, Blue Cross and Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 174 | Former Trustee, Blue Cross and Blue Shield of Minnesota, 2009-2021 (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; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Richard M. Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Chair since 2023; 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, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 174 | Trustee, New York Presbyterian Hospital Board, since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee, Nominating and Governance Committee), since 2019; Director, Apollo Commercial Real Estate Finance, Inc. (Chair, Nominating and Governance Committee) (financial services), since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer), since 2019; former Director, Whiting Petroleum Corporation (independent oil and gas company), 2020-2022 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | CEO and President, RhodeWay Financial (non-profit financial planning firm), since December 2022; Member, FINRA National Adjudicatory Council, since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; 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 | 172 | Former Director, The Autism Project, March 2015-December 2021; 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 (former mutual fund complex), January 2015-December 2017 |
| 38 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | 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; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 1990-2004; Touche Ross CPA, 1985-1988 | 172 | Treasurer, Edinburgh University US Trust Board, since January 2023; Member, HBS Community Action Partners Board, since September 2022; former Director, University of Edinburgh Business School (Member of US Board), 2004-2019; former Director, Boston Public Library Foundation, 2008-2017 |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Professor of Economics and Management, Bentley University, since 2002; Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 174 | Former Trustee, MA Taxpayers Foundation, 1997-2022; former Director, The MA Business Roundtable, 2003-2019; former Chairperson, Innovation Index Advisory Committee, MA Technology Collaborative, 1997-2020 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 174 | Trustee, Catholic Schools Foundation, since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Trustee since 1996 | 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 | 174 | Director, SpartanNash Company since November 2013 (Chair of the Board, since May 2021) (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing), since August 2006; 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 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 | 172 | None |
| Columbia Flexible Capital Income Fund | Annual Report 2023 | 39 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; former Chief Executive Officer of Freddie Mac and Chief Financial Officer of U.S. Bank | 172 | Director, CSX Corporation (transportation suppliers); 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; former Senior Adviser to The Carlyle Group (financial services), March 2008-September 2008; former Governance Consultant to Bridgewater Associates, January 2013-December 2015 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2004 | 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. | 174 | Director, Valmont Industries, Inc. (irrigation systems manufacturer), since 2012; Trustee, Carleton College (on the Investment Committee), since 1987; Trustee, Carnegie Endowment for International Peace (on the Investment Committee), since 2009 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2022; Advisor, Paradigm Asset Management, November 2016-January 2022; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and to December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 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 | 172 | Independent Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2010-2021; Independent Director, (Executive Committee and Chair, Audit Committee), Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2016; Independent Director, (Investment Committee), Sarona Asset Management, since 2019 |
| 40 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Independent trustees (continued)
(Unaudited)
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 and other relevant Board experience |
| Sandra L. Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street 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 | 174 | Former Director, NAPE (National Alliance for Partnerships in Equity) Education Foundation, October 2016-October 2020; Advisory Board, Jennersville YMCA, since 2022 |
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 and other relevant Board experience |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021 and President since June 2021 | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC, since April 2015; President and Principal Executive Officer of the Columbia Funds, since June 2021; officer of Columbia Funds and affiliated funds, 2020-2021 | 174 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since, January 2022; Director, Columbia Threadneedle Canada, Inc., since December 2022 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Funds Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Carrig, Flynn, Paglia, and Yeager serve as directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| ** | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
The 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 Flexible Capital Income Fund | Annual Report 2023 | 41 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
(Unaudited)
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. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 42 | Columbia Flexible Capital Income Fund | Annual Report 2023 |
TRUSTEES AND OFFICERS (continued)
(Unaudited)
Fund officers (continued)
(Unaudited)
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 |
| 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; Vice President, Chief Legal Officer and Assistant Secretary, Columbia Management Investment Advisers, LLC, since October 2021 (previously Vice President and Assistant Secretary, May 2010 – September 2021). |
| Lyn Kephart-Strong 5903 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | Vice President, Global Investment Operations Services, Columbia Management Investment Advisers, LLC, since 2010; Director (since January 2007) and President (since October 2014), Columbia Management Investment Services Corp.; Director (since December 2017) and President (since January 2017), Ameriprise Trust Company. |
Liquidity Risk
Management Program
(Unaudited)
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, 2022,
through December 31, 2022, 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 Flexible Capital Income Fund | Annual Report 2023 | 43 |
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.
© 2023 Columbia Management Investment
Advisers, LLC.
columbiathreadneedleus.com/investor/
ANN148_05_N01_(07/23)
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, Sandra L. Yeager, and Douglas A. Hacker, 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, Ms. Yeager, and Mr. Hacker 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.
(a) Audit Fees. Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended May 31, 2023 and May 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$392,200 |
$384,500 |
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, 2023 and May 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$0 |
$10,000 |
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, 2023 and May 31, 2022, 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, 2023 and May 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$137,500 |
$48,300 |
Tax Fees 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, 2023 and May 31, 2022, 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, 2023 and May 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$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, 2023 and May 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$557,000 |
$535,000 |
In fiscal years 2023 and 2022, 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, 2023 and May 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$694,500 |
$593,300 |
(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. |
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 21, 2023 |
|
|
|
|
|
|
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 21, 2023 |
|
By (Signature and Title) |
/s/ Michael G. Clarke |
|
|
Michael G. Clarke, Chief Financial Officer, |
|
|
Principal Financial Officer and Senior Vice President |
|
|
|
|
Date |
July 21, 2023 |
|
By (Signature and Title) |
/s/ Joseph Beranek |
|
|
Joseph Beranek, Treasurer, Chief Accounting |
|
|
Officer and Principal Financial Officer |
|
|
|
|
Date |
July 21, 2023 |
